In an effort to expand financial inclusiveness and provide sellers with an easier and faster means of payment, the Lao Central Bank and Soramitsu Corporation signed a memorandum of understanding in preparation for the launch of a CBDC.
The Japanese financial software company Soramitsu announced the signing of a Memorandum of Understanding with the Payment Systems Department of the Bank of the Lao People’s Democratic Republic. This is in anticipation of the launch of a proof-of-concept project for a central bank digital currency (CBDC). Under this agreement, a digital form of the Lao kip, called DLak, would be launched on February 7.
According to one video explanatory, the central bank would provide DLak to commercial banks in exchange for fiat currency. Thus, it would be easy for users to exchange fiat for CBDC at the commercial bank. Users could then make purchases from local vendors using a QR code and an app.
Fighting financial exclusion with a CBDC
Additionally, the CBDC would be instantly converted to fiat by a commercial bank. This will allow sellers to receive payment in real time. As a reminder, a digital transaction in Laos took up to a month to process. It is a revolutionary project for local sellers who were once excluded from the traditional banking system. To transact with DLak, a user would not be required to have a bank account. The financial inclusion of people without bank accounts is one of the stated goals of the project. According to Nikkei Asia, about 70% of Laotians have no Bank account.
The DLak project was modeled after the Cambodian Bakong system launched in collaboration with Soramitsu in 2020. Although this system has not been described as a CBDC. In addition, the Bakong system attracted 200,000 users in a few months and began experiments with cross-border transactions in 2021. Another objective of DLak is to simplify remittances from abroad.
For many experts, a CBDC is a way to advance the sophistication of payment systems. It also helps to ensure economic security thanks to a local currency that is not dependent on other countries. According to Nikkei Asia, the Bakong and DLak would help maintain the stability of their respective countries’ currencies while trading with China, which has introduced a digital yuan. Soramitsu said she is also conducting research on CBDCs in Fiji, Vietnam and the Philippines. Until these research projects come to fruition, we keep our fingers crossed while we wait to see if CBDCs will contribute to the financial inclusion advocated by cryptocurrencies.
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