TOKYO – Laos will explore issuing its own digital currency with the support of a Japanese fintech startup that has been implicated in a similar effort by Cambodia, Nikkei has learned.
The study by the central bank of Laos and Tokyo-based Soramitsu will begin this month.
The initiative marks Laos’ attempt to expand the reach of its currency, the kip, as a digital Chinese yuan emerges as a potentially powerful presence in the Southeast Asian country with close economic ties to China.
The Bank of the Lao People’s Democratic Republic recently signed a memorandum of understanding with the Japan International Cooperation Agency on the study of the development of a central bank digital currency.
A digital version of the kip would allow policymakers to better collect the data needed to take the pulse of the economy, such as the amount of money in circulation.
Laos has hired Soramitsu, one of several startups applying blockchain – the decentralized ledger technology behind Bitcoin – to fund. Soramitsu helped develop Cambodia’s Bakong digital payment system, an attempt to ease the country’s dependence on the dollar.
The Japanese company will undertake the Laos study, which will assess the role of banks and other intermediaries and the country’s financial inclusion needs, among other areas. If Laos decides to issue a digital currency, Soramitsu could play a role in its development.
Landlocked Laos, which includes hydropower and minerals as its main exports, counts China as its second largest trading partner, after Thailand, according to World Bank data.
In Cambodia, the Bakong app has exceeded 200,000 downloads since its debut in October 2020 and can be used in around 2,000 stores. Soramitsu and other fintech players are looking to further extend the reach of the digital payment platform.
Elsewhere in Asia, Bhutan said in September that it was teaming up with U.S. blockchain player Ripple on a digital currency pilot project.
The measures come as China prepares to launch a digital version of its currency as early as next year.
While the digital yuan is likely to be a force only within China’s borders in the early stages, Beijing should seek to give it international reach sooner or later. The People’s Bank of China, the country’s central bank, has already announced that it will consider testing cross-border payments in digital yuan.
The US dollar has long been the primary currency, officially or unofficially, in many emerging market economies in Asia. But since the global financial crisis, Asian countries with high levels of trade with China have become more concerned about the stability of their currencies in yuan terms. Digital currencies issued by central banks are seen by some as a way to curb excessive inflows of yuan.