The Bank of Thailand (BoT) is considering the chances of bringing smart contracts and decentralized finance (DeFi) together in the implementation of its digital currency.
Vijak Sethaput, Senior Developer for BoT?s Inthanon project, and Sky Guo, CEO of Cypherium, granted an interview with Official Monetary and Financial Institutions Forum (OMFIF), on August 13, to discuss the Bank of Thailand?s digital currency experiment.
During the interview, they discussed the influence of blockchain on CBDC design choices and how it can enable interoperability. Aside that, they discussed topics including how a distributed system could solve liquidity issues between commercial banks and whether central banks will implement new infrastructure for cross-border payments.
Guo noted in the interview that global economies can adopt the DeFi model to allow qualified parties to issue digital assets backed by real world assets like real estate and stocks, and use them as collateral to obtain loans in CBDCs. He claims such developments could bring significant liquidity to the economy.
Sethaput also said that the BoT is keeping track of recent developments in the DeFi industry. He however stated that the central bank has to solve 2 major issues surrounding the DeFi, which includes customer identification and privacy, before adopting the technology to Thailand?s native cryptocurrency.
Sethaput again stated that smart contract deployment is a major focus for the next phase of the Inthernon project. He noted that the central bank has explored functionality in the smart contract like Guo has already described. He added that:
?We have mimicked the bond lifecycle, so the bond itself can pay coupons and can exchange between the parties, we have something called repurchase, so you can sell it and then you can get it back in another time.?
The BoT recently deployed its CBDC for financial transactions with some major businesses. It is now reportedly planning to launch the digital currency for transactions with Hong Kong?s central bank as it apparently enters a new phase.
DeFi is a new technology that allows crypto users to borrow and lend money in a decentralized architecture outside the control of banks and governments. The BoT news comes at a time when the DeFi industry continues to grow as companies around the world increasingly pour money into the crypto space. The total value locked in the DeFi market currently stands at $5.27 billion, according to data from DefiPulse.