One of Thailand’s leading retail banks and the fourth largest by assets, Kasikornbank Pcl., has entered into an agreement with IBM to develop blockchain services using the Linux Foundation’s Hyperledger. The announcement marks the first time any bank in the tumultuous country has embraced blockchain technology.
At a joint press conference in Bangkok on Thursday, the Managing Director of IBM Thailand, Ms. Parnsiree Amatayakul, and Vice Chairman of Kasikornbank Technology Group, Mr. Somkid Jiranuntarat, announced that the blockchain services will be put to use in the first half of 2017.
Among the benefits listed during the presentation were improved document accuracy, added standardization, risk mitigation, faster ID verification, and security enhancements for various banking systems. The bank is also in talks with other major Thai banks to share the blockchain network, according to Jiranuntarat.
“KBank is a leading financial institution known for continuously adopting advanced technologies to enhance customer experience. We are delighted to continue supporting KBank’s important initiatives in blockchain and the significant value these projects will bring to the bank.”
- Ms. Parnsiree Amatayakul, IBM Thailand Managing Director
The 71 year old Kasikornbank, often referred to as KBank, is Thailand’s fourth-largest bank for retail, commercial, and lending. The bank operated 1,120 branches, 9,349 ATMs, and 159 foreign exchange booths last year. There are branches in six other countries, including one in Los Angeles, where the only Thai town in the USA is located.
In 1973, KBank, then called Farmer’s bank, was the first to offer credit card services, setting a precedent for leading Thai finance innovation. In April, the bank revealed that it has set aside five billion baht, roughly US$143 million, for new FinTech projects.
The Thai Central Bank (BOT) recently started promoting FinTech and launched a new regulatory sandbox where businesses can test innovative products, services, business models and delivery mechanisms.
The sandbox is designed for banks, non-bank fintech developers and technology firms that have sufficient capital and human resources with innovative lending, payment and money-transfer services and products.
Less well-funded ventures, such as start-ups, were encouraged to join an incubator program and find sponsorship before joining the sandbox program. Thai residents, business startups, and entrepreneurs were given the opportunity to share their opinions and concerns about the sandbox for almost a month.
“If the products and services from the sandbox can facilitate convenience, safety and protection for consumers, the central bank might consider adjusting the KYC (know your customer) rules to facilitate the use of those products and services.”
— – Vireka Suntapuntu, Senior Director of the BOT Financial Institution Applications Department (translated)
The new joint venture is taking advantage of the new environment, and has several purposes. KBank elaborated that the joint venture’s Hyperledger-based blockchain will first be put to use as a way to certify original documents on the blockchain through timestamping.
The platform, named OriginCert, will initially be used to certify letters of guarantee, the bank explained, helping to speed up the issuing process. There will also be a permission scheme involved, allowing authorized parties to view and write to each letter securely, making OriginCert more akin to a document supply chain service than a simple timestamping application. The API can also be extended to authorized outlet, such as participating commercial banks and government organizations.
The OriginCert team has been working in IBM’s Bluemix Garage network space in Singapore, while waiting for the sandbox period to begin. IBM is a founding member of Hyperledger, which is a collaborative effort created to advance blockchain technology by identifying and addressing important features for a cross-industry open standard for distributed ledgers. The private, permissioned blockchains do not have a cryptocurrency attached and can be used in a variety of ways, including transacting in fiat currencies.
“Blockchain and cloud have the potential to play a critical role in improving business transactions. This project demonstrates considerable benefits for the financial industry and beyond.
- Ms. Parnsiree Amatayakul, Managing Director of IBM Thailand
Meanwhile, Bitcoin’s legal status in Thailand has been dubious since the beginning, and there are only signs of trouble ahead for cryptocurrencies. Their status was already under question long before the current government threw out the previous constitution and set of laws that banks abide by.
In July 2013, Thailand’s first and largest bitcoin exchange, Bitcoin Thailand, shut down operations for over a month due to an ominous declaration by the BOT, making all use of bitcoin sound illegal in the country.
While international press widely reported that the country made bitcoins illegal, the Central Bank never had the legal power to create laws, and could only issue a preliminary ruling that using bitcoins was, “Illegal because of a lack of existing laws.”
After petitioning the government for a license, Bitcoin Thailand resumed service, and has been cautiously operating ever since. Competitors have since started to emerge, and a few Bitcoin ATMs have popped up in Bangkok.
The following year, however, a military Coup resulted in the whole government, the constitution, and mostly all of the existing laws being replaced. A military junta took control of the country, infamously banning signs of opposition like the three-fingered salute from the Hunger Games movies and books like George Orwell’s 1984.
The media and internet are now both controlled by the government, which announced plans to install a great firewall of Thailand last year, “For easier monitoring and interception of materials deemed inappropriate.” Bitcoin users have been quietly going about their business ever since, while many companies in digital communications and media are considering leaving the country altogether.
“I think most of [the private digital companies] may leave or give up. Only some of the industries with close connections to the government would agree to this proposal, but then you hurt diversity and the freedom that you need to thrive.”
— – Supinya Klangnarong, Commissioner at the National Broadcast and Television Commission