Thailand has done multiple projects experimenting several technologies to accomplish multiple use-cases since 2017.
Project Inthanon
Phase 1
Motivation:
In August 2018, the Bank of Thailand (BOT) launched Project Inthanon, aiming to evaluate the potential and practical applications of Distributed Ledger Technology (DLT) within the realm of financial infrastructure. Through collaboration with prominent industry participants, Project Inthanon represented a significant step in advancing technological progress within the Thai financial domain. The initial phase of the project was focused on establishing the foundational payment structure. This included the creation of a Proof of Concept (PoC) for a DLT-based Real-Time Gross Settlement (RTGS) system, employing wholesale Central Bank Digital Currency (CBDC) for interbank settlements. Notably, a standout achievement was the development of an inventive GR architecture that incorporated Automated Liquidity Provision (ALP) functionality, successfully ensuring privacy and atomicity attributes.
Use-Cases:
- The decentralised RTGS for the interbank payment was chosen to be the first business case for the joint-learning initiative in
Design Considerations:
Solutions:
Corda was chosen as the platform for developing Project Inthanon’s proof-of-concept. The POC is built as a private and permissioned Corda network. Each authorised participant operates a Corda node on the network; in all, there are 9 nodes representing the BOT and each of the 8 participating banks. The key components for Corda’s architectural design for Phase I are as follows: Corda Distributed App (CorDApp), Network Map Service, Central Bank (BOT) Node, Participating Bank Node, Notary (Consensus Service).
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Phase 2
Motivations:
The objective is to build on the Phase 1 POC and augment it with additional functions to handle DvP settlement for interbank bond repo & trading, data reconciliation and handling of NR regulatory requirements. Outcomes from Phase 2 demonstrate the practicality of DLT at enabling transformative process improvement and technical feasibility of achieving DvP in real-time through an experimental MLSM.
UseCases:
- DvP for Interbank Repo & Trading of Bonds
- Third-Party Payment Integration & Regulatory Compliance
Solution:
The POC was built as a private and permissioned Corda network. Each authorised participant operates a Corda node on the network; in all, there are 9 nodes representing the BOT and each of the 8 participating banks. The network also operates a doorman service which provides network permission, and a single notary node. To reflect a security setup similar to reality, each participant node is placed behind the firewall and a connection is opened to the network.
The results obtained during Phase 2 highlighted the viability of employing smart contracts for automating various stages of the bond lifecycle and for achieving Delivery versus Payment (DvP) in interbank bond trading and repo transactions. The proficient utilization of smart contracts showcased their potential to significantly simplify operational processes and enhance overall efficiencies.
Additionally, the enhancements to the Real-Time Gross Settlement (RTGS) system’s ability to prevent fraud were notable. This was achieved through the establishment of a novel end-to-end workflow, enabling the validation of transactional details using external sources through integration points.
In the same vein, Phase 2 also effectively tested the use of smart contracts for ensuring regulatory compliance. This was exemplified by the implementation of the NRFS mechanism, which holds promise in potentially eliminating numerous manual operational procedures and empowering banks to more adeptly monitor limits associated with Non-Resident Baht Accounts (NRBA) and Non-Resident Baht Securities (NRBS).
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Phase 3 — Project Inthanon LionRock
Motivations:
The Bank of Thailand’s Project Inthanon Phase III centered around enhancing the compatibility of ledgers to enable cross-border fund transfers, aiming to facilitate HKDTHB PvP (Payment versus Payment) transactions between banks in Hong Kong and Thailand. The project’s scope encompassed addressing regulatory and compliance issues related to both the Thai Baht (THB) and foreign currencies. The project involved a Proof of Concept (PoC) for cross-border fund transfers empowered by Distributed Ledger Technology (DLT), creating a seamless link between domestic and international payment networks. The primary goals included enhancing the efficiency of settlement, liquidity, and regulatory processes. The collaboration between central banks and financial institutions was facilitated through the DLT infrastructure.
Project LionRock unfolded in two consecutive phases. Phase A was dedicated to evaluating the potential advantages and obstacles associated with issuing Central Bank Digital Currency (CBDC) and examining the technical feasibility of utilizing DLT. This phase successfully demonstrated the secure interfacing of DLT-based CBDC with the Real-Time Gross Settlement (RTGS) system. It also indicated the possibility of extending access to central bank money for corporations without granting RTGS access. Notable benefits of DLT for CBDC encompassed traceable transactions, heightened security and resilience, and the capability for direct settlements in central bank money between customers. The phase also brought to light challenges related to scalability and privacy concerns.
Phase B of Project LionRock further evaluated the technical feasibility and suitability of implementing the lifecycle of Exchange Fund Bills and Notes (EFBN) as well as Hong Kong government bonds on the DLT network. This phase successfully demonstrated the feasibility of tokenizing EFBN and government bonds. Operational benefits were verified in automated intraday repurchase agreements, while hurdles emerged in executing specific corporate actions, such as coupon payments.
The PoC illustrated the potential of CBDC to simplify transactions by reducing intermediaries and settlement layers in contrast to conventional banking payment systems. For instance, individuals or entities making payments could directly settle with recipients through CBDC on a DLT network, bypassing intermediaries like banks and avoiding multiple debit and credit account entries in systems like RTGS. This direct payment infrastructure also safeguarded against double-spending through the implementation of chronological transaction orders.
