DLak: Lao PDR's Central Bank Digital Currency Takes Off

Laos' central bank has announced the launch of "DLak" (digital Lao kip), the country's central bank digital currency (CBDC) proof-of-concept, which rolled out on 7 February using a system developed by Japanese fintech Soramitsu.

This comes after a year-long feasibility study that started in December 2021, of a blockchain-based modern payment infrastructure in Laos, initiated by the Japan International Cooperation Agency.

The DLak aims advance the sophistication of payment systems, increase financial inclusion, and reduce cross-border remittance times and costs. Soramitsu is providing the country with a modified system based on the "Bakong" system, which has been operating smoothly for two years in Cambodia, a press release on Thursday said.

Operational Flow & Objectives

Operatioanlly, the Bank of the Lao PDR will generate  the CBDC and issue it to a temporary commercial bank. This bank will then send CBDC to an individual, who can use it in stores for goods or services. Then, the store sends CBDC to a commercial bank. Finally, the Bank of the Lao PDR will collect CBDC from the commercial bank, as shown in the figure above.

The objectives of the CBDC implementation are to provide digital financial services to those who don't have access to bank accounts, increase cross-border remittances efficiency, and enhance economic security through a local currency that doesn't depend on other countries, Soramitsu said.

The results of the PoC will be used to adjust the CBDC requirements and will be a prerequisite to any consideration of an official CBDC launch in Lao PDR.