The Hungarian National Bank has announced that it is testing a new blockchain-based system for interbank transactions. The system, which is being developed in partnership with the Bank of Thailand, is designed to speed up and simplify cross-border payments. 

Hungary–Thailand partnership 

On Oct. 25, the Hungarian Blockchain Coalition and the Thai Fintech Association (TFA) signed the bilateral Memorandum of Understanding (MOU) to “share experiences, best practices… beneficial for direct cooperation,” according to a Facebook post from the Hungarian Embassy in Thailand.

The Bangkok Post reported on Oct. 29 that the international partnership would seek to develop better mobile payment systems, digital currency services, and e-commerce transactions. TFA president, Chonladet Khemarattana, stated in the same report that digital currencies are rapidly expanding and Thailand inhabits 20% of the world’s top crypto holders. 

Both countries have been resistant to adopting cryptocurrencies. György Matolcsy, governor of the Hungarian National Bank, had advocated for a ban on crypto trading with mining throughout the European Union. 

In Thailand earlier this year, the Thai Securities and Exchange Commission banned some aspects of crypto payment systems claiming they could destabilize the financial system. 

Benefits from blockchain technology

There are many potential benefits of using blockchain for interbank payments. For one thing, it could help to reduce costs and speed up transaction times; current transactions in traditional banks can take days to complete. In addition, blockchain offers a high degree of security and transparency as the distributed ledger is public, which could help to reduce the risk of fraud.

The Hungarian National Bank is currently working on a proof-of-concept for the new system, and it is expected to be up and running by the end of 2022. If successful, the system could be used by other central banks around the world.

A growing trend

The Hungary-Thailand alliance is just the latest example of how central banks are exploring the potential of blockchain technology. Earlier this year, the Bank of England completed a successful trial of a blockchain-based system for settling financial transactions. And in March, the US Federal Reserve announced that it was working on its own blockchain project.