Source: Nikkei Asia
Laos will explore issuing its own digital currency with support from a Japanese financial technology startup that was involved in a similar effort by Cambodia, Nikkei has learned.
The study by Laos’ central bank and Tokyo-based Soramitsu will begin as early as this month.
The initiative marks an attempt by Laos to extend the reach of its currency, the kip, as a digital Chinese yuan looms as a potentially powerful presence in the Southeast Asian nation with close economic ties to China.
The Bank of the Lao People’s Democratic Republic recently signed a memorandum of understanding with the Japan International Cooperation Agency on studying the development of a central bank digital currency.
A digital version of the kip would make policymakers better able to gather data needed to take the pulse of the economy, such as the amount of money in circulation.
Laos has enlisted Soramitsu, one of the many startups applying blockchain — the decentralized ledger technology behind Bitcoin — to finance. Soramitsu helped develop Cambodia’s Bakong digital payment system, an attempt to ease that country’s dependence on the dollar.
The Japanese company will undertake the Laos study, which will asses the role of banks and other intermediaries and the country’s needs for financial inclusiveness, among other areas. If Laos decides to issue a digital currency, Soramitsu may play a role in its development.
Landlocked Laos, which includes hydropower and minerals as main exports, counts China as its second-largest trading partner, after Thailand, according to World Bank data.
In Cambodia, the Bakong app has topped 200,000 downloads since its debut in October 2020 and can be used at about 2,000 stores. Soramitsu and other fintech players are looking to further expand the digital payment platform’s reach.
Elsewhere in Asia, Bhutan said in September it was partnering with U.S.-based blockchain player Ripple on a pilot digital currency project.
These moves come as China prepares to launch a digital version of its currency as early as next year.
While the digital yuan is likely to be a force only within China’s borders in the early stages, Beijing is expected to seek to give it international reach soon or later. The People’s Bank of China, the country’s central bank, has already said it will considering testing cross-border digital yuan payments.
The U.S. dollar has long been the mainstay currency, officially or informally, in many Asian emerging-market economies. But since the global financial crisis, Asian nations with high levels of trade with China have become more concerned with their currencies’ stability in yuan terms. Central bank-issued digital currencies are seen by some as a way to curb excessive yuan inflows.