Despite being landlocked, Laos is well-known for its magnificent waterfalls and, as a result, its hydroelectric potential. The Laotian government changed its stance last month, allowing six companies to mine and trade Bitcoin in the country. Furthermore, Laos has been investigating digital currencies with the assistance of a Japanese fintech startup.
The Bank of the Lao People’s Democratic Republic recently signed an agreement with the Japan International Cooperation Agency to investigate the development of a digital kip – Laos’ currency.
Laos enlisted the help of Tokyo-based Soramitsu, which has some experience with digital currencies in the region, to better assess the situation in its country.
International cooperation is possible.
Soramitsu is well-known for his collaboration with the National Bank of Cambodia in the development of the digital payment platform Bakong. Furthermore, the main purpose of the “Bakong” digital currency, which was developed as part of Cambodia’s CBDC projects, was to help reduce Cambodia’s reliance on the US dollar.
According to a press release on the Soramitsu website,
“Because Bakong was integrated into local banking apps, 5.9 million users benefited from this service in the first six months of 2021. Bakong’s digital wallet has 200,000 users, and over 1.4 million transactions totaling $500 million have been recorded in the same time period.”
Consider the neighboring country of Laos. One could argue that Soramitsu’s knowledge of the region will help it work effectively with Laotian bank officials.
The joint study between Laos’ central bank and Soramitsu could start this month.
Going to war with China?
It should be noted that China and Laos are active trading partners. According to 2019 OEC data, China’s exports to Laos totaled around $1.87 billion, while Lao exports totaled around $1.88 billion. As China moves forward with its own digital yuan pilot program, it is only natural for Laos to investigate its CBDC options as well.
Furthermore, rising inflation has harmed the Laotian kip. Along with COVID-19, the fluctuating currency had a significant impact on the country’s economy this year. A Laotian CBDC could help residents feel safer in the country’s largely cash-based economy.
CBDCs, as well as multiple CBDCs
Central banks throughout Asia have been eager to investigate not only CBDCs, but also cross-border remittances facilitated by multiple CBDCs and CBDC bridges. China, Hong Kong, Thailand, and the UAE are all active players in this field.
Soramitsu’s research has the potential to enable Laos to participate in CBDC remittance trials alongside neighboring countries and economic rivals. Finally, if Laos decides to formally establish its own CBDC, Soramitsu’s efforts may persuade the Laotian government to bring the Japanese firm on board.