The Bank of the Lao PDR Payment Systems Department and SORAMITSU Co., Ltd. have signed a Memorandum of Understanding (MOU) to launch a Central Bank Digital Currency (CBDC) Proof of Concept (PoC) on the 6th of February, 2023
Starting from the 7th of February, the Bank of the Lao PDR will commence the CBDC PoC using a system developed by SORAMITSU. The Bank of the Lao PDR will also proceed with further research toward the official launch of a CBDC based on the result of the PoC.
SORAMITSU completed a feasibility study of a blockchain-based modern payment infrastructure in Lao PDR that took one year, from December 2021 under the project initiated by the Japan International Cooperation Agency (JICA). After that, the Bank of the Lao PDR and SORAMITSU jointly continued researching CBDC until an agreement to start the CBDC PoC was reached. The project name of the CBDC PoC is “DLak” (Digital Lao Kip).At the ceremony that took place on the 6th of February, The Bank of the Lao PDR and SORAMITSU signed an MOU marking the commencement of the PoC, speeches were delivered by representatives of the Bank of the Lao PDR, the Embassy of Japan in the Lao PDR, the Ministry of Economy, Trade and Industry, JICA, and SORAMITSU. A CBDC demonstration was also performed in this ceremony.
As for the operational flow of the CBDC PoC, the Bank of the Lao PDR will generate CBDC, then issue it to a temporary commercial bank. The temporary commercial bank will then send CBDC to an individual, allowing said individual to pay at the store. Then, the store sends CBDC to a commercial bank. Finally, the Bank of the Lao PDR will collect CBDC from the commercial bank, as shown in the figure below.
1) Financial inclusion to the broader population, in order to provide digital financial services to people who do not have access to bank accounts;
2) Cross-border remittances, to reduce remittance times and costs from migrant destinations such as neighboring countries;
3) CBDC is a way to advance the sophistication of payment systems, as well as ensuring economic security through a local currency that does not depend on other countries.