Bank of Thailand to begin central bank digital currency tests in 2022

Thailand’s central bank is calling for public comments on its proposed plan to launch a sovereign digital currency within the next five years.

The Bank of Thailand has set its agenda for a retail central bank digital currency with preliminary testing protocols scheduled to begin in Q2 2022.

Thailand’s central bank made this known in a press release issued on Friday calling for public comments on the proposed CBDC roadmap.

As part of its plans, the central bank published a preliminary report detailing its CBDC thesis. Explaining its motivation for creating a CBDC, the Bank of Thailand argued that the success of private stablecoins poses risks to “monetary sovereignty and financial stability.”

Indeed, back in March, Thailand’s apex bank deemed Thai Baht Digital (THT) — a stablecoin issued by Terra — to be illegal. At the time, the central bank cited the country’s law prohibiting any other entity save the central bank from issuing currency in Thailand.

According to the Bank of Thailands’s report, the central bank will begin its CBDC developmental efforts by engaging with stakeholders followed by cost-benefit analysis to ascertain opportunities, risks and challenges associated with a sovereign digital currency.

For the BoT, “flight to quality” i.e. consumers preferring CBDCs to fiat currency during market upheavals, remains a major risk factor. Thus, the central bank is proposing the addition of withdrawal limits among other transaction friction protocols to reduce the possibility of bank runs whenever periods of market uncertainty emerge.

As part of its preliminary conclusion, the BoT revealed that it was leaving the door open for a CBDC hence the reason for kickstarting its digital baht testing protocols.

Speaking during the Friday briefing, Vachira Arromdee, assistant governor of the financial markets operations group at the BoT, said that the central bank sees CBDCs as a means of providing greater access to financial services in the country.

According to Arromdee, the digital baht project could be implemented within the next three to five years. Members have until June to submit their comments on the BoT’s plans for a CBDC.

As previously reported by Cointelegraph, the BoT is also part of a CBDC coalition involving Hong Kong, China, and the United Arab Emirates. Indeed, regional CBDCs are becoming a noticeable trend in the emerging sovereign digital currency ecosystem as participants look towards cross-border interoperability.

The Eastern Caribbean Central Bank recently launched a regional CBDC for four of the eight nations in the Eastern Caribbean Currency Union.