Blockchain developer Soramitsu is involved in a new project to enable payments between Cambodia, other Southeast Asian countries and Japan. It was the developer behind Cambodia’s Project Bakong which created a quasi central bank digital currency (CBDC). The new Mutsumi project, which translates as friendly relations, will use Bakong and stablecoins to support Japanese SMEs in selling goods and digital services to Southeast Asian customers through e-commerce.
Digital transformation company VIVIT will run the joint venture project with Tama University also involved. It will effectively create a “Bakong Economic Zone” using the technology used in Cambodia to enable Japanese SMEs to reach the large offshore market, aiming to launch in late 2024.
Cambodia’s Bakong already has cross border payments using QR codes with Malaysia, Thailand and Vietnam. Additional jurisdictions being worked on include India, China and Laos. Bakong is effectively at the center of a hub. So rather than trying to link all these countries one to one to Japan, the idea is to link Japan to Cambodia’s Bakong using a Japanese stablecoin via an FX coin exchange. Hence Bakong becomes the intermediate hub for these payments to Japan.
The advantages of using stablecoins and CBDC is the low cost and the fact that Bakong will soon connect to seven jurisdictions. Because Cambodia is a dollarized country, it makes foreign exchange a little easier.
It also reaches users who are unbanked enabling them to make cross border payments. However, we wondered how many unbanked people will be able to afford to buy goods or digital content from Japan. Although they might want to receive remittances from relatives working in Japan. Nonetheless with the size of the targeted audience representing more than a third of the world, only a small proportion of the audience needs to transact to make it worthwhile.
Digital currency payments good for Soramitsu clients
If you’re familiar with Soramitsu Labs it’s hard not to miss that this initiative could make several of its clients pretty happy. For example, the Japanese Ministry of Economy, Trade and Industry (METI) has partnered with Soramitsu for exploring CBDC in other jurisdictions such as Fiji. Given this promotes Japanese SMEs, METI should be happy with this.
Soramitsu is also partnering with Japan’s biggest bank MUFG for interoperability for its Progmat Coin platform that supports stablecoin issuance from multiple banks. MUFG should be delighted with this project if its stablecoins can be used.
Apart from that, several of the jurisdictions to be linked are Soramitsu clients. For example, Soramitsu is working on a CBDC proof of concept with Laos. It also previously conducted CBDC feasibility studies that included Vietnam.
The biggest challenge will be promoting the e-commerce platform to consumers in all these different countries. Because at the moment, only Cambodians use the Bakong app. The other countries use their native banking or payment apps.
If the Mutsumi project is a success it will have opened up another payment corridor for purposes beyond e-commerce.
Meanwhile, Soramitsu is not the only organization exploring cross border payments using digital currency. Thailand initiated the MBridge multi-CBDC project for cross border payments that currently includes Hong Kong, China and the UAE.