Japanese software developer Soramitsu said the Bank of the Lao PDR Payment Systems Department would launch a proof of concept central bank digital currency (CBDC) tomorrow. The Lao central bank first inked a deal for CBDC research with Soramitsu in late 2021.
Soramitsu was responsible for developing Project Bakong, the blockchain-based payment system deployed by Cambodia’s central bank, which has been referred to as a CBDC system, but strictly speaking isn’t. That’s because the digital money represents tokenized commercial bank deposits of either Cambodian riel or US dollars. Launched in 2020, Project Bakong uses Hyperledger Iroha, a blockchain system originally developed by Soramitsu. The software company is also doing CBDC research with the Philippines, Vietnam and Fiji.
The Lao CBDC proof of concept (PoC), referred to as DLak (Digital Lao Kip), will start tomorrow, and research work is continuing with the aim of launching a production CBDC based on the PoC. The solution uses a customized version of the Project Bakong software.
There are similarities between the Laos CBDC motivations and those of Cambodia’s Project Bakong. For example, in 2021 the World Bank estimated that just 37% of those aged over 15 have a bank account in Lao compared to 33% in Cambodia. Hence financial inclusion is the primary motivator for both countries. A second driver is cross border remittances and a third one is to improve payment systems.
In the case of Cambodia, the central bank lacked a real time gross settlement system (RTGS), which is not the case with Laos. However, when a consumer pays a retailer with electronic money in Lao, it can take up to a month for the merchant to receive the money because it goes via a payments company which might settle bi-weekly or monthly. In contrast, CBDC settles in real-time.
Soramitsu secured many of its CBDC research projects through a collaboration with the Japan’s Ministry of Economy, Trade and Industry (METI).
