The Bank of Thailand is looking at using DeFi in its digital batht

Thailand's central bank is studying smart contracts and implementing decentralized finance (DeFi) for its national digital currency, the digital baht.

Vijak Sethaput, a senior developer at the Central Bank of Thailand (BoT) for the Inthanon digital currency project, discussed the progress of the country's CBDC in an interview with the Official Forum of Monetary and Financial Institutions on August 13.

Sethaput is joined by Sky Guo, CEO of New York-based blockchain firm Cyprusherium, which focuses on global CBDC implementations and interoperability.

In the interview, Guo said that global jurisdictions could use the DeFi model to allow qualified parties to issue digital assets backed by real assets such as real estate and shares and use them as collateral for loans in CBDCs. According to management, such developments could bring huge liquidity to the economy.

Sethaput said the central bank is following recent developments in the DeFi industry, however, before attempting to adopt the new technology to Thailand's native cryptocurrency, it needs to address two major DeFi issues - customer identification and privacy.

In an interview, Sethaput stated that the implementation of smart contracts is a key element of the next phase of the Inthanon project:

"We studied the functionality of smart contracts as described by Sky. We mimic the life cycle of a bond so the bond itself can pay coupons and can be traded between parties, we have something called redemption so it can be sold and then redeemed at another time as well as during trading.

BoT's comments come amidst the growing hype around the DeFi industry. DeFi is a new tool that aims to enable cryptocurrency entrepreneurs to recreate traditional financial instruments in a decentralized architecture, outside the control of companies and governments. The DeFi industry is breaking records in 2020, with companies around the world increasingly putting money into the crypto sector.