Joint Hong Kong Thailand DLT payments would soon be in place to ensure smooth cross border payments between the two nations. A joint central bank digital currency (CBDC) based on digital ledger technology will be built by the collaborative efforts of the central banks of both countries.
As per the official statement of the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT), the two organizations have come together for Project Inthanon-LionRock for the CBDC details the official press release.
While in extension of the release for Hong Kong Thailand CBDC an extensive ninety-page report has also been released. This report covers an exhaustive summary of potential CBDC risks, advantages, regulatory compliance, exchange, liquidity management, and other vital elements of the proposed CBDC.
The Inthanon-LionRock project for Hong Kong Thailand DLT payments
Commencing in May 2019, Project Inthanon-LionRock will research and develop the digital currency. There are ten banks from both the nations participating in the project. A ‘Distributed Ledger Technology’ prototype has already been built and showcased. Prominent names include HSBC, ZA Bank, R3, and more.
R3 Corda blockchain platform will form the basis of the joint Hong Kong Thailand DLT payments platform. The project involved the creation of a currency bridge between HK dollar and Thai Baht so that both parties can transfer the funds and undertake foreign exchange using a peer-to-peer methodology.
The proposed mechanism will not only speed up transactions but also reduce settlement costs related to both the parties.
Foreign exchange is handled using the ‘Payment-versus-Payment’ settlement mechanism built on the R3 Corda platform. It ensures that final payment transfer happens only when the simultaneous exchange of both the currencies has taken place.
The successful proof-of-concept of the Hong Kong Thailand CBDC has shown that the central banks now have a potent mechanism that will help them reduce settlement layers, lower risks, and reduce intermediaries that plague the conventional banking systems.
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