Thai Banks launch Blockchain Community Initiative while regulator remains firm on cryptocurrency

14 commercial banks have teamed up with seven partners to set up the country's first Thailand Blockchain Community Innovative project, starting with blockchain-based letter of guarantee (LG), which is now being tested out in the central bank's regulatory sandbox

Mike Richardson
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The country's top banks, Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Kasikornbank - have jointly launched the “Thailand Blockchain Community Initiative”, under which the country’s first project for blockchain-based letters of guarantee (LGs) will initially be implemented, aimed at reducing costs and increasing productivity for both banks and their clients.

The initiative, which utilizes the Linux Foundation's Hyperledger Fabric as a technology platform.

The seven partners are Metropolitan Electricity Authority, Provincial Electricity Authority, and Electricity Generating Authority of Thailand, PTT Global Chemical Plc, PTT Polymer Marketing, IRPC Plc and and Siam Cement Group. Related technologies and legal aspects of the initiative are being supported by Accenture, Baker & McKenzie, and NECTEC and IBM. 

"With this infrastructure sharing, banks do not need to invest on their own," Veerathai Santiprabhob, the governor of the Bank of Thailand, said at a press conference according to Nikkei.

"Interoperability enhances efficiency, reduces costs in our financial sector and addresses the needs of the consumer and the business sector."

The group's blockchain platform was first launched by Kasikornbank in collaboration with IBM in July of 2017.

In Thailand, administering letters of guarantee - which are documents issued by banks to guarantee their clients' payment obligations - can take days. Digitizing the documents and shifting them to the blockchain can reduce the turnover time to just thirty minutes, according to Nikkei.

"For the business sector, the Thailand Blockchain Community Initiative will reduce the complexity of connecting to the same financial services provided by different banks, facilitate data verification on the same blockchain network, mitigate risks of counterfeiting and increase timeliness as well as security," Thai newspaper The Nation quoted Santiprabhob as saying.

The system will initially be tested in the Thai central bank's "sandbox" and used to issue letters of guarantee to state-owned enterprise auctions and other domestic trading operations.

The Electricity Generating Authority of Thailand, a state-owned energy company, and Siam Cement Group, the second largest company in Thailand, are both poised to participate as well.

In a related development, the Bank of Thailand plans to adopt blockchain technology for its bond issuance and wholesale central bank digital currency, an interbank payment system.

Speaking at the Bangkok FinTech Fair 2018, Dr. Veerathai Santiprabhob spoke on the central bank’s policy direction on fintech development and he believes that fintech can enhance efficiency in financial services. The benefits range from efficient transfer of funds, to significantly lower transaction costs for customers, to scaling down on the high cost brick-and-mortar delivery model, to more efficient lending process, and much more. Underscoring the potential of blockchain technology, he said:

“[B]lockchain has advanced technology behind many aspects of the financial services, especially back-office operations and fund transfers.

“...advancements in technologies like artificial intelligence, biometrics, and blockchains can help safeguard financial information, improve identity verification, and reduce the number and magnitude of financial frauds. These developments will contribute to safer environment for both service providers and customers.”

The central bank's bond issuance via blockchain technology would shorten the time for bond underwriting from around 15 days to a few days, he said. The bank has a proof of concept to use blockchain for a wholesale central bank digital currency project called Inthanon. The project would improve the central bank's management of interbank settlement in the banking industry, keeping it in line with the direction of its counterparts across the world.

Staying in Thailand, regulators have also reportedly agreed to enact two new laws regarding cryptocurrencies and initial coin offerings. These laws will, apparently, regulate the business, selling and buying of cryptocurrency.

Thailand’s Minister of Finance, Mr Apisak Tantivorawong, said on Thursday that the Thai government is set to announce two new laws that will regulate the cryptocurrency market and ICOs by then end of the month. The deputy Prime Minister too made a similar statement after a cabinet meeting, reported local news.

The first law is the Act on Digital Asset Businesses. This law makes it compulsory for all cryptocurrency operators like agents, dealer, broker, news outlets etc, to register their businesses and conduct a KYC. The act also has provisions and remedies for possible violations and modes of reprimanding violators.

The second law is the amendment of the Thai Revenue Code to include cryptocurrency as an asset, so that cryptocurrency and the money made in and through ICOs is taxable under the law.