The Bank of Thailand announced on Thursday that its retail central bank digital currency, or CBDC, will undergo trials in the second quarter of next year. The digital baht will be used for “cash-like activities within a limited scale,” including money transfers and payment for goods and services.
The digital currency will be cash-like and non-interest-bearing. It will be distributed to the public by financial institutions, which will establish conditions and limits for converting CBDC into other forms of currencies.
“These guidelines are to ensure that the CBDC does not compete with deposits or cause runs on financial institutions, and preserve the role of intermediaries in collecting deposits and providing credit as well as managing liquidity in the overall financial system,” the central bank said in its announcement.
While the full rollout might take three to five years, the Bank of Thailand expects demand for its retail CBDC to surge over time, adding that the digital currency has the potential to become an alternative payment option in the future and “partially” substitute cash and e-money.
The news comes two months after Thailand’s central bank appointed German payment giant Giesecke & Devrient to design a CBDC prototype in a project that costs THB 10 million (USD 320,000).
In Southeast Asia, Cambodia is taking the lead in the CBDC race. Cambodia’s central bank launched its pilot interbank CBDC project in October 2020. It links together 11 domestic commercial banks and payment processors, with the aim to foster financial inclusion and interbank transfers, facilitating real-time, electronic transactions of the Cambodian riel. The country’s CBDC project has so far amassed 5.9 million users. Total transactions amounted to USD 500 million in the first half of this year, per Nikkei Asia.
This is one of two projects—the other is in the Bahamas—that have reached the implementation stage, according to a report published by PwC in April. China commenced its research on a digital yuan as early as 2014 and has been testing the currency for personal and business use in several cities since last year.
Indonesia’s central bank is also preparing its own CBDC. Other major economies, including Singapore, Malaysia, and Vietnam, are exploring similar initiatives, some solely for wholesale use.