The Central Bank of Solomon Islands (CBSI) and Japanese blockchain fintech company Soramitsu (Tokyo, Japan; President Kazumasa Miyazawa; Group CEO Makoto Takemiya) have begun a Proof-of-Concept (PoC) for a Central Bank Digital Currency (CBDC). Starting from November 1, 2023, the CBSI has been testing the system provided by Soramitsu for use cases related to domestic and foreign payments, including testing simulated international remittances.
The CBDC system, named Bokolo Cash, consists of a Hyperledger Iroha 2-based permissioned blockchain network where the CBSI issues the Bokolo Cash currency as a digital representation of the Solomon Dollar, available as tokens that can be bought by PoC participants. These tokens are accepted as legal tender within the confines of the PoC, with individual participants and businesses being able to send and receive Bokolo Cash between each other and receiving Bokolo Cash for payments. Bokolo Cash will be accepted at selected merchants in Honiara for use by PoC participants.
A Bokolo Cash wallet allows PoC participants and merchants to manage their CBDC tokens on their mobile devices. Within the PoC, users will be able to seamlessly scan a standardized QR code with their Bokolo Cash wallet to send instant cash payments to merchants or make peer-to-peer cash transfers. Users will undergo two-tier Know Your Customer (KYC) identity verification, including eKYC, keeping in line with international regulations. After the PoC is completed, Bokolo Cash CBDC tokens will not retain any value at merchants or within the broader ecosystem.
A ceremony for the CBDC demonstration experiment took place on November 28, 2023; Soramitsu gave speeches to the participants and provided screened and practical CBDC demonstrations. Soramitsu also explained the results of the CBDC experiment, the benefits that arise from introducing the CBDC to the Pacific island countries, and its effects on individuals, the financial and industrial sector, the government, and others.
The Solomon Islands Prime Minister Manasseh Sogabare, Finance Minister Harry Kuma, Central Bank Governor Luke Forau, Ambassador Extraordinary and Plenipotentiary of Japan to the Solomon Islands Miwa Yoshiaki, the Cabinet Secretariat of the Government of Japan, and JICA attended the ceremony. The central banks of Fiji, Vanuatu, Samoa, Tonga, Australia, New Zealand and Papua New Guinea were also present in the ceremony.
Prime Minister Sogavare said, “CBDC will improve safety, credibility, and privacy, provide financial services that leave no one behind, and bring sustainable economic development and technological development to the Solomon Islands, enabling a new era.''
Additionally, to simulate cross-border payment feasibility, a public blockchain, which offers global reach and interoperability, will be tested to complement the features of a private Iroha-based blockchain, which is tailored specifically to the regulatory framework of its managing jurisdiction. Bokolo Cash users will be able to bridge their CBDC tokens to the SORA network, a decentralized Substrate-based public blockchain network, where they can transfer Bokolo Cash tokens to other users within the network using QR codes through the Fearless Wallet mobile app that is compatible with SORA public blockchain and is also developed by Soramitsu, taking advantage of public blockchain security, availability, and speed. Within the scope of the PoC, Fearless Wallet is used to simulate cross-border transactions. Because SORA is not owned by any country, it is ideal for central banks to use without worrying about political exposure, so in the future, other central banks could bridge their CBDCs to SORA as well, which will aid remittances between multiple jurisdictions.
By embracing state-of-the-art blockchain technology and working with Soramitsu and the Hyperledger Iroha blockchain framework, the CBSI reiterates its commitment to modernizing the financial landscape of the Solomon Islands and fostering greater financial inclusion and connectivity in global financial systems. The Bokolo Cash PoC will provide valuable data to aid decision-making by CBSI as it endeavors to take full advantage of the latest technology for the good of the Solomon Islands. The modernization of the financial landscape has been enabled by the existence of a regulatory sandbox for innovative solutions, together with amendments to relevant sections of the CBSI Act 2012 to accommodate digital currency developments in the Solomon Islands.