R3 Corda helping Thailand’s case for international trade dark horse

Transcript

Angie Lau: Is Thailand a new crypto hub? How has the crypto boom influenced enterprise blockchains — and why should you keep an eye on CBDC developments in Asia Pacific? 

Welcome to Word on the Block, the series that takes a deeper dive into blockchain and the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast.News. I’m Forkast Editor-in-Chief Angie Lau. 

Movies and travel — well, you can pay for them with crypto in Thailand now, as the nation leans on blockchain technology for a much needed push into the post-Covid world. Enterprise blockchain firm R3 has established an office in Thailand and maybe they’re not necessarily just there for the full moon party. 

Recently renewing their partnership with Bangkok Bank, R3’s Corda is digitizing Thailand’s economy. Well, let’s find out more. Let’s bring in R3 head of Asia Pacific, Amit Ghosh, to find out how they’re doing it. Amit, welcome to the show!

Amit Ghosh: Good morning Angie. Great to be here.

Lau: I want to understand, as you know, as we’re all super interested. Thailand is one of the most beautiful, pristine geographies — but a very promising economy. It’s not quite there yet. It’s still a developing nation. And we have certainly observed (from a global level) the role that Thailand wants to play. And so with crypto, what does it hope to play in the next five to 10 years — or even earlier than that?

Ghosh: Look, I think we have been pleasantly surprised and have had a positive interaction with the ecosystem in Thailand. I think ever since we started as a company in 2015, we have had partners and customers in Thailand. It’s an economy, which, at the economic level, it doesn’t get to the heights it wants to reach. 

On the blockchain side and the crypto side, I believe they’re a leading player globally. They don’t probably get as much recognition for all the work that’s happening in the ecosystem. But from our experience, they are one of our leading countries globally, in fact. From R3’s perspective, our R3 Corda is an enterprise blockchain platform. We build applications with our partners using our enterprise platform, and those applications range from various industries: in CBDC, trade, finance, supply chain, insurance and others. So in Thailand, we have been very, very busy over the last couple of years. 

The Bangkok Bank announcement is another testament of our work there. In working along those areas with Bangkok Bank, we are working on various trade finance applications. One of them is a Singapore-based company, but very active in Thailand. They’re using Corda to build and digitize letters of credit applications, and Bangkok Bank is one of their key customers. So that company is called Contour. You might have heard of it. They are expanding quite rapidly in the region as well — they recently signed up ICBC in China as well as a customer. There are examples like that. And then Bangkok Bank and similar customers in Thailand are also building their own applications for pain points, which they have.  

In one of the cases, Bangkok Bank will be digitizing a lot of their processes with their anchor customers and supplier base. We are working with the Bangkok Bank, for example, on those. And those are just a few examples. We have had a long history of working with Bank of Thailand, for example, on the CBDC side — which you are aware of — in Project Inthanon, and more to come, really. We’re very excited about what we are doing in Thailand, very excited about what we are doing in the Asia-Pacific region.

Lau: As you mentioned, you just renewed your partnership with Bangkok Bank. You’re setting up a team, establishing a local office, and it really sounds like you’ve become a trusted partner for a lot of enterprise [blockchain] in institutions in Thailand.

It does beg the question of interoperability. How are you also thinking about — as you’re establishing that technology layer for Thailand — how it’s going to also integrate and speak to other technology infrastructure layers that might be different than R3, different than Thailand’s as it extends its partnership in blockchain across the region?

Ghosh: Great question and I’ll answer that in three parts effectively. There is interoperability of various business applications. Today, when we started off Corda and building Corda, we realized that companies will use different business applications which are built on Corda. So you might have a trade finance application built on Corda and then you might have a supply-chain application built on Corda [or] you might have an insurance application built on Corda. We architected Corda and built a Corda network effectively, where these applications can really interoperate very seamlessly. That’s our approach to interoperability within our ecosystem. From the get go, we knew that we would have to interoperate with current technology or legacy technology. Whether it’s the large ERP providers like SAP or whether it be other platforms, I think we knew that we had to coexist here. 

