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Central banks are increasingly looking towards more efficient payment methods and crypto tokens are filling that role. Thailand and Hong Kong have just announced a joint agreement to utilize digital currencies to facilitate quicker payment in bilateral trade.
Cross Border Crypto
Central banks are beginning to realize that the options for cross border payments are woefully dated, painfully slow and ridiculously expensive. Yes, we’re talking about SWIFT.
The explosive growth of the crypto industry, which is really only a few years old, has highlighted how easy, fast and cheap it is to send money across international borders via a secure and immutable distributed ledger.
Nations, especially in Asia, are looking towards crypto to ease the process of sending finances overseas and Thailand and Hong Kong are the latest to embrace the embryonic technology.
According to reports, the two nations have entered an agreement to roll out a two-tier digital token as part of the process to create a prototype for cross-border transfers. The initiative has been dubbed Project LionRock-Inthanon and the first tier involves the issuance of a crypto token to participating banks.
According to the Hong Kong Monetary Authority (HKMA), the second tier involves the banks distributing these crypto tokens to their corporate customers for settling wholesale payments. The fintech collaboration between the HKMA and the Bank of Thailand was established in May.
The two nations have bilateral trade worth an estimated $US20 billion per year and the new system will give businesses a competitive edge over inflated exchange rate mechanisms between the two currencies.
Project LionRock is focused on streamlining cross-border transfers and payments between banks and companies rather than replacing cash as the People’s Bank of China intends to do with its crypto yuan. HKMA senior executive director Edmond Lau added;
“The prospect of issuing a central bank digital currency for retail purpose in Hong Kong is limited, as we have so many retail payment services (ranging from) credit card, debit card, and (others),”
He continued to state that the HKMA and Bank of Thailand will announce more details on their proof-of-concept study during the first quarter of 2020. Thailand’s central bank has already been researching its own central bank digital currency (CBDC) under ‘Project Inthanon’. The initiative involves banks such as HSBC, Standard Chartered, and a number of Thai banks including Kasikorn Bank and Krungthai Bank.
The Kingdom has recently opened its doors to crypto currencies by amending regulations to favor the industry and innovation.
Not Using Ripple
The system appears to be similar to that offered by San Francisco based fintech firm Ripple. The company’s loyal followers, also known as the ‘XRP Army’, have been insistent that banks will be using their token. This latest announcement proves that they are more likely to just develop their own rather than rely on one controlled by a third party.
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