Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Hong Kong, Thai central banks closer to using digital currencies for cross-border payments

Hong Kong, Thai central banks closer to using digital currencies for cross-border payments

Plan would let Hong Kong, Thai banks use a CBDC to move funds; Other central banks could join HKMA and Bank of Thailand later
the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BoT) announced their findings from a cross border central bank digital currency (CBDC) initiative. The aim was to experiment with circumventing the correspondent banking network, allowing direct payments between banks. Hence this was an institutional or wholesale CBDC experiment. Two commercial banks in Hong Kong and eight in Thailand participated in the research.

The two central banks will continue their joint research, including exploring business cases and connectivity to other platforms. This is a continuation of Thailand’s Project Inthanon research and Hong Kong’s LionRock project.

Typically in correspondent banking, to make cross border payments, a bank will establish accounts at other banks in numerous jurisdictions. The downside is it ties up funds and is a time-consuming administrative burden. For those jurisdictions where it doesn’t have a banking relationship, payments will be routed via another bank, a correspondent bank.

The Asian banks’ work, part of a project begun in July, comes a day after the central banks of Britain, the euro zone, Japan, Sweden and Switzerland said they would jointly study the case for digital currencies.

The People’s Bank of China has progressed the furthest with CBDCs, and the head of its digital currency research institute, Mu Changchun, told a public forum in August that its project was “almost ready”.

The Chinese project focuses on payments within China, unlike the Hong Kong and Thai initiative.

By exchanging CBDC tokens, there is no need for the paying bank to have a bank account at the destination or use a correspondent bank. Bank to bank payments become real-time peer-to-peer payments. In the banking world, this instant settlement is referred to as Payment versus Payment (PvP).

Edmund Lau, Senior Director at the HKMA, commented about how the solution helps to solve the “pain points of low efficiency and high costs in traditional cross-border payments.”

As with other central bank research initiatives, the banks plan to share their results with the rest of the central banking community.

The technology used was R3’s Corda, and the tech partners were CryptoBLK, which has worked on previous iterations of Project Inthanon and Hong Kong consultants CH & Co.

The two Hong Kong banks were HSBC and new online bank ZA. In Thailand, the financial institutions involved were HSBC, Standard Chartered, Bangkok Bank, Krunghthai, Krungsri, Kasikornbank, Siam Commercial Bank, and Thanachart Bank.
How it works

For domestic payments, every country usually has a Real-Time Gross Settlement system (RTGS). So one of the first questions is, how will the cross border CBDC fit in with this? There are two potential models.

The ‘cross-participation’ model allows foreign entities to access to the domestic payment system. The downside of this model is that correspondent banking is likely to persist.

The other ‘asset expansion’ choice is to enable the domestic RTGS to support transactions in both local and foreign currencies. The challenge is for central banks to keep control over their own money supply. Alternative options include setting up a new multi-currency RTGS, or a subset of that, a segregated multi-currency corridor between two countries. The latter was the chosen route for the trial.

So in this selected case, domestic payment systems do not allow access to foreign banks. Each central bank issues its own wholesale CBDC for domestic use. For cross border transactions, each central bank issues (and destroys) Depository Receipts (DR). So a local bank will request an amount of CBDC to be converted to DRs to use in the corridor, which involves the central bank destroying some CBDC and creating the exact same amount of DRs.

The corridor network allows inter-bank payments of DRs by central banks in either of the currencies.

In addition to the primary payment mechanism, the research also allowed for different types of foreign exchange, liquidity management, and regulatory compliance.
Benefits

The conclusion was that settlement efficiency was improved because it involves real-time settlement without correspondent banks. Liquidity is more efficient because CBDC tokens replace Nostro accounts, which usually tie up assets.

From a compliance perspective, transactions are reported in real-time, and it reduces the commercial bank reporting efforts.

Despite only targeting ten banks in one corridor, the conclusion was that the model could be extended for global financial market needs.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
House Republicans Move to Defund OECD Over Global Tax Dispute
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
Intel Reports Revenue Beats but Sees 81% Rise in Losses
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
CEO Resigns Amid Controversy Over Relationship with HR Executive
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
Tulsi Gabbard Unveils Evidence Alleging Political Manipulation of Intelligence During Trump Administration
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Trump Announces Coca-Cola to Shift to Cane Sugar in U.S. Production
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Air India Pilot’s Mental Health Records Under Scrutiny
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
Moonshot AI Unveils Kimi K2: A New Open-Source AI Model
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Bitcoin Reaches New Milestone of $116,000
Severe Heatwave Claims 2,300 Lives Across Europe
Declining Beer Consumption Signals Cultural Shift in Germany
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
×