This partnership marks Soramitsu’s second foray into the south-east Asian market for a blockchain digital currency solution, the first being Cambodia, which launched its Bakong payment system in October 2020.
Low levels of financial inclusion are a problem for Laos. The country was hit particularly hard by the pandemic, during which local districts were not equipped to provide cash relief handouts. Government response was also hindered due to outmoded methods of documentation, which exist largely in the form of paper-based family books.
A digital payment system would help to make the distribution of aid both traceable and instant, enabling the government to target particular regions that have higher levels of poverty.
On an everyday basis, a CBDC would also make low-value retail transactions easier and more convenient, allowing the population to participate more actively in the e-commerce sector.
Laos already possesses the foundations for a potential CBDC. According to a 2019 IMF report, the central bank implemented a Law on Payments System in 2018, which focused predominantly on modernizing monetary governance. Rolling out a payment clearing infrastructure for the banking system will improve the efficiency of transactions.
Turning to Soramitsu’s work with Cambodia, Bakong is the only live central bank blockchain payments project aside from the Bahamas’ Sand Dollar, and it has seen promising results. In the first half of 2021, Bakong recorded a total of 1.4 million transactions at a value of $500 million.
Soramitsu is the original developer of the Hyperledger Iroha blockchain which is used by Bakong and will also be leveraged in the Laos project.
Meanwhile, Laos’ CBDC research follows a string of activities in the ASEAN region. Last week, Bhutan announced a partnership with Ripple for a CBDC pilot. In other developments on Project Inthanon-LionRock, the Bank for International Settlements published a report last week, confirming that the project can significantly reduce cross border payment costs.