The Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT) has revealed the outcome of a Joint Central Bank Digital Currency research undertaken by the two entity. The project known as Inthanon-LionRock is a follow up to a Memorandum of Understanding signed by the two Central Banks in May 2019. 

According to a joint press release, the motive was to examine the application of CBDC to cross-border transactions. Subsequently, a THB-HKD cross-border hallway system was initiated to provide participating banks in Thailand and Hong Kong to administer money transfer and foreign exchange payments on a P2P level. 

The statement indicated that it aided in reducing settlement layers. With the use of Smart Contracts, transfer of funds between the two countries went through in real-time in an atomic Payment-Versus-Payment (PvP) mode. 

The Press release proclaimed: 

 “Project Inthanon-LionRock was completed in December 2019, and a distributed ledger technology-based proof-of-concept (PoC) prototype was developed successfully together with ten participating banks from both places. The key findings of the project are presented in this report, which covers topics including token conversion, real-time interbank funds transfer, foreign exchange execution, liquidity management and regulatory compliance.”

Further Joint Research          

Consequently, the two authorities have agreed to advance with further collective research work in suitable fields. The focus will be on analysing business cases and connections to other platforms, involving the participation of banks and other relevant parties in cross-border funds transfer trials.

Mr Edmond Lau, Senior Executive Director of the HKMA, remarked that the joint research project with the Bank of Thailand marks an essential first step to solve the pain points of low efficiency and high costs in traditional cross-border payments. “With the use of blockchain technology, the innovative and unique solution addresses not only different technical issues in practical applications but also offers good references to the central banking community on the use of Central Bank Digital Currency,” Lau said. 

On the part of Mr Mathee Supapongse, Deputy Governor of the BOT, the building on pain points and business cases, is a novel cross-border model designed and developed as a PoC. The model offers a transnational corridor network where participants can transfer funds instantaneously on a peer-to-peer basis and in an atomic PvP manner. 

“The design and key findings of the project have added new dimensions to central bank communities’ studies on cross-border funds transfer area,” Supapongse noted. 

Central Bank Digital Currency had attracted many Countries since mid last year when Facebook announced its Libra project. The move has seen many Central Banks announcing to research or issue their CBDC with China reportedly set to launch soon. 

However, the latest development from Thailand and Hong Kong is very innovative. The two South-East Asian countries’ approach seems to be well thought out.