August 20, 2021
The Bank of Thailand has announced the results of a survey it had conducted on retail Central Bank Digital Currency (CBDC).
In terms of its implications of Retail CBDC on the Thai financial sector, the report showed 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.
In this regard, the following characteristics are key:
(1) the CBDC shall be cash-like and non-interest-bearing, (2) intermediaries such as financial institutions shall be the distributors of CBDC to the general public, and (3) conditions or limits for converting CBDC shall be established. These guidelines are 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 predicts that the public’s demand for Retail CBDC will gradually increase over time and that CBDC could become an alternative payment option in the future, partially substituting cash and e-money,” the announcement said.
Based on the study and survey results, the BOT has established guidelines for the development and testing of Retail CBDC in a real-life environment (Pilot Test) under two tracks, as follows:
1) Foundation Track: To test and evaluate the usage of CBDC in conducting cashlike activities within a limited scale, such as accepting, converting, or paying for goods and services. This phase of testing is expected to begin in the second quarter of 2022.
2) Innovation Track: To test and evaluate the ways in which CBDC can be further developed for innovative use cases, by allowing for participation from the private sector and technology developers. The BOT is currently in the process of considering the format and criteria for participation.
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.