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Hong Kong, Thailand Central Banks Partner up on Digital Currency Initiative

Last Updated March 4, 2021 2:31 PM
David Hundeyin
Last Updated March 4, 2021 2:31 PM

By CCN.com: In an attempt to spur collaboration between both regulatory bodies in Fintech and intriguingly a central bank digital currency, the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT) have signed a Memorandum of Understanding (MOU).

The MOU, which was signed  in Basel on Monday enables both regulators to work together on joint innovation projects, as well as share information, experience and referrals regarding disruptive Fintech businesses.

Central Bank Digital Currency

One key area of collaboration which both parties look forward to working on is a joint project on the issuance of Central Bank Digital Currency (CBDC). While both countries already have individual extensive research and projects on CBDC – Project Lionrock for HKMA and Project Inthanon for BOT – the hope is that the joint effort and information sharing under the partnership will produce better results.

Project Inthanon which aimed at developing a prototype CBDC alongside R3 and Wipro has already partnered successfully with almost ten commercial banks who now use it for decentralized interbank settlement. HKMA’s Project Lionrock, whose goal was to test how well CBDC will fare on a Distributed Ledger Technology (DLT), was carried out alongside the R3 consortium, three-note issuing banks in Hong Kong and the Hong Kong Interbank Clearing Limited. Both projects have had remarkable success and according to the regulators, a joint operation between the projects is currently under consideration.

According to the official announcement by HKMA, the MOU will take move existing partnership between HKMA and BOT to the next level. Explaining what this entails, an excerpt from the announcement reads:

The signing of this MoU not only demonstrates our mutual interests in developing collaborative Fintech initiatives, but also underlines our ongoing efforts in cross-border collaboration between central banks in promoting innovation and enhancing experience sharing. The HKMA looks forward to working together with BOT and seeing the positive outcome from our joint effort.

Common Goals, Strange Bedfellows

While the partnership makes sense on a technical level, some believe that this does not mean that the Thai government is actually willing to embrace decentralisation, but is rather only looking to explore Fintech innovation within a narrowly defined set of criteria. Quoted in the announcement, BOT Governor Veerathai Santiprabhob alluded to the allure of fintech innovation. He said:

The synergies from our collaboration will lead to productive outcomes that will benefit us all. I believe there is huge potential to enhance quality of financial services by leveraging on technological advancement, and it is our responsibilities as regulators to create an ecosystem that is conducive to innovations,the BOT looks forward to working closely with the HKMA in turning great ideas into innovative practical solutions that will ultimately improve people’s lives.”

Known as one of the world’s most crypto-friendly financial jurisdictions, this is Hong Kong’s latest in a long-running series of efforts to boost its burgeoning reputation as a global Fintech hub.

Whereas in mainland China, cryptocurrency trading and ICO investment are completely banned, Hong Kong’s government uses what is probably of the world’s most open-minded policy direction on the subject of digital asset regulation. Last year, the Hong Kong Securities and Futures Commission (SFC) set up a framework for the regulation of digital asset trading platforms and plans to give operating licences to operators who qualify and make it through the SFC regulatory Sandbox program.

Thailand, on the other hand, is a completely different proposition. While the Thai government appears sold on the promise of Fintech innovation, it remains to be seen whether it will warm up to blockchain technology.