The Central Bank of Laos plans to explore issuing its own digital currency, according to a media report that provided details of the plan. A study on this topic will start soon and it will be conducted with the support of a fintech startup in Japan.
Laos central bank joins race to develop digital fiat
Nikkei Asia revealed on Sunday that the Bank of Lao People’s Democratic Republic will launch the study focusing on developing a central bank digital currency (CBDC) early this month. The monetary authority used Japanese fintech company Soramitsu, which was involved in a similar project in neighboring Cambodia.
The cooperation report comes after Laos recently signed a memorandum of understanding with the Japan International Cooperation Agency. Soramitsu, a blockchain finance firm, co-founded Cambodia’s Bakong digital payment system designed to reduce the country’s dependence on the US dollar.
Bakong payment app has been downloaded by 200,000 users since it was introduced to the public. The app can be used to pay for goods and services at 2,000 stores in Cambodia while Soramitsu and other fintech entities are working to expand the digital payment platform’s coverage across the country.
The Laos study, with the help of a Japanese startup, will assess the role of commercial banks and other financial intermediaries as well as the country’s needs in terms of financial inclusion. If the authorities in Vientiane eventually decide to issue a state-controlled digital currency, Suramitsu will play a role in its actual development as well.
The Nikkei noted that the digital version of the Lao Kip would improve the government’s ability to collect data needed to “take the pulse of the economy” and better track the amount of money in circulation. The move comes as regional power China is pushing ahead with its own digital yuan project, and some neighbors want to prevent excessive yuan inflows into their economies by launching their own sovereign digital currencies. Laos, a landlocked country in Southeast Asia, borders the People’s Republic of China which is its second largest trading partner after Thailand, according to the World Bank.
While China’s central bank digital currency is mostly being tested domestically at this point, sooner or later Beijing is likely to promote it as a tool for international transactions. China is already working with Thailand and the United Arab Emirates on a project led by the Innovation Center of the Bank for International Settlements (BIS). Its Hong Kong Special Administrative Region announced in June that it wanted to connect its domestic payments system with the Chinese yuan’s electronic infrastructure to pilot the digital currency in cross-border scenarios.
Besides the People’s Bank of China, dozens of central banks around the world are currently working on developing and launching digital central bank currencies. These include the US Federal Reserve, the Bank of Russia, and the European Central Bank. In Asia, Bhutan and US-based Ripple last month announced their partnership on a digital currency pilot project. The small Himalayan kingdom, which also borders China, is planning to test the digital version of the national fiat currency, ngultrum, on Ripple’s private ledger.
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