OSL Prepares for Fund Launch Following License Approval

Japanese blockchain infrastructure firm Soramitsu has been contracted by the State Bank of Pakistan (SBP) to work on a pilot program for the digital Pakistani rupee. Pakistan originally announced its intention to pursue a central bank digital currency (CBDC) or digital rupee back in 2019. However, unlike other Asian nations such as China, Cambodia and Thailand, it has not taken much action to progress such a digital currency since then.SBP Governor Jameel Ahmad spoke at the Reuters NEXT Asia Summit in Singapore last month, outlining that the South Asian country was moving towards the establishment of a digital rupee and “building up [its] capacity” to launch it, and that a pilot project would be the next step. According to a report published by Nikkei Asia on Aug. 12, that pilot project is now underway.Photo by Hamid Roshaan on UnsplashCBDC specialistSoramitsu already has a wealth of experience in this field. In 2023, it signed a memorandum of understanding with the Laotian central bank to launch a proof-of-concept CBDC project, with the Tokyo-headquartered company going on to play a pivotal role in the issuance of Laos’ Digital Lao Kip.In Cambodia, it partnered with the National Bank of Cambodia to bring about the establishment of Bakong, Cambodia’s CBDC-like payment system. The company is also involved in CBDC projects in Papua New Guinea and the Solomon Islands, while spearheading a project aimed at enabling seamless cross-border payments among Asian countries. Japanese fundingIn the case of Pakistan’s pilot project, Soramitsu’s CBDC platform will facilitate the digital rupee while funding is being provided by the Global South Future-Oriented Co-Creation Project, an initiative from Japan’s Ministry of Economy that seeks to promote the formation of co-creation business models. Infrastructure, such as the internet and power, can be unstable in some parts of Pakistan. Consequently, the proposed CBDC will incorporate the ability for the user to transact with it using their smartphone, even if the phone doesn’t have an active internet connection. Digital transformationMasato Toriya, an associate professor at Tokyo University of Foreign Studies and an expert on Pakistan, outlined the behavioral change that would be required in getting Pakistanis in rural areas to use such a currency. He stated: “Many transactions in rural areas are cash-based, even for wage payments, and the rate of people with bank accounts is low."  However, cash-based systems have significant overheads, and it's thought that a CBDC could reduce such costs considerably. Last month, the Pakistan Institute of Development Economics published an article written by Dr. Ahmed Fraz, an assistant professor of finance with the organization, in which he claimed that the digital rupee pilot project is part of a “profound digital transformation” that Pakistan is moving towards.  Dr. Fraz asserted that a CBDC would enhance financial inclusion in Pakistan through the reduction of transaction fees, digitization of welfare payments and the financial inclusion of millions of unbanked citizens within the formal economy.He added that the digital rupee “is not intended to replace existing payment systems immediately but to complement platforms” and to modernize Pakistan’s financial architecture.

