Thailan’s largest and oldest cement firm signed a memorandum of understanding (MoU) with the Bank of Thailand and Digital Ventures to develop a prototype system of Central Bank Digital Currency (CBDC) to enhance the efficiency of purchasing and payment management in the business sector.
The CBDC aims to reduce transaction steps and processing time, which will be conducive to boosting business confidence and competitiveness and promoting Fintech innovation in the future.
The partnership will optimise digital technology in business operations and initiate the development of the Central Bank Digital Currency system which is vital for the country’s economic development.
The MoU with Bank of Thailand and Digital Ventures to collectively develop the prototype system of Central Bank Digital Currency (CBDC) is a significant milestone in boosting competitiveness for organisations and business partners and improving the payment infrastructure for the business sector in the future.
According to another article, the new CBDC payment system prototype will be integrated with the procurement and financial management systems of the cement giant and its suppliers.
The new BOT project will begin in July 2020 and is expected to conclude by the end of the year, after which the BOT will publish the project summary and outcome accordingly. The project scope will include conducting a feasibility study and developing a process to integrate CBDC.
The new project builds on two BOT Digital Ledger Technology (DLT) initiatives launched in 2018, Project Inthanon and Project Scripless Bond. These two initiatives were designed to catalyses an industry-wide exploration and assessment of the potentials and applications of DLT.
Project Inthanon is a collaborative effort initiated by the BOT, together with eight commercial banks. The prime focus was to develop and test a DLT-based, real-time gross settlement system (RTGS) by issuing wholesale CBDC.
The project was based on a decentralized payment network set up on the Corda platform with the BOT node and participating bank nodes.
Corda is an open-source distributed ledger platform built to record and manage contracts between mutually distrusting parties. Corda was built by R3 in collaboration with financial institutions. It was designed to meet the requirements imposed by financial service regulators, conform to industry standards, and deliver on the promise of DLT. Corda was chosen as multiple networks can join to create a wider network with assets that can be transferred between them.
The notary service in Corda serves to prevent double-spending within the network. Once the notary service is satisfied that a digital token has not been spent before, it issues a signature to indicate transaction finality.
In assessing Inthanon, the Asian Development Bank Institute (ADBI) concluded that DLT can implement key functionalities in RTGS, while smart contracts can handle complex use cases that include bond life cycle events, fraud prevention, and regulatory compliance. The technology also demonstrates the ability to support 24/7 payment operations and provides an atomic delivery-versus-payment settlement without intermediaries.
Further, the system was shown to provide a technical settlement finality for the fund’s transfer and the exchange between cash and bond tokens. Settlement finality describes the way a system reaches consensus when a change of ownership occurs.
Thus, the signing of the aforementioned MoU is in line with the vision of creating innovations to fulfil needs and rapidly changing customers’ behaviours, especially now with the ‘New Normal’ business landscape.