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Laos Central Bank Partners with Soramitsu on its CBDC Project

Payment Systems Department, Bank of the Lao PDR and Soramitsu signed a Memorandum of Understanding (MOU) to launch CBDC Proof of Concept on February 6, 2023

Laos CBDC DLAK Soramitsu JICA POC signing ceremony

The Bank of Lao PDR initiated a feasibility study on blockchain-based payment infrastructure back in 2021.  The project was supported by Japan International Cooperation Agency (JICA) and implemented by Soramitsu. After that, the Bank of the Lao PDR and Soramitsu jointly continued researching the technology till reaching an agreement to start the CBDC PoC. The project name of the CBDC PoC is “DLak” (Digital Lao Kip).

According to the press release on Soramitsu website, the solution will be a "system based on the proven Bakong system", which has been operating in Cambodia since its implementation by Soramitsu in October 2020.

The proposed operational flow of CBDC PoC is shown in the figure below.

Operational flow of CBDC PoC DLak
The operational flow of CBDC PoC DLak. Source. Soramitsu

Bank of the Lao PDR will generate CBDC, issue it to a temporary commercial bank. The temporary commercial bank sends CBDC to an individual, allowing the individual to pay at the store. Then the store sends CBDC to a commercial bank. Finally the Bank of the Lao PDR collect CBDC from the commercial bank.

The conclusions drawn from the PoC will be used to further adjust the requirements for CBDC to best address the challenge presented by the financial landscape of the Lao PDR.

Laos is a landlocked country on the Indo-Chinese peninsula between Thailand and Vietnam. It has a total area of 236,800 km² and a population of around 7 million. Most of the population (63%) resides within rural regions with undeveloped financial infrastructure.
Map of Lao PDR
Map of Lao PDR. Source: BBC

The country has set clear objectives for DLak CBDC implementation:

1) Financial inclusion to the broader population in order to provide digital financial services to people who do not have access to bank account;
2) Cross-border remittances to reduce remittance time and cost from migrant destinations such as neighboring countries;
3) CBDC as a way for further sophistication of the payment system, such as ensuring economic security through a currency that does not depend on other countries.

Starting from the 7th of February, the Bank of the Lao PDR will commence the CBDC PoC using a system developed by Soramitsu. Then it will proceed with further research toward the official launch of a CBDC based on the result of the PoC. We marked our calendars and ready to observe the progress.