The central bank of Laos has begun testing a proof of concept central bank digital currency (CBDC) known as the DLak or digital Lao kip as part of its research into the potential issuance of a CBDC in the country.

During the pilot the Bank of the Lao PDR will issue the CBDC to a temporary commercial bank that will then distribute it to individual users to test as a payment method at participating retail outlets.

The pilot follows a year-long feasibility study and will trial a modified version of the blockchain-based CBDC system officially launched in Cambodia in October 2020 that enables users to make bank transfers and P2P and point of sale payments using the country’s Bakong digital currency.

“The conclusion drawn from the PoC will be used to further adjust the CBDC requirements to best respond to the challenges presented by the financial landscape of the Lao PDR,” says Soramitsu, the Japan-based decentralised technology provider that developed the proof of concept CBDC with the central bank of Laos.

“Additionally, the result of the PoC will influence and be a prerequisite to any consideration by the Bank of Lao for the official launch of a CBDC system in Lao PDR.”

The bank is exploring the implementation of a CBDC as a means of enhancing financial inclusion by offering digital financial services to unbanked people, facilitating cross-border remittances and ensuring economic security, according to Soramitsu.

A short video explains how the proof of concept CBDC will work.

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