By
Tolu Ajiboye
April 17th, 2024
Governor of Thailand’s Central Bank has announced the ‘Inthanon’ project as part of Thailand’s ongoing research into new applications for blockchain technology.
As the era of blockhain gradually unfolds, it is bringing the most prominent technology of our time together with the basic organizational structures needed for the operation of a society. Yet, much more remains to be done in order to make people realize the huge potential hiding behind a blockchain-based payment system that is entering our daily transactions.
However, being reputed pillars of financial system, banks have a power to influence public opinion and actually contribute to the faster mass adoption of disruptive technologies underlying digital assets. By now, the proactive trials of blockchain used to streamline a banking settlement system are on the way.
Since Asia is known as a motherland of cryptocurrency along with many blockchain-based startups located in this particular region, it is no wonder that Asian banks are showing increased vigor to the incorporation of blockchain technology into interbank clearance and settlement system.
During a keynote speech delivered to the Nomura Investment Forum in Singapore this week, the Thailand Central Bank chief, Veerathai Santiprahbhob, addressed the growing adoption of blockchain technology across Asia and shared how the Thailand Blockchain Community Initiative (TBCI) will be looking into digital currencies as a means of transacting interbank settlements.
The governor of Thailand’s Central Bank stressed a broad effort made to research blockchain technology in various financial applications including supply chain, bond issuance and letters of guarantee. As the result of these efforts, Santiprahbhob has announced the ongoing project ‘Inthanon’ conceived to create the bank’s own blockchain-based cryptocurrency that will resolve dual problems of costs and speed attended to interbank transactions.
Project ‘Inthanon’ is the next big step towards developing Thailand’s digital asset infrastructure, which is primarily concerned with improving Thai banking interoperability. The project will conduct trials using ‘wholesale central bank digital currency’ (CBDCs) as a means of streamlining interbank transactions, which aim to greatly lower intermediary costs and transaction times.
CBDCs do however, also carry high risks, as the Bank of International Settlements (BIS) remarked in a report earlier this year noted a general purpose of CBDC could give rise to higher instability of commercial bank deposit funding. Even if designed primarily with payment purposes in mind, in periods of stress a flight towards the central bank may occur on a fast and large scale, challenging commercial banks and the central bank to manage such situations.
In his speech, Santiprahbhob emphasized the importance of initial trials before moving to bring CBDCs into larger scale of real life use:
“Like other central banks, our goal is not to immediately bring CBDC into use, but rather to explore its potential and implications for back-office operations. These efforts should pave way for faster and cheaper transaction and validation due to less intermediation needed compared to the current systems.”
Furthermore, the official indicated that a proof-of-concept project involving bonds issued over a blockchain was almost complete and the production is going to start in “the very near future”. The solution is expected to “speed up saving bond allocation to retail investors from 15 days to 2 days”. A separate project sees the central bank exploring the decentralized innovation in supply chain finance.
The development of such projects as Inthanon marks the belief of Thailand’s firm in the value of blockchain technology and its utility across numerous economic areas. In case of successful trials, Thai banks have a good chances to become a pioneering nation in this technological space.