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Corporate Sector Research Project:
The BOT together with the Siam Cement Group ( and Digital Ventures Company Limited ( engaged in an experimental cross platform project to explore how Central Bank Digital Currencies ( could be used for payment and settlement by the corporate sector. This project was developed using Hyperledger Besu a blockchain platform supported by ConsenSys.This partnership was formed with the vision that digital currencies will become a basis for future financial innovations, especially around the areas of programmable money, which will become building blocks for future business innovations
Usecases for Corporate project:
Programmable money, Invoice tokenisation, Blockchain for Procurement to Pay.
Cross Border CBDC — Project mBridge
Focus Area:
To assess the capabilities of a widely accessible, cost-effective, and efficient multi-CBDC platform in establishing direct connections between central banks and commercial participants, thereby significantly enhancing the possibilities for international trade and facilitating cross-border business on a larger scale.
Overview:
mBridge is a joint project between the BIS Innovation Hub Hong Kong Centre (HKC), and four participating central banks in Asia and the Middle East — the Hong Kong Monetary Authority (HKMA), the Bank of Thailand (BOT), the Central Bank of the United Arab Emirates (CBUAE) and the Digital Currency Institute of the People’s Bank of China (PBCDCI).
Project mBridge conducted experiments on cross-border payments using a shared platform built on distributed ledger technology (DLT), enabling multiple central banks to issue and exchange their respective central bank digital currencies (multi-CBDCs).
Currently, cross-border payments rely on a global network of correspondent banks that involve numerous intermediaries scattered across different time zones and operating hours. This fragmented system leads to high costs, slow transaction speeds, operational complexities, limited accessibility, and a lack of transparency. Moreover, these inefficiencies introduce settlement risk, negatively impacting both financial intermediaries and end users.
Out of the 15 identified use-cases, international trade settlement was selected as the initial business scenario to be piloted on mBridge. This decision was driven by the significant trade value within the four participating jurisdictions and the crucial role of trade in the region.
The pilot tested the following three transaction types:
- Issuance and redemption of CBDC between central banks and their domestic commercial banks.
- Cross-border payment between commercial banks in local CBDC (for example, a UAE corporate paying a mainland Chinese corporate in e-CNY through their commercial banks participating on the platform).
- Cross-border PvP FX between commercial banks in local CBDC (for example, a Thai bank exchanging e-THB for e-HKD with a Hong Kong SAR bank on the platform).
Financial institutions involved:
- BIS Innovation Hub Hong Kong Centre (HKC)
- Hong Kong Monetary Authority (HKMA)
- Bank of Thailand (BOT)
- Central Bank of the United Arab Emirates (CBUAE)
- Digital Currency Institute of the People’s Bank of China (PBCDCI)
- Bank of China
- HSBC
- Standard Chartered
- First Abu Dhabi Bank
- Bank of Communications
- Agricultural Bank of China
- China Construction Bank
- Industrial and commercial Bank of China (ICBC)
- Bangkok Bank
- Kasikorn Bank
- SCB
- Krungsri
Design considerations:
In order to streamline the technical functionality of the pilot, the mBridge ledger was deployed and managed in a highly secure, centralized cloud infrastructure located in Hong Kong SAR. This setup allowed participants to conveniently access the platform as a software-as-a-service (SaaS) solution through a user-friendly web-based interface (UI).
Within the platform, commercial banks have the capability to engage in direct peer-to-peer transactions with any other commercial bank, eliminating the need for intermediaries.
Technical Solution:
Following extensive experimentation with various technology architectures during earlier stages, the project team successfully created a dedicated blockchain specifically designed for mBridge, known as the mBridge ledger (mBL). This native blockchain was developed to cater to the requirements of both central banks and commercial participants.
To enhance the accessibility, flexibility, and scalability of the mBL platform for existing and future users, a modular design approach was adopted. This design allows users and developers to leverage a service-oriented architecture that is familiar and easy to work with, enabling seamless integration and adaptability within the platform.
Conclusion:
As of 2022, this project marked the largest cross-border CBDC initiative, involving the issuance of over US$ 12 million worth of CBDCs onto the platform. Additionally, it facilitated over US$ 22 million worth of payments and instant FX PvP settlements across borders, while boasting the highest number of direct pilot participants.
Project mBridge effectively validated the hypothesis that an efficient, cost-effective, real-time, and scalable cross-border multi-CBDC arrangement could establish direct connectivity between central banks and commercial participants. This achievement significantly enhanced the potential for international trade flows and cross-border business on a larger scale.
The platform’s modular framework allowed for seamless integration with domestic payment systems, accommodating both manual and automatic processes. Leveraging the insights gained from the pilot and earlier project phases, Project mBridge will continue its efforts. This entails further technology development, testing, and improvement of existing functionalities, as well as the addition of new features to transition from the current pilot phase to an MVP (Minimum Viable Product) and eventually a fully operational system.
In 2023 and 2024, the roadmap for mBridge will focus on the following:
- Achieving automated interoperability with domestic payment systems;
- Integrating FX price discovery and matching into the platform;
- Introducing liquidity management tools such as transaction queueing and priority management;
- Evaluating the role of central bank participants in providing liquidity;
- Improving data privacy-preserving tools;
- Continuing to develop the legal framework, and platform terms and conditions;
- Taking further inventories of policy, regulatory and compliance considerations;
- Evaluating decentralised deployment through a lens of data-privacy and legal considerations, and in tandem determining the remit and structure of a centralised governance role;
- Testing and piloting more business use cases and transaction types;
- Including additional jurisdictions and participants; and
- Exploring more services that the private sector can add to the platform
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