Bank of Thailand Pushes Towards Blockchain in Government, to Save Bonds

December 10, 2018

The Bank of Thailand is pushing for a transformation of government saving bonds, issuance, distribution, and sales, all by conducting proof of concept (POC) using distributed ledger technology (DLT), more commonly known as blockchain technology.

Recently, the Bank of Thailand (BoT) published a report stating that it has initiated utilizing blockchain technology in a pilot of the DLT Scriptless Bond Project and at the core of its project is BoT’s mission to prepare its people for disruptive technology. Which is exactly why government officials are slowing down in their tracks and paying very close attention to the benefits of distribution and blockchain tech.

BoT has set expectations that the application of blockchain technology will function as a helpful solution for stakeholders for access of information, as it will allow for total access, increased efficiency, and complete transparency.

Once this is completed, this initiative will not only help increase efficiency but most of all it will cut down total operating costs of the entire system. Moreover, it will be developed onto the next stage to support the government and corporate securities forming the basis for Thailand’s market. Thailand aims to become one of the global leaders in spearheading blockchain tech in government operations, specifically for savings and bonds.

BoT is certainly in the lead but definitely not alone in this initiative. There are a number of organizations carrying out this pilot project such as the Public Debt Management Office, Thailand Securities Depository (TSD), Thai Bond Market Association, and agents such as Bangkok Bank, Krungthai Bank, Kasikorn Bank, and Siam Commercial Bank. One look into the non-federal sector and straight into tech and computers will reveal that IBM is currently one of the most critical and massive players cooperating as the technology partner for this project.

Nevertheless, BoT remains at the top of the shortlist for early-stage participants. The plan is to meet with the DLT Scriptless Bond Project which means that their aim is twofold: enabling BoT to gain deeper insight and implicate a number of usable blockchain technologies, as well as to greatly reduce costs to the industry while maximizing operational processes and efficiency.

Targeting to identify both weaknesses and opportunities for blockchain technology, the primary project was built based on the following key features:

  • Data integration and bookkeeping: in order to integrate all data having the connection as a single source of truth and record all transactional activities
  • Real-time information accessibility: to enable analysis at a rapid and efficient pace
  • Smart contracts & automation: To maximize the reduction of manual intervention by making operations more efficient through smart contracts
  • Reports and monitoring: To monitor information and enable visibility

The central bank expressed their interests in distributed ledger technology (DLT) clearly when they have started to look at its benefits and considered the savings bonds sales as their first use case.

With their project whitepaper, The Central bank is the first one in the world using blockchain technology in the field of government savings bond sales.

The activities relative to bond are complex and require a number of participating entities. The existing setup takes the average investor about 15 days to receive their bonds after getting an allocation.

According to the Bank of Thailand, Proof of Concept (POC) has proved that DLT Scriptless Bond could succeed in meeting core business demands while creating greater business value for all relevant parties.

The key benefits were outlined, in an official statement, as the following:

  • The time for investors to receive their bonds will be greatly reduced from its current average of 15 days to 2 days.  In addition to this, it is also possible to purchase a bond without the current purchasing limit per bank while maintaining full rights from any Selling Agent.
  • Due to the efforts of Selling Agents, TSD, and BOT, the complex operational processes will be alleviated and simplified. Bond Issuers can manage their bond sales in real time, which increases competitive change among Selling Agents.

In the future, the Bank of Thailand is going to develop the system in a way that builds the basis for the infrastructure of Thailand’s market for both government and corporate security.

As cited in an official statement, The Proof of Concept of this Project is only the first step toward the real-world implementation that would initially cover government savings bond, which may begin by the end of 2019.

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