It’s not about the entire displacement of existing technology and also on the infrastructure layer. We have to work with the cloud providers. We have to work with the on-premises service providers. So whether it would be AWS, or IBM, or Microsoft, or GCP (Google Cloud Platform), we work with all of them. The way we architected Corda and the design choices we made enabled us to interoperate with existing technology quite seamlessly as well. And we have also forged deep partnerships with these companies to make it easy for customers who are, let’s say, for example, using an IBM LinuxONE server, and also want to use Corda.

Now, Corda is today — and this is something we announced late last year — integrated off the shelf on the LinuxONE server line. We are working with all of these infrastructure providers to make it easy for our customers — like Bangkok Bank — to really use Corda. 

And finally, the most interesting question for the ecosystem is interoperability between different blockchains. And even permission blockchains, like ours, with public blockchains. Frankly speaking, I think that conversation is definitely happening, but the need from customers hasn’t come to us yet. We’ll tackle that when it does.  There are very few cases where I can think of where a network of institutions, who are building an application on Corda, also want to do something similarly on Hyperledger, or Ethereum, or something like that. So that’s not yet happening. But as you rightly can predict, it’s a matter of time because it will happen. So we’ll tackle it when we get to it. I think we are quite busy working with our customers right now and our partners  to make it easy for them to use Corda and build applications to solve their problems.

Lau: Yeah, no doubt. No doubt that day is coming. I also note that, as a former executive at Visa and PayPal — these are two large global conglomerates that are freshly into the crypto and blockchain space. Does that surprise you?

Ghosh Not at all. Having been there, I know that both of them have aspirations to be the payment rails and the payment network technology provider for the globe, for both merchants, consumers [and] companies. I am absolutely not surprised that they have jumped in. I’m sure they have been working on it for a few years now and they’ve made the announcements only recently. I think they will continue to delve more into how to enable cryptocurrency, especially on CBDCs in the future, to transverse on their rails. They have a huge, powerful network where they connect consumers and merchants. I can use a Visa card to buy coffee, or I can go online and shop using my PayPal account. Why can’t I just pay with a digital yuan or the digital dollar or Bitcoin or anything else? I think they are making these choices because consumers want these choices. I’m not at all surprised. And merchants are also getting open to accepting these payment methods. That’s also important.

Lau: Well, and to your point that Thailand really seems to be the testing ground — not necessarily that they’re testing it, they’re full on. They’re working with R3 obviously, but I think to everybody else observing what’s happening in Thailand, what’s happening in Asia, what’s happening in specific sandbox jurisdictions is really interesting. Because we can see then; how does it adapt to a consumer group, a certain demographic, certain enterprise transactions, a certain financial vehicle, and then across industries? 

To your point, if Visa and PayPal are coming in and allowing people to use crypto — Thailand’s crypto adoption is also increasing. We recently heard of — and reported on — a major movie theater in Thailand starting to receive Bitcoin as payment. This is a pilot. We also saw, essentially, the national policy that took a look at whether or not there should be a minimum annual income for crypto investors — that is to test public sentiment. Then we have the tourism board starting to target crypto holders in Japan to lure them to come to Thailand and explore. 

As you’re working across industries, what do you think is the most interesting observation that you’re viewing — these nascent pilots and these outreach attempts using crypto and if it’s effective so far? What are you seeing that’s interesting that you can report, even in its early days for Thailand?

Ghosh: Look, Thailand, as I said, always continues to lead innovation, especially in Southeast Asia, along with, Singapore is the other economy which does that from a crypto perspective. From our perspective — as you know, we are a platform that doesn’t have a native crypto built-in. So we are not directly in the game, so to say. But where we come in and where we participate in these ecosystem plays or these use cases which are coming in, is to provide the backend infrastructure and really the platform where applications will get built, whether you want to spend Bitcoin or whether you want to spend Ethereum or something else — to buy a movie ticket or buy a cup of coffee in the future.

