Thailand’s central bank unveils plans for digital currency pilot in 2022

The Bank of Thailand (BOT) has revealed it intends to begin a retail central bank digital currency (CBDC) pilot study in the second quarter of 2022.

According to Regulation Asia, the BOT made the decision after it recently published the results from its CBDC consultation that it began earlier this year. The paper sought feedback on the benefits, challenges, opportunities, risks, implications and industry status of retail CBDC on the financial landscape of Thailand.

Based on the results of the consulation, the BOT said that it has established guidelines for the testing and development of CBDC in a pilot test. The test will be undertaken through two tracks – the first, a foundation track, will test and evaluate the usage of CBDC in conducting cash-like activities within a limited scale. This will involve accepting, converting or paying for goods and services.

The second track will be an innovation track and will test and evaluate the ways in which the CBDC can be further developed for innovative use cases. This track will allow private sector participation and the BOT claims it is currently in the process of considering the format and criteria for participation.

The BOT has underlined that it aims to assess all results and 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 lead to financial uncertainty in the future.

The Thai CBDC will be cash-like and non-interest bearing, the BOT claims, and financial institutions will be the distributors of CBDC to the general public.

The BOT has said these guidelines are to ‘ensure that the CBDC does not compete with deposits or cause runs on financial institutions’ and also preserves the role of intermediaries in collecting deposits and providing credit as well as managing liquidity in the financial system.

According to the central bank, it predicts the public demand for retail CBDC will ‘gradually increase over time’ and that it could become an attractive alternative payment option in the future.

The BOT said, “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.”

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