Blockchain: Southeast Asia’s key to Development
We have all heard the excitement about potential applications of blockchain technology. But what is really happening in developing countries in the Asia-Pacific region? First, what exactly is a blockchain? This is a kind of database that gets records and puts them in blocks like sheets in an Excel file. Then the block is “chained” to the previous block using a cryptographic signature. This allows the blockchain to be used like a ledger to be shared and validated by anyone with permission. In short, this is a peer-to-peer exchange of data and does not require a trusted intermediary.
Bitcoin payments and remittances, blockchain is primarily in the early stages. Governments and banks are working with technology companies to see if they can be used to solve stubborn issues such as traceability, identification, and trust. Beyond the hypothesis, let’s see how blockchain technology is being tested in some Southeast Asian countries in the Asia-Pacific region.
Cambodia: Payment System
In April 2016, the National Bank of Cambodia (NBC) signed a contract with a Japanese startup to develop a new payment system. The test phase is expected to begin later this year. The goal of is to develop a system of interbank transactions that provides a safe and inexpensive way to transfer money. This could benefit many people in countries with solid mobile technology and connectivity, while the commercial banking infrastructure is still under development. Unique to this project is the partnership between partners. Technology providers build the infrastructure and NBC contributes to the ongoing technology design of startups. Many central banks around the world have explored the potential of blockchain. The International Monetary Fund encouraged this activity and urged banks to investigate its impact.
Indonesia: Sustainable Supply Chain
In early 2016, a British company implemented a blockchain project to track the sources of yellowfin and bonito captured by local fishermen as part of a sustainable supply chain. This allows for proof of original compliance and may replace current paper records that are difficult to verify and damaged. This system is a combination of mobile technology and blockchain. The fisherman registered the catch on the blockchain via SMS. Additional data will be checked by the NGO and added later. Once the information is sent through the supply chain, it cannot be modified, and the data is displayed throughout the product process.
Myanmar: Microfinance Transactions
BC Finance, the largest microfinance institution in Myanmar, works with a Japanese company to register transactions on the blockchain. The partners hope the initiative can accelerate industry growth by reducing costs and reducing the administrative complexity of tracking large numbers of small transactions. It is expected that blockchain technology could be useful in a country like Myanmar, which does not yet have an advanced accounting system. However, barriers include frequent power outages and poor-quality local circuitry. Finance in general and trade finance is one of the most active areas for blockchain development. Commercial banks across the region are entering into a contract to provide blockchain solutions for very expensive, slow, and opaque business processes.
Blockchain pilots are making waves in developing countries in Asia for two reasons. The first reason is that most developing countries do not have a legacy system that needs to be replaced. Blockchain can provide the first upgrade to an existing inefficient system or introduce previously non-existent infrastructure. The second reason for widespread interest stems from the light regulatory infrastructure in many countries. So far this has been an opportunity, but it also raises concerns as the technology matures. Asian Development Bank can play a key role in ensuring blockchain is implemented in a development-friendly manner, bringing together regulators, best practices, IT professionals and government officials to make sure everyone is on the same wavelength.
We have all heard the excitement about potential applications of blockchain technology. But what is really happening in developing countries in the Asia-Pacific region? First, what exactly is a blockchain? This is a kind of database that gets records and puts them in blocks like sheets in an Excel file. Then the block is “chained” to the previous block using a cryptographic signature. This allows the blockchain to be used like a ledger to be shared and validated by anyone with permission. In short, this is a peer-to-peer exchange of data and does not require a trusted intermediary.
Bitcoin payments and remittances, blockchain is primarily in the early stages. Governments and banks are working with technology companies to see if they can be used to solve stubborn issues such as traceability, identification, and trust. Beyond the hypothesis, let’s see how blockchain technology is being tested in some Southeast Asian countries in the Asia-Pacific region.
Cambodia: Payment System
In April 2016, the National Bank of Cambodia (NBC) signed a contract with a Japanese startup to develop a new payment system. The test phase is expected to begin later this year. The goal of is to develop a system of interbank transactions that provides a safe and inexpensive way to transfer money. This could benefit many people in countries with solid mobile technology and connectivity, while the commercial banking infrastructure is still under development. Unique to this project is the partnership between partners. Technology providers build the infrastructure and NBC contributes to the ongoing technology design of startups. Many central banks around the world have explored the potential of blockchain. The International Monetary Fund encouraged this activity and urged banks to investigate its impact.
Indonesia: Sustainable Supply Chain
In early 2016, a British company implemented a blockchain project to track the sources of yellowfin and bonito captured by local fishermen as part of a sustainable supply chain. This allows for proof of original compliance and may replace current paper records that are difficult to verify and damaged. This system is a combination of mobile technology and blockchain. The fisherman registered the catch on the blockchain via SMS. Additional data will be checked by the NGO and added later. Once the information is sent through the supply chain, it cannot be modified, and the data is displayed throughout the product process.
Myanmar: Microfinance Transactions
BC Finance, the largest microfinance institution in Myanmar, works with a Japanese company to register transactions on the blockchain. The partners hope the initiative can accelerate industry growth by reducing costs and reducing the administrative complexity of tracking large numbers of small transactions. It is expected that blockchain technology could be useful in a country like Myanmar, which does not yet have an advanced accounting system. However, barriers include frequent power outages and poor-quality local circuitry. Finance in general and trade finance is one of the most active areas for blockchain development. Commercial banks across the region are entering into a contract to provide blockchain solutions for very expensive, slow, and opaque business processes.
Blockchain pilots are making waves in developing countries in Asia for two reasons. The first reason is that most developing countries do not have a legacy system that needs to be replaced. Blockchain can provide the first upgrade to an existing inefficient system or introduce previously non-existent infrastructure. The second reason for widespread interest stems from the light regulatory infrastructure in many countries. So far this has been an opportunity, but it also raises concerns as the technology matures. Asian Development Bank can play a key role in ensuring blockchain is implemented in a development-friendly manner, bringing together regulators, best practices, IT professionals and government officials to make sure everyone is on the same wavelength.