I think the national level’s payment systems will require it to be resilient, will require it to be scalable, will require a lot of different features which we have catered for. So from our perspective, we are clearly and very interestingly observing the DeFi space overall, which is — the examples you quoted are part of that. They are many more going on, as you know very well, and we are working with our customers and partners to participate, leveraging our strengths. 

For example, one of the things which we are observing is a very deep interest from both institutional and other investors to really participate in the crypto and digital asset space. So what we did, for example, there is work with HSBC — which is one of the biggest custodians of assets — to build a digital vault, and that’s using the enterprise and that really serves the institutional investors who are interested in this space. So that’s our role in the DeFi space today. Of course, we are constantly evolving our product line. There’s more to come. And we hope to be more ingrained there as well. But we are already quite participating quite heavily.

Lau: I’ve often talked about how DeFi is enormously interesting because of the lessons that it can give centralized finance, or CeFi, or mainstream institutions like HSBC and other banks of the world. What are the most interesting aspects of DeFi that you think has, from an R3 perspective, product-level interest, enterprise interest?

Ghosh: Definitely. How do you issue assets, manage those assets and hold those assets? If you’re an institutional investor, you are dealing in billions and billions of assets. Our values work there. So you want to make sure that things are safe. The ecosystem, which is if you think of DeFi assets traversing different platforms. Like you have an asset on Bitcoin, which is on the Bitcoin network and sitting in exchanges potentially all in your ledger, all its hardware [and] wallets; versus, you have institutional investors holding these assets, different assets which they procure. “How do you trade them? How do you hold them? How do you sell them?”

Those are the areas where we play. And then we will see new use cases coming up in. Lending, for example. There are companies like BlockFi who are already paying interest on your crypto assets. We want to work with them as well to provide the infrastructure which they need to build their technology stack. Of course, the asset in itself is a Bitcoin asset, potentially. But, how do you, again, store it, manage it, issue it, trade it? Those are the problems which we are interested in solving.

Lau: And these are things that you can explore. Definitely in Thailand, there seems to be just such an interesting direction of crypto in Thailand. How do you compare that to other regions in the Asia Pacific?

Ghosh: There are at least a few of the geographies in Asia-Pacific where there is a huge interest in crypto. Korea comes to mind naturally. To an extent, Japan comes to mind. China, of course Hong Kong. But I think adoption is also dependent — a little bit — on the regulations in these cases. 

From an R3 perspective, we also see regulations as a big part of blockchain adoption. The mere reason we started off our journey as a company working very heavily with regulators was to inform them on what this technology can bring. What is blockchain really? And why is this necessary to upgrade the infrastructure of the country, whether it be crypto, non-crypto use cases? We see some progressive regulators. We see some reactionary moves from regulators, as you can see in the region, especially. We have seen bans in a few different countries, and then bans being lifted, and then bans being put again.

Lau: Thailand is a great example, right?

Ghosh: Exactly. The way we look at this whole ecosystem and our role in the ecosystem is to drive the right conversation with the regulators from the very beginning rather than when things happen. We don’t want to be reactionary to this. We want to be proactive here.

Lau: But help us understand then — Thailand’s stance on stablecoins tied to the baht. And they’re very clear, at the moment at least, that they don’t like it. They do not want a stablecoin that is pegged to the Thai baht. They’re okay with the US dollar. Clearly, they’re working on CBDC. But I wonder why that stance and what are the concerns?

Ghosh: This is a hard question in some sense, because I don’t know what exactly Bank of Thailand and other regulators are thinking. But our view is that, given how much work Bank of Thailand has done itself, they will lead innovation rather than being subject to innovation, which doesn’t work for them. We have seen enough examples of Bank of Thailand working on various different initiatives in the CBDC space. Both on the wholesale side and recently on the retail side as well. I expect that Bank of Thailand wants to manage this carefully [and]  wants to also protect its citizens.There’s a fiduciary responsibility of the government to protect the citizens. And we have seen enough scams happening in the crypto space. 

