Leveraging on IBM Cloud technology, the Bank of Thailand has launched the world’s first blockchain-based platform for government savings bonds.
The bank issued a total of US$1.6 billion bonds within two weeks to investors.
“Bank of Thailand’s success with the government savings bond project is the latest example of how blockchain technology can redefine the way businesses operate,” said Patama Chantaruck, the VP for Indochina Expansion and MD of IBM Thailand.
In the past, the sale of government savings bonds was a complex, multiparty, time-consuming process that relied on a non-real-time system, with duplicated validation steps and manual reconciliation prone to data errors.
The bank was able to reduce the bond issuance process from 15 days to just two by simplifying complex processes, resulting in fast, transparent, secured and efficient multiparty collaboration.
Thai investors can now purchase bonds up to the maximum value of their individual allocated quota from a single bank.
“IBM is proud to bring our world-class blockchain platform and IBM Cloud to support Bank of Thailand, and work side-by-side with them in achieving this important milestone for Thailand’s financial industry,” said Ms. Chantaruck.
By keeping a digital record of transactions linked together in a single list, the government savings bond platform is now said to work as a ‘real-time single source of truth for network participants, which minimises the redundant validation and reduces the costs of reconciliation’.
The effort to develop a secure and efficient government bond infrastructure involved collaboration among eight institutions including the Bank of Thailand, Public Debt Management Office, Thailand Securities Depository, Thai Bond Market Association and selling-agent banks, including Bangkok Bank, Krungthai Bank, Kasikorn Bank, and Siam Commercial Bank.
IBM Blockchain acted as the Bank of Thailand’s technology and cloud platform partner.
The benefits and business value of using blockchain technology for government bond distribution will be shared across stakeholders to include faster bond issuance for investors, decreased workloads and processing times, as well as greater transparency and reduced operating costs across the entire value chain.
The Bank of Thailand now plans to extend blockchain to all other government bonds targeting both retail and wholesale investors.
Thailand is an active adopter of blockchain technology, with a dynamic ecosystem extending to both public and private spheres. In 2019, the electronic letter of guarantee platform and network participated in by 22 Thai banks and 15 companies successfully went live and currently handles approximately US$300 million in guarantee letters.
The Thai Customs Department also became the second government agency in Southeast Asia to use TradeLens, a blockchain-based global trade digitisation platform that improves the speed, accuracy and security of local and international shipping activities.
More pilots and applications of blockchain are being rolled out to bring transparency and efficiency to finance, insurance, government and other sectors.
According to the Thai Bond Market Association, the outstanding Thai bond market stood at US$421 billion as of December 2019, while Government bonds dominate the Thai market, with an outstanding value of US$157 billion in 2019, accounting for 37% of the total outstanding Thai bond market.
Image credit: Reuters