Blockchain: A key emerging technology for Thailand
The country strives to be digitally efficient
THAILAND has continued to break new grounds in the financial services space, embracing emerging technologies in a bid to optimize transaction processes. The drive to be digitally efficient is part of the Thai government’s overall Thailand 4.0 plan to create an innovative or value-based industrial sector.
In May the Stock Exchange of Thailand (SET) launched a crowdfunding marketplace called LiVE, using blockchain technology to help small and medium enterprises (SMEs) gain access to capital. The platform is attracting participation from a number of enterprises.
“The platform will be a key mechanism to help drive Thailand’s growth, enabling startups and SMEs to have greater financial access through crowdfunding,” says Kesara Machusree, president of SET.
One of the major drivers of blockchain usage in Thailand has been the country’s “Blockchain Community Initiative” that seeks to develop solutions such as blockchain-based letters of guarantee. Led by Thailand’s central bank the initiative also has an eye on creating a central bank digital currency (CBDC) to better conduct interbank settlements. “Like other central banks, our goal is not to immediately bring CBDC into use, but rather to explore its potential and implications for back office operations. These efforts should pave the way for a faster and cheaper transaction and validation procedure due to less intermediation process needed compared to the current systems,” says Veerathai Santiprabhob, governor of the Bank of Thailand at a recent investment forum.
The Thai Bond Market Association (TBMA) has also voiced support for blockchain technology. It developed a new registrar system that significantly reduces issuance times. The TBMA says that the new blockchain-supported platform can issue bond certificates within three to four days compared to the standard period of seven to 15 days. TBMA plans to cut processing time to just two days by eliminating the need for physical certificates.
Thai banks have also been a driving force for blockchain, taking part in various blockchain network consortiums and several pilot transactions. 2018 has seen an uptick in blockchain developments with partnerships and projects being carried out by different stakeholders in the domestic financial ecosystem.
Bangkok-based Bank of Ayudhya worked recently with Standard Chartered in executing an international remittance transfer from Thailand to Singapore utilizing the Thai bank’s own blockchain system.
In 2017 IBM forged a partnership with Kasikornbank to launch the first enterprise letter of guarantee.
Bangkok Bank has agreed to join the Marco Polo trade finance initiative. Operated by technology companies R3 and TradeIX, the platform aims to improve connectivity between different parties along a trade finance transaction from corporates to trade credit insurers.
“Our customers are increasingly deploying sophisticated technologies in their operations,” says Pornit Dunnvatanachit, executive vice-president at Bangkok Bank. “Through the effective use of technology we can simplify complex processes and support faster and more secure transactions, which in turn will help encourage the use of digital channels,” he adds.
Daniel Cotti, CFO and head of bank partner relationships at TradeIX adds: “The Marco Polo initiative provides a unique solution to the banks to reshape the way they are serving their clients to meet their trade finance needs and the way they interact with each other.”
While the country is one of the standouts in embracing emerging technologies, there is a limit to how far Thai financial regulators are willing to go. In February the Bank of Thailand banned the use of cryptocurrencies, saying that they do not have legal tender in the country. This was followed by a regulation from the Thai Securities and Exchange Commission stating that it would monitor cryptocurrency transactions and verify the identity of users.