[NEWS] Soramitsu begins demonstration experiments on government bonds and CBDC in Palau and Papua New Guinea

Fintech company Soramitsu, known for developing Cambodia's CBDC (Central Bank Digital Currency), has announced that it will develop a system for issuing, managing, and operating savings bonds in the Republic of Palau and begin a pilot project.

The company will also conduct a pilot project for CBDC in Papua New Guinea, and will aim to build a common platform for Pacific island nations using blockchain technology.

Cambodia has already introduced a payment system using blockchain technology, and in Laos, with the support of the Japan International Cooperation Agency (JICA), it conducted basic research and pilot projects on the introduction of CBDC.

Last year, it conducted a survey to improve the sophistication of financial systems and cross-border payments through the introduction of CBDC in Vietnam, Indonesia, Fiji, and the Solomon Islands. A pilot project for CBDC has already been conducted in the Solomon Islands.

This time, Soramitsu will use the blockchain technology (Hyperledger Iroha) developed by Soramitsu to develop and begin pilot projects for a savings bond system and its application in Palau at the request of the Ministry of Finance of the Palau government.

Palau uses the US dollar as its currency, and US banks (Bank of Hawaii and Bank of Guam) are planning to absorb residents' funds as deposits to diversify the country's financing methods and use them for economic growth and infrastructure investment in bridges, roads, and public facilities. We will support this project.

The benefits of building a savings bond issuance management system using blockchain include increased security by preventing counterfeiting, tampering, and impersonation, smoother settlement of savings bond purchases and sales when CBDC is introduced using smart contract technology, and reduced construction and operating costs and fees for the savings bond issuance management system.

In Papua New Guinea, we will conduct a demonstration experiment of CBDC at the request of the country's central bank. Financial inclusion is one of the major issues in the country, and there are many areas with unstable security, with many crimes such as robbery and highway robbery using violence and intimidation. We were looking for digital technology that could leave some kind of record and allow recovery after being victimized. Therefore, in order to improve these issues, we will conduct a demonstration experiment of CBDC using Soramitsu's blockchain technology.

Furthermore, Pacific island countries have limited population and economic scale, and the introduction of their own financial systems in each country will impose a large burden on them to cover the costs. Therefore, Soramitsu will develop a mechanism to introduce CBDC and savings bonds more cheaply and efficiently by building a common platform using blockchain technology.

Soramitsu has already started actual operation of the central bank's payment system "Bakong" using Hyperledger Iroha technology in October 2020, in collaboration with the National Bank of Cambodia, the central bank and financial supervisory authority of the Kingdom of Cambodia. According to the National Bank of Cambodia, in the short period of about three years since its launch, Bakong has 10.9 million users, which is two-thirds of the country's 16.7 million people. Bakong's settlement volume in 2023 is expected to be about US$23 billion (about 3.63 trillion yen), equivalent to 74% of Cambodia's GDP.

Reference: Official announcement
Image: Shutterstock

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