Fourteen Thai banks partner with state enterprises and corporations to launch blockchain initiative
Fourteen Thai banks have joined hands with three state enterprises and four large business corporations to launch the Thailand Blockchain Community Initiative. The Initiative aims to upgrade business efficiency and competitiveness through the adoption of blockchain technology.
The first project to be undertaken will be blockchain-based letters of guarantee (LGs).
The estimated value of LGs issued via the banking system in Thailand in 2017 was around THB1.35 trillion (US$43 billion). Of this, LGs via electronic system or e-LG represented only around 15-20 percent. Therefore, paper-based LGs still dominate in the Thai economy, leading to document management and cost burdens for both issuing banks and businesses using LGs.
Fully integrating the LG system worth THB1.35 trillion into the era of electronic documentation through a blockchain network is expected to reduce operating costs by 50 per cent.
This will also enable LG services to be more efficient, reliable and secure, with a unified information standard. The use of blockchain technology via cloud platforms also offers greater flexibility for users because providing more ways to configure service settings in order to facilitate transactions and check service status around the clock.
Because of the collaboration, participating banks will be able to share the infrastructure and technology without having to individually invest in development.
For business sector, Thailand Blockchain Community Initiative will reduce the complexity of connecting to the same financial services provided by different banks, facilitate data verification on the same blockchain network, mitigate counterfeiting risks, and improve timeliness as well as security.
The system is currently being tested in the Bank of Thailand (BOT)’s regulatory sandbox, which facilitates safe experimentation and the development of innovative and standardised financial products and services the benefit of service providers, consumers and the Thai economy. It is expected to be launched in the third quarter of this year.
The fourteen banks participating in the initiative are: Bangkok Bank, Krungthai Bank, Bank of Ayudhya (Krungsri), KASIKORNBANK, Kiatnakin Bank, CIMB Thai Bank, TMB Bank, TISCO Bank, Siam Commercial Bank, Thanachart Bank, the Bank for Agriculture and Agricultural Cooperatives, United Overseas Bank (UOB), Standard Chartered Bank (Thai) and the Government Savings Bank
The other seven partners are: Metropolitan Electricity Authority, Provincial Electricity Authority, and the Electricity Generating Authority of Thailand, PTT Global Chemical, PTT Polymer Marketing, petroleum and petrochemical company, IRPC and SCG (Siam Cement Group).
Consulting firm, Accenture; law firm, Baker & McKenzie; statutory government organisation under the National Science and Technology Development Agency, NECTEC (National Electronics and Computer Technology Center) and IBM Related technologies will support the initiative in terms of technology, legal aspects and the overall picture.
Dr Veerathai Santiprabhob, BOT Governor, said the Bank of Thailand is delighted to witness the setup of Thailand Blockchain Community Initiative which will be beneficial to banking and business sectors and a whole Thai economy.
Mr. Predee Daochai, Thai Bankers’ Association Chairman, said that the blockchain-based LG service is a starting point toward end-to-end paperless processes which are highly secure, easy to examine and difficult to forge. It is better than conventional methods. The LGs on blockchain can be conveniently examined anytime and anywhere, and each change will be automatically recorded. The system also allows for further connectivity to other bank and business networks envisioned for the future.
Meanwhile, Bangkok Post reported that the Bank of Thailand (BoT) is planning to adopt blockchain technology for bond issuance and wholesale central bank digital currency, an interbank payment system. According to the article, BoT has a proof of concept to use blockchain for a wholesale central bank digital currency project.
In a speech on BOT’s Policy Direction on FinTech Development at the Bangkok FinTech Fair 2018 Dr Veerathai Santiprabhob highlighted the potential of blockchain (along with other technologies, such as artificial intelligence and biometrics) to safeguard financial information, improve identity verification, and reduce the number and magnitude of financial frauds.