Laos has become the latest country to begin exploring a central bank digital currency (CBDC), announcing upcoming studies on the topic in collaboration with Japanese distributed ledger technology company Soramitsu (DLT).
According to a Nikkei Asia report dated October 3, the project is set to start this month following the signing of an agreement between the Central Bank of Laos and the Japan International Cooperation Agency to study the development of CBDCs.
The study will assess the performance of banks and other financial intermediaries in the financial system, as well as assess the broader transaction needs of the Lao public.
The report says the CBDC will provide Laotian politicians with better economic data and could pave the way for a CBDC-based cross-border settlement with its neighbor and second largest trading partner, China.
Soramitsu worked with Cambodia to develop the Bakong Digital Payment System, a DLT-based payment network designed to reduce the country’s dependence on the US dollar for local trade.
The Bakong app has been downloaded nearly 200,000 times since its launch in October 2020 and is currently supported by nearly 2,000 stores.
The Lao government’s decision to investigate the CBDC appears to have come amid pressure to consider more liberal regulation of digital ownership.
In September, the administration formally approved a public-private pilot project to study cryptocurrency mining and trading in an effort to exploit China’s recent attacks on the mining sector and the associated exodus of miners on an industrial scale.
Six companies, including banks and construction companies, have obtained permission to mine cryptocurrency as part of the project.
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Several government ministries, led by the Ministry of Technology and Communications, in cooperation with the Bank of Laos and the national energy company Electricite du Laos, have also begun work on establishing rules for the use of digital assets in Laos.
However, the country’s central bank issued a statement warning the public about the risks associated with unregulated cryptocurrencies, including Bitcoin and Ethereum.