Thailand currency

Kip-currency? | The interpreter

A rare flurry of headlines from Laos last month reported a new high-speed train linking the capital Vientiane to China, with the government heavily in debt after the drill.

But the country was also recently included in an inauspicious list. The International Monetary Fund has listed Laos among 30 underdeveloped countries at risk of economic collapse.

“We could see an economic collapse in some countries unless G20 creditors agree to accelerate debt restructurings and suspend debt servicing while restructurings are being negotiated,” warned the IMF in November. He called for the suspension of debt service obligations until things improve, noting that 60% of low-income countries are over-indebted, up from 30% just six years ago.

The US$5.9 billion high-speed train promises to boost Laos’ economy, passing through a series of tunnels, reducing time but also scenery. Reports suggest the government has incurred debt of at least $1 billion under the project, but at the same time the tiny nation of six million people is seeking domestic revenue in local currency kip of 28.963 trillion. dollars ($2.63 billion) next year. budget, or 15 percent of GDP. This is apparently a 20% increase from 2020, according to the Ministry of Finance.

“Mining and digital businesses will bring in about 2 trillion kips,” Deputy Finance Minister Phouthanophet Xaysombath reportedly said during a two-day planning, investment and finance meeting last month.

Mining seems conventional as a source of income – minus the mining part of the “digital business” hope. Laos also believes bitcoin mining could bring 2 trillion kips to the economy.

After first banning cryptocurrency trading and mining, the government then allowed six companies, four of which are under construction, to begin a trial, announced in September.

A trial with private companies paying the government seems like a way to limit the damage.

Wap Data Technology Laos, Phongsubthavy Road & Bridge Construction, Sisaket Construction Company, Boupha Road-Bridge Design Survey company, Joint Development Bank and Phousy Group. Notably, Phongsubthavy Road works in hydroelectricity, among other energy sectors, which opens up an interesting prospect for generating the electricity needed to support the cryptocurrency project.

A close observer speaking to the media said there had not been enough transparency in the decision-making and that no one except the Joint Development Bank had financial experience. However David Gerard, who wrote a book on cryptocurrency, 50ft Blockchain Attackand another on Facebook’s largely forgotten attempt at its own currency says limiting it to local businesses is a smart approach.

“There are 1 million bitcoin mining machines that no longer have a home in China and are looking for a buyer, for example,” he told me via email.

The financial system in Laos has remained relatively immature, the highest denomination of the kip is 100,000 LK, or about 12 Australian dollars. Laos established a stock exchange in 2011 and still has only 11 companies on the stock exchange. Unlike Cambodia or Timor-Leste, it does not use greenbacks in parallel.

There was a previous cryptocurrency attempt, called Bananacoin, where coins were backed by a specialized type of banana (really), with tokens based on the export price of 1 kilogram of bananas. It all went as smoothly as a truckload of fruit left homeless in the sun, suggesting a rationale for keeping things in the country, as this excellent recap from Forbes illustrates.

On the surface, the latest proposal is an elegant idea: using excess hydroelectricity to generate the power-hungry blockchain that underpins cryptocurrencies. Meanwhile, get the cheap machines from China. The country’s plan for more than a decade has been to export excess energy from dams built in Thailand, China and South Korea to its neighbors, using its “grounded, not landlocked” label ( although the roadblocks have drawn regular protests) .

A notice issued in November by the Minister of Technology and Communications, Boviengkham Vongdara, said that “companies operating or operating cryptocurrency trading platforms must be wholly owned by Laotians with stable financial status and must have sufficient capital to operate a cryptocurrency trading business,” according to a report in Lao Times. He went on to state that “a security deposit of US$5 million must be deposited with the Bank of Laos by any company applying to operate or serve as a platform for cryptocurrency trading.”

Operators must use at least 10 MW “with 115 kV or 230 kV of electricity supplied under a renewable six-year contract, subject to the ability of Electricité du Laos to supply electricity”. Transmission charges will be waived, but the cost will be a lump sum of $1 million per 10 MW. They will, however, apparently pay lower fares during the rainy season. It will charge trading platforms a one-time fee of $1 million and the tax will be 15%.

At this point, a trial with private companies paying the government seems like a way to limit the damage. Or as Gerard put it, “There’s nothing wrong with looking at weird ideas just in case.”

This is all good enough, only for one last problem: the dams themselves.

Shortcuts and cost cutting hampered construction. A hydroelectric dam collapse in 2018 killed at least 71 people, although the true cost in lives may be higher. And there are fears of more danger. A US expert who used satellite data to model the first collapse posted images on Facebook last month, saying another storm-triggered disaster was likely.

What price for a kip-to-currency coin then?