Japanese software developer Soramitsu said the Lao PDR Bank Payment Systems Department would launch a central bank digital currency (CBDC) proof-of-concept tomorrow. The central bank of Laos first signed an agreement for CBDC research with Soramitsu in late 2021.

Soramitsu was responsible for the development of the Bakong Project, the blockchain-based payment system implemented by the Cambodian central bank, which has been referred to as the CBDC system, but strictly speaking is not. This is because digital money represents tokenized business bank deposits in Cambodian riel or US dollars. Launched in 2020, Project Bakong uses Hyperledger Iroha, a blockchain system originally developed by Soramitsu. The software company is also conducting research on CBDCs with the Philippines, Vietnam, and Fiji.

The proof-of-concept (PoC) of the Lao CBDC, known as DLak (Digital Lao Kip), will start tomorrow, and research work continues with the goal of launching a PoC-based CBDC production. The solution uses a customized version of Project Bakong software.

There are similarities between the motivations of the Laotian CBDC and those of the Cambodian Bakong Project. For example, in 2021, the World Bank estimated that only 37% of those aged 15 and over have a bank account in Laos, compared to 33% in Cambodia. Therefore, financial inclusion is the main motivator for both countries. A second driver is cross-border remittances, and a third is improving payment systems.

In the case of Cambodia, the central bank did not have a real-time gross settlement (RTGS) system, which is not the case in Laos. However, when a consumer pays a retailer with electronic money in Laos, it can take up to a month for the merchant to receive the money because it goes through a payment company that can settle bi-weekly or monthly. By contrast, CBDC settles in real time.

Soramitsu secured many of its CBDC research projects through a collaboration with Japan’s Ministry of Economy, Trade and Industry (METI).