It seems that the economy of Thailand is readying itself for greater use of digital currencies. This comes via a June 18, 2020 report which states that the Thai Central Bank is developing a new prototype for a payment system. This system will enable businesses to process transactions made with a central bank digital currency.
Thailand’s CBDC Explained
This pilot is, however, not limited only to the central bank digital currency. It also makes provision for the digital forms of other existing fiat currencies of other countries. This is to accommodate the CBDCs created by other nations in the world.
This system has already made great strides and has its first pilot participant already on the ground. According to the official press release, it will be tested by Siam Cement. More specifically, it will be integrated into the company’s procurement and financial management systems, along with those of its suppliers.
The project launches officially in July 2020, and the Bank of Thailand also intends to carry