A new digital currency called DLaK, short for "Digital Lao Kip," has recently been tested by the Central Bank of Laos (BOL). The aforementioned coin is the result of BOL's partnership with Soramitsu, a financial technology firm based in Japan

CBDCs, which central banks issue, are the digital equivalent of fiat currency. However, this cryptocurrency also makes use of the algorithm that all other cryptocurrencies do. At first glance, CBDC seems to be a hybrid of fiat money and cryptocurrency.

In order to launch their digital currency, Laos is using the Proof-of-Concept (PoC) method. You could think of this process as demonstrating viability by putting a method or concept through its paces in a real-world setting.

How the digital currency functions is explained below: The Central Bank of Laos creates and issues CBDC to commercial banks. The commercial bank will transfer this digital money to customers' personal accounts. When buying goods in stores, customers can use their smartphones to pay with CBDC.

The retail outlets will transfer these DlaK coins to commercial banks, who will then return them to the Central Bank of Laos. There is a closed cycle that money will follow that begins and ends at BOL. While testing the digital Kip coins, their functionality will be fine-tuned on an ongoing basis to make sure they can handle real-world scenarios. Following the completion of the testing phase, Laos will formally implement the CBDC system based on the evaluation results of the DlaK currency under the PoC mechanism.

Before partnering with Laos, the Soramitsu firm helped the National Bank of Cambodia introduce and roll out their digital currency, Bakong. Approximately 445,000 individuals had utilized this currency for consumer purchases by July 2022, following nearly two years of launch. There have been an astounding 12.7 million recorded transactions involving the Bakong currency, with a total estimated value of 7.2 billion USD.

A DLaK system, according to Soramitsu Company, is a tweaked version of the Bakong system, which is in use in Cambodia. Two Vietnamese neighbors, Laos and Cambodia, have put their national digital currencies to the test.
 

In over a hundred different countries, CBDC has been studied for potential deployment at various levels. Our country's government has tasked the State Bank with studying, developing, and testing blockchain-based digital currency in response to this trend. This is all a part of the strategy for the development of e-government from 2021 to 2025.

Citing CBDC, Mr. Safdar Khan, president of Mastercard's Southeast Asia region, told the press that the country's payment system will be modernized. When people aren't willing to spend as much cash, CBDC helps central banks keep their role and access to funds intact.

Using digital currency also reduces printing and transportation costs for the Central Bank. Another watershed moment in international money transfers will be the launch of a standardized system for payments between CBDCs of different nations.

According to Mr. Safdar Khan, strategists can evaluate CBDC and other new payment infrastructure options to determine which digital currency strategy is best suited to meet domestic needs. 

It follows that digital currency has an indisputable role to play in the country's effort to modernize. Vietnam must take the necessary steps to ensure the proper implementation of CBDC going forward.