The Spring Development Bank (SDB), the online blockchain bank run by the National Unity Government (NUG), will open to the general public later this month. Since its soft launch on July 22, the bank’s beta version had 4,000 customers with the equivalent of $850,000 USD in assets under management. With 25,000 people in the queue, some 29,000 people signed up in the first two weeks alone.
By the end of February 2024, the SDB aims to have some 100,000 accounts with some $50 million USD under management, and some 500,000 accounts by August 2024. With an estimated $500 USD per account, that could put SDB assets under management conservatively around $250 million USD in its first year.
The bank is under the legal supervision of the NUG Interim Central Bank, which was established on June 1, and currently has a management team of roughly 50 individuals with experience in banking, fintech, asset management, cyber security, and marketing. There are now some 150 customer service representatives that will increase, with its customer base.
In September 2023, SDB will sell 10 percent of its shares to investors, in its initial coin offering, in order to raise some $10 million USD. Of that, nine million dollars will be immediately remitted to the NUG to support its revolution, one of the largest single injections of funds. The remaining one million will be invested in the bank’s operations and reserves.
With $50 million USD under management, the bank will start to be profitable, with immediate fees from currency swaps, administration fees and the spread between deposits and loans. The bank has several critical functions. First, it will serve as a full service bank providing a range of services, including deposits, currency swaps, remittances, gold savings, and three, six or 12 month term deposits.
For now, the bank deals in kyat, USD, Singapore dollars and Thai baht. But it will expand to include British pounds (GBP), Euros, Japanese yen and South Korean won. The rates for services and interest are extremely competitive by industry standards.
In phase two of the bank’s development, it will offer digital debit cards and increase its merchant payment services. While the focus right now is providing a range of banking services for individuals, the commercial offerings and private banking services for high-net-worth individuals will be phased in next year.
SDB expects to peel away customers from the state-controlled and crony-controlled private banks, diminishing revenue for the military regime. And in doing so, it will help citizens avoid the regime-controlled banking system within the country. In August, the regime appointed 20 more officers to oversee Myanmar Economic Bank operations, augmenting officers previously deployed there and to privately-owned banks.
The regime’s monitoring of bank transactions has been an effective tool at controlling the population and stemming the flow of funds to the NUG, the People’s Defense Force (PDF), and Civil Disobedience Movement (CDM).
There is enormous potential for the SDB to service the business community. Regime-imposed currency controls force companies to sell foreign exchange at a fixed rate, but state banks sell what little foreign exchange there is to importers at close to black market rates.
U.S. Treasury Department sanctions on the Myanmar Investment and Commercial Bank and Myanmar Foreign Trade Bank, have really hurt their ability to use USD. The recent announcement by Singapore’s UOB (United Overseas Bank Limited) that it will stop clearing for Myanmar banks makes foreign transactions even more difficult.
In sharp contrast, SDB will be tied to the SWIFT (Society for Worldwide Interbank Financial Telecommunications) global transfer system. The second function of the bank is to raise funds for the revolution, which it will do in a number of ways. First, the SDB will be a one-stop shop for a range of products, including the bonds and popular land auctions. In the future, the NUG will auction off shares in certain companies owned by the two regime-owned conglomerates. Title and deeds will be delivered directly into accounts through non-fungible tokens.
The first tranche of Spring Bonds come due this November. And the NUG needs to be able to repay the principal on the zero coupon bonds if people opt to redeem them. But the hope is that people roll them over into new bonds or other NUG products, through the SDB.
The new Spring Lottery will commence in October and be open to SDB account holders only. The purchase of tickets will be automatically deducted from accounts, and likewise, the winnings automatically deposited. The Spring Lottery, through SDB, will offer a range of lottery products for different market segments.
The lottery is important for one key reason: it will deliver to the NUG a steady monthly income. The conservative estimate right now is $3 million USD, which will directly support the war effort. SDB will be the internal revenue collection point for corporate and local tax collection; the latter now in 38 townships.
The SDB will have a donation function on their dashboard and people will be able to support individual PDF units. It will also offer some tailored products. For example, they will be offering special land sales and auction shares in a major power station to support the new Karenni State revolutionary government. The goal is to capitalize on developments on the ground.
Finally, the SDB will support the NUG war, fighting and governance. Each PDF and government ministry will have their own account within SDB where their monthly budget will be deposited. This should dramatically increase the functioning of the government. There will be some growing pains, but the SDB leadership is confident that the bank will thrive due to patriotism, the ability to connect the diaspora community, and the regime’s abject incompetence in running the economy, in general, and banking sector, in particular.
Zach Abuza is a professor at the National War College in Washington, DC. The views expressed here are his own and do not reflect the opinions of the National War College or Department of Defense.
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