Building Financial Innovation with Blockchain

Electronic Letter of Guarantee (e-LG on Blockchain): Transforms the Thai financial sector with blockchain technology

In the past 4-5 years, blockchain technology is one of FinTech technologies that is continuously evolving and expected to be seen as the most transformative and upgrading of financial services. Many people anticipate that blockchain would revolutionize financial system in various forms, such as CBDC, Digital Asset, Trade Finance, etc.


Key principle of blockchain is a computer network technology that can process and store data without the need for a centralized controller. There is a recording mechanism that can prevent tampering. As a result, the data in the Blockchain system will be transparent and verifiable. In the same time, the steps and costs of data validation can be greatly reduced, for instance, the original time for cross-border transfer is 3-5 days but with blockchain the time will be reduced to 3-5 minutes only and with lower fees. Thus, blockchain is expected to be a breakthrough which lead to new financial innovation and bring benefit to the world economy.


The Bank of Thailand (BOT) supports financial service providers for adopting blockchain for developing useful innovations in the financial sector through the implementation of Regulatory Sandbox. So far, many innovations and projects have been put into limited trials. However, the e-LG on Blockchain project is the successful example that reflects the full potential of Blockchain.


e-LG on Blockchain originated from the initiative of 6 commercial banks joining together to establish BCI (Thailand) Co., Ltd. (BCI) as a platform developer and later on extend the cooperation with other banks, government agencies, state-owned enterprises and other businesses to upgrade LG service to be faster and more efficient. Previously, requesting a paper LG at the bank took 3-7 days and there was a risk of forgery or being edited by unauthorized persons.  but with e-LG, the issuing takes only 1-4 hours and beneficiary also be able to manage the LG from various banks in one place and can prevent forgery of information in the document.


At present, 19 commercial banks and more than 169 government agencies and businesses are members of BCI. Total value of LG in the system accounted for more than two hundred billion baht. The e-LG on Blockchain project is considered to be a potential financial infrastructure that could create more financial innovations in the future.


Comparing to other countries in ASEAN, e-LG on Blockchain project is a successful example collaboration between coordination among public sector, the private sector, and technology companies in creating a limited blockchain network (Blockchain Consortium) to be the efficient financial infrastructure for the country.