My understanding and my assumption here, is that Thailand, because it’s a progressive regulator, because it’s a progressive economy, it’s very innovation prone. They will continue to just drive the innovation, rather being subjected to it and then putting the citizens in power in some sense. Because most people don’t still understand what a stablecoin is. Most people don’t understand why crypto prices are moving so much up or down. It’s hard if you are a pure retail investor. It’s hard even for educated individuals like myself sometimes to understand what’s going on because there’s so much going on right now. And some of it is just gamed, as we know. There are large players who are probably making big swings in these cases. And that’s moving the markets. I think my view is that the Bank of Thailand, as always, will lead innovation. And that’s why probably. But I’m guessing a little bit here, as you can imagine.

Lau: When we take a look across the landscape, you’re totally right. Thailand, I think would be, probably, superficially, considered in Tier II when it comes to just regulatory and adoption. Most of the attention is still on Hong Kong, Singapore, Japan, Korea, to a certain extent. But Korea and Thailand probably kind of sit in that second tier. But that doesn’t mean that there aren’t some really interesting innovations that are happening in Thailand or Korea, [as] we’ve noted. But since you’re there, you’re in the weeds with Thailand’s innovation — are there interesting things that they got on the regulatory part of it? On policy that has stoked a very interesting growth pattern in either industry, or engagement, or adoption? Anything that you could share that might be very interesting from a global point of view? That, “Hey, that works really well in Thailand, we should pay attention.” And what would that be?

Ghosh: Yes, quite a few things. I Definitely their work on the CBDC side. I think they’re one of the early central banks globally to lead that. That’s very well known. Maybe a less well-known example is how they work with the industry, really very closely. For example, we work very closely with Siam Commercial Bank’s innovation team called Digital Ventures to build a product called P2P which is a procure to pay product, which digitizes the processes between the bank and their primary customer at that point, Siam Cement Group, and the supplier base. That started the journey. That platform right now has 70 other corporates similar to Siam Cement Group. All the big corporates on the platform, over 7000 suppliers on the platform. 

Bank of Thailand has been very keenly and closely observing what goes on in this industry and has an intention to take this broader than just one bank because they feel that this digitization effort will really help the overall industry. What I find very fascinating and really good about most central banks, especially the Bank of Thailand, is that they work very closely with the industry and are not limited to banks. They understand what’s going on in this ecosystem. They leverage their strengths. Companies like ITMX — which is the payments rails for domestic payments in Thailand — the Thai Banking Association or other associations in Thailand — all are very well ingrained and speaking to each other. That’s what’s fascinating and that’s what’s driving the innovation, not just within one central bank, or one corporate, or one bank. It drives the whole ecosystem to do more. I find that approach quite a good one. We see a few other countries taking that approach. But many, many do this in silos. And that’s where the tide doesn’t rise for everybody at the same time.

Lau: Yeah, and certainly at Forkast, we’ve noted exactly where those spots are. With Thailand also, there’s just some interesting B2C engagement — thinking about the consumer, thinking about the end user, and then trying to stoke interest with crypto. I wonder what observations there are. Is it working? Is it exciting? Is it froth? I note that Thailand walked back that minimum of personal wealth requirement before you could be a retail investor in crypto because they wanted to test public sentiment. What is the public sentiment exactly?