Japanese financial services company SBI Holdings has successfully established "SBI XDC Network APAC" in Japan, following through on an intended joint venture with TradeFinex, the driving force behind the XDC Network.Photo by William Warby on UnsplashJV company formationAt the end of September, the two companies outlined the starting point of an intended collaboration. Only three months later, SBI has come back with an update, a press release published on Dec. 27, to detail the progress that has been made thus far. According to that document, the companies established joint venture corporate entity SBI XDC Network APAC Co. Ltd. on Dec. 18. Among the directors of the new company is the President of BITPoint Japan, a wholly owned subsidiary crypto exchange business of SBI. Majority stakeholderSBI will be the majority stakeholder in the venture, holding 60% of the company’s shares while Dubai-based TradeFinex will be the minor partner, with a 40% shareholding. The press release outlines that the stakeholders will “work to expand the use case using the blockchain technology of the XDC Network in global economic activities centered on trade finance and cross-border payments, not just the handling of tokens.” With that, this enterprise-focused blockchain initiative aims to elevate the efficiency of trade finance. Going forward, it endeavors to broaden the applications of XDC Network's blockchain technology in global economic activities, with the emphasis remaining on trade finance and cross-border payments. The XDC Network, inaugurated in 2017, is a community-driven platform tailored explicitly for trade finance and payments. It introduces a smart contract system that streamlines global trade operations by tokenizing real-world assets (RWAs) such as bonds, trade assets and trade documents. Operating on a high-speed, secure and cost-effective blockchain, XDC Network aspires to transform the landscape of trade finance. SBI Group has been actively involved in various services related to the XDC Network, including being the first exchange in Japan to handle XDC tokens. This was made possible through a partnership with SBI VC Trade, a company within the SBI Group specializing in crypto asset exchange services. Corda platform proof of conceptLogo design has been completed for the new entity, while a website has also been launched. Not wasting any time, the new company has already initiated a proof-of-concept (PoC) experiment. The experiment involves connecting the XDC Network with the Corda platform from SBI R3 Japan and the Corda Bridge from IMPEL GLOBAL. The PoC experiment revolves around conducting fiat payments generated by business-to-business transactions in XDC via Corda and the Corda Bridge. Leveraging a hybrid blockchain with both private and public characteristics, the objective is to attempt to offer a seamless one-stop service that settles both private and public aspects simultaneously. The company claims that this approach achieves an efficient and smooth payment method for cross-border transactions, including international trade, outshining conventional fiat currency transactions. 

News emanating from the Central Asian republics of Kyrgyzstan and Kazakhstan in recent days points to further rollout and development of cryptocurrency sector infrastructure. A press release published on March 26 outlined that Kyrgyzstan is working on various initiatives in order to copper-fasten its position as a regional crypto hub. Those efforts include the advancement of digital asset regulation, enabling the launch of licensed crypto platforms and ongoing trials of legal frameworks relative to crypto. Photo by Steve Johnson on UnsplashA7A5 stablecoinOne initiative that may aid in the development of the digital assets sector in Kyrgyzstan is the rollout of the A7A5 stablecoin. A7A5 is pegged to the Russian ruble, with the token having been issued by Kyrgyz company Old Vector. The product was first launched in February, with the intention for it to be used on the A7 cross-border payment platform of Russian state-owned bank Promsvyazbank. Garantex, a Russian crypto exchange which had been sanctioned by U.S. and European authorities and was recently shut down, announced on Feb. 19 the listing of the A7A5 stablecoin. The stablecoin’s backers claim that it was issued “in complete accordance with the new national legislation - under the control of regulatory authorities and directed to an officially registered, regulated broker.” The stablecoin is being promoted on the basis of an annual yield of up to 20%, which has been established due to its link to the refinancing rate of the central bank of the Russian Federation. Kazakhstan crypto bank proposalMeanwhile, lawmakers in Central Asian neighbor Kazakhstan have proposed the creation of a national crypto bank. According to The Times of Central Asia, an English-language daily newspaper, Azat Peruashev, leader of the Ak Zhol political party within Kazakhstan’s lower house of parliament, put forward the proposal, which would implicate the involvement of the National Bank of Kazakhstan and a number of the country’s commercial banks. Peruashev addressed the proposal to Kazakhstani Prime Minister Olzhas Bektenov. However, the Central Asian country may have some fundamental issues to address before a crypto bank can become a reality. Currently, Kazakhstan has yet to establish a legal framework for the use of digital assets.  Last year, the authorities shut down 36 cryptocurrency exchanges which were deemed to have been operating illegally. In total, 3,500 illegal crypto exchanges have been shut down in Kazakhstan. Leading American crypto exchange business Coinbase faced a setback in the Central Asian country in November 2023 when the government cut access to its website within the country. While these crypto businesses have struggled to operate in Kazakhstan, Binance Kazakhstan successfully obtained a trading license from the Astana Financial Services Authority (AFSA) in September of last year. Earlier this month, the company added options trading and futures copy trading to the platform. Blockchain industry pioneer Kyle Chasse took to X to report on this most recent development. He suggested that given that 90% of crypto activity in Kazakhstan is off the books, the authorities are interested in launching a crypto bank so as to bring it all under their control.