Bank of Thailand CBDC to be tested in Q2 2022

By Raffaele Redi

The Bank claimed the experiment will be limited to some cash-like activities

Bangkok Cityscape, business district with high buildings at dusk                                 
BoT predicts public demand for retail CBDC will increase over time – Photo: Shutterstock
                                

​Following its study on the implications of using retail central bank digital currency (CBDC), the Bank of Thailand (BoT) has announced its intention to commence a pilot test use of CBDC to evaluate its impacts and potential, to begin in the second quarter of 2022.

The Bank stated that the first phase of its CBDC experiment will be conducted on a limited scale, to be applied only to some cash-like activities such as accepting, converting, or paying for goods and services. 

The second phase of the experiment will test and evaluate how CBDC can be developed for innovative use cases, which would allow for participation from technology developers and the private sector.

“The BoT will assess all results and associated risks from the pilot test to ensure that retail CBDC is beneficial to the public, business sector, and country as a whole, and does not undermine economic and financial stability in the future,” stated the bank.

Implications of retail CBDC on Thai financial sector

The BoT announcement came after a series of surveys and studies had been conducted by the bank, which disclosed the results of its research on Thursday.

“The study results show that for the design and development of retail CBDC to have maximum potential, the CBDC must not adversely affect monetary policy transmission, financial institutions or overall financial stability,” the bank stated.

Based on the results of the study, the bank has established a series of guidelines “to ensure that the CBDC does not compete with deposits or cause runs on financial institutions, and preserves the role of intermediaries in collecting deposits and providing credit as well as managing liquidity in the overall financial system”.

The BoT’s recommendations include stipulating that the CBDC will be cash-like and non-interest-bearing; that intermediaries such as financial institutions are the distributors of CBDC to the general public; and that conditions or limits for converting CBDC are established.

Survey results

The BoT said that the feedback it collected via a public survey and focus group discussions were almost entirely positive, although some respondents advised the bank to focus on promoting consumers’ knowledge and understanding of the benefits and uses of CBDC, particularly how it differs from current electronic payment (e-payment) options.

The results were disclosed by Vachira Arromdee, assistant governor of the BoT, and were based on ‘The Way Forward for Retail Central Bank Digital Currency in Thailand’, which was published in April 2021.

Warning and rules

According to BoT predictions, the public’s demand for retail CBDC will gradually increase over time. It considers that CBDC could become an alternative payment option in the future, partially acting as a substitute for cash and e-payments.

However, the bank also recently released a warning on the usage of cryptocurrencies as means of payment. It stated: “The BoT does not support the usage of digital assets as a means of payment for goods and services as digital assets are not legal tender.”

Recently, the board of the Securities and Exchange Commission, Thailand approved new rules prohibiting digital asset exchanges from providing services related to certain types of cryptos.

These include meme-themed tokens, non-fungible tokens (NFTs), fan tokens and any digital token utlised in a blockchain transaction issued by “digital asset exchanges or related persons”.

Further reading: Two-thirds of people would use a central bank digital currency 

Further reading: Nigeria to trial CBDC as 81 countries explore the concept 

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