Ghosh:Our view is definitely within the educated masses. There is a huge degree of awareness just broadly of the technology and of also cryptocurrencies. I find Thai people very entrepreneurial and I think they will jump into the game many times to participate. That’s also driving the interest within the public. We are not quite ready, in my view, for the entire country to be open to adopting crypto. It requires some degree of understanding before you invest. It’s not yet similar to buying a share of, let’s say, R3, or Visa, or PayPal, or whatever company. The markets are not stable yet, as we can clearly see. The average investor should be protected. But, of course, the opportunistic investor and entrepreneurial investor — the one which takes the effort — the sentiment there is that, “Look, we should be participating here.” And that’s what the Bank of Thailand and other regulatory authorities are trying to balance. That interest on one side, but also the need to protect the citizens.

Lau: And so, in contrast to efforts in the CBDC, if we’re going to see a digital baht — which is Thailand’s fiat currency — and we’re going to see the CBDC or the digital baht rolled out to its citizens, does that conflict with cryptocurrency holdings trading? What is the intersection of that like? Is it a conflict? Or is it more complementary?

Ghosh: It’s not a conflict. The digital baht is a representation of the baht we hold in our wallets or in our bank accounts. But it’s more programmable. The difference is not that money is not digital enough to pay. We have bank accounts. It’s entirely digital. I can move money to you. It’s all digital.

It’s not programmable. Digital baht will give the programmability. Similar to cash being an asset, it will be an asset class, as will Bitcoin be an asset class. But the digital baht really adds another layer and another effort to digitize money, movement and money into the economy. Especially in Thailand. If you go — as we have all been — to the nice tourist spots, a lot of our interaction is still in paper-based cash. All economies around the globe are at some stage of digitizing this cash, because cash has a lot of demerits. It needs management, it leads to fraud, corruption and so on. The digital baht is not a conflict to whatever a retail investor or an institutional investor does with other asset classes — in the crypto space or other digital asset classes.  We are working on which is related, but is not crypto — is digitization of assets which are like real estate or invoices. Those are digital representations, representations of assets as well. And both retail and institutional investors want to participate. You will see all asset classes remaining and the digital baht being complementary, but more focused on digitization of payments. 

Lau: Look, you’ve hit the nail on the head. Essentially, if you want to think about what CBDC is, it’s literally programmable money. And the people who are doing the programming are the central banks. And so for people who are just getting into the space, they might be apprehensive. What does programmable money actually mean? How does programmable money facilitate the current role that central banks play? And so, what is the thinking behind what is going to be programmed into this money? Give me some examples.

Ghosh: A good example is resulting from the pandemic, where many governments have issued grants to their citizens under a certain income, and allowing those grants to be used for the right purposes — whether it be food, medicines and so on. Today, if the government gives me a hundred dollars, there’s no ability for them to say, “That hundred dollars can only be spent for buying medicines or buying food.” I can totally go and gamble it in the casinos — although the casino charges here in Singapore are extraordinarily high to enter. 

But nevertheless, I think the point being that programmable money allows you to just program the conditions where the money can be used, and how the money can be tracked, and how the money can be monitored. It’s one — the usage of money.

Second, in economies where there is high corruption, it is the traceability of money as well. How that money exchanges hands. Cash is very hard to trace. You have heard enough cases in other economies in Asia where people find enough cash in pillows and mattresses and so on. That’s very hard to trace. Whereas money which is digital only and programmable can be traced [and] can be determined where to use — that usage is not only limited to necessary needs. It’s usage for wrong purposes, but you can track those and block those. You could program money and say, “Look, this digital baht, or this digital dollar,  cannot be used to buy drugs,” for example. So that’s where programmable features come in.

To be frank, I would say we were a few years away from full scale deployment of retail CBDC. But I think the leading central banks know the world, they need this technology and many of the global central banks are working with us to already start on their journey. But this requires political will. This requires a new degree of governance. It’s not just technology which needs to come together here for retail CBDC. And it requires participation from the economy, and the people in the economy, and the merchants, and consumers. So it’s a big effort.

