As interest in cryptocurrencies surges across Southeast Asia, Thailand is set to start testing a retail digital baht with the help of German payment giant Giesecke & Devrient. The Bank of Thailand (BoT) appointed the company to design a central bank digital currency, or CBDC, prototype in a project that will cost THB 10 million (USD 320,000), according to a release on May 27. Reuters reported earlier that the BoT planned to commence testing in the second quarter of next year, while the rollout might take three to five years.
Giesecke & Devrient, which is known for its banknote and securities printing business, launched a new software suite called Filia in 2019. It helps central banks create their own digital money based on either decentralized distributed ledger technology or traditional centralized database infrastructure. The firm, which counts 145 central banks as its clients, is talking with at least six of them about developing CBDCs, according to a Forbes report.
Although the digital baht might still be a few years away, the BoT said in April that it is critical to make preparations. “Even though there is no immediate need to issue a retail CBDC to the general public under current conditions, the issuance of a CBDC may be appropriate if privately issued digital currencies become widely adopted and systematically important in the near future,” the bank said. In 2019, Facebook shelved plans to launch a digital currency under pressure from regulators.
Meanwhile, Thai citizens are embracing decentralized digital currencies, lifting trading volumes on crypto exchanges to USD 2.5 billion in 2020, the BoT said. But the volatile nature of these coins makes it difficult to use them as a means of payment, prompting central banks across the world to explore safer and more reliable options. China commenced its research on a digital yuan as early as 2014 and has been testing the currency among individuals and corporate users in several cities since last year.
Sanjay Popli, CEO of consulting firm Cryptomind, said that CBDCs will make the financial system run more efficiently. “In the past, businesses would credit or debit cash through checks,” he explained. “With CBDCs, cash or cash equivalents can be transacted through any digital device, allowing for money to move at the speed of information.”
CBDCs also allow the central bank to track and monitor transactions, making it easier to spot illegal activity. “Unlike cryptocurrencies, CBDCs will be run on private blockchains and are not decentralized,” Popli said. This will raise privacy concerns. “Censorship and mutable transactions will be possible with CBDCs,” he said. As every transaction will be tracked, the government will know about its citizens’ income and how it is spent.
Meanwhile, Thailand has enacted regulations to ban online registrations for cryptocurrency accounts. The new rules will come into effect in September and require people who open new cryptocurrency accounts to submit identification documents in person, much like opening an account at any conventional financial institution.