Lau:The domestic infrastructure is one. And then you, of course, have the external infrastructure. Project Inthanon-Lionrock is that example. You’re working with Thailand on the CBDC. This Project Inthanon-Lionrock, that we’ve reported on at Forkast, is talking about the UAE, Thailand and Hong Kong initiatives. So all the CBDCs are now working together. Consensus’s Quorum joined the project. It is behind some of the CBDC efforts. It’s external to Thailand. So it’s back to the question of: how do you, as a permissioned blockchain, work with what is essentially a permission-less aspect of CBDC infrastructure? How is this project also evolving how permissioned and permission-less blockchains work together?

Ghosh: As I said before, it’s a matter of time when these will come together. Today, we work with platforms like Quorum or any other complementary platform by either; building technology ourselves, or working with partners. For example, on the identity side, we work with the Hyperledger Project on Sovereign. And there, we have put in the effort internally because we know that there are benefits of working with Sovereign, for example. 

However, in cases where we interact with Quorum or any other project, then most likely at this stage, we work with our partners who are building the product or the application. We are still the platform company and maybe the application provider is bridging the gap for now. The real interoperability, probably will come at some point. Again, not there yet. From our perspective, there’s not a high demand from our customers to focus on that. So we are trying to make our platform as better and as rich for our current customers and our future customers. But we’ll tackle the interoperability question for sure at some point.

Lau: What stage are we at with APAC adoption? What’s your perspective?

Ghosh: APAC overall is leading in many areas. From the central bank perspective, APAC’s definitely leading globally. You see that Europe, and North America, and even parts of Africa or Latin America are following what the central banks here are doing. From a trade perspective, also, there’s a big leading role we are playing. Also because APAC tends to be an important leg of any trade corridor. Whether it be China, whether it be parts of Vietnam, or Australia, or India — we have enough economies who are  huge parts of trade corridors. And places like Singapore are huge trade hubs. We see a lot of adoption by the local government in Singapore, whether it’s via agencies like IMPA, or Enterprise Singapore, or even the Ministry of Trade — they’re adopting blockchain technology. Overall, I’m very pleased with where adoption is. I think there is some froth in the market right now — from a retail perspective — because there is some interest in the volatility of the crypto side. But we don’t really get involved that much directly, primarily because of our role as a permission blockchain platform for businesses, which is what we are trying to solve. And where we see opportunity really is doing new things.

So, we have recently launched a product on multiparty confidential computing called Conclave. That’s very exciting for any data aggregators,  whether those be central agencies, or companies who connect with other companies and process data. That’s very powerful. We’re working with various companies in the region on that. We announced an acquisition, for example, of an electronic Bills of Lading company, which is a very critical document in the trade world. And we are building an SDK to make it easy for companies to digitize that document — when that document moves between corporates, banks, shippers and customs. We’ll be working with governments as well as companies on those, and so on. We started our journey with Corda, which was the distributed ledger platform. But we see the opportunity here to do a lot more with our customers because they are telling us what they need R3 to help them with.

Lau: If that’s not more of an indicator on adoption, I don’t know what is. You’ve not only helped expand, you’re setting up office and continuing to see the business case to help enterprises in governments and agencies to get deeper into blockchain. There is a business case for you to expand into Thailand. That is the best indicator that we can realistically see. The froth — let somebody else. What that represents — to your point — is it’s interesting. It has stoked interest. But it will also bring more interest to expand into what is the meat and potatoes of blockchain growth. And it’s not necessarily speculative nature of prices on crypto. It’s certainly what real governments’ agencies and enterprises are doing with blockchain. Thank you for sharing. That was a fascinating insight into how Thailand is thinking and extending blockchain integration in its own economy. It was great to have you on, Amit.

Ghosh: Thank you and great to be here.

Lau: Absolutely. I want to thank Amit for joining us, R3 Head of Asia Pacific there. I’m going to welcome you back. We’re going to get more updates when the time warrants. 

But audience, you’ve been great, great viewers. And I want to thank you for joining us on this latest episode Word on the Block. I’m Angie Lau, Forkast.News Editor-in-Chief. Until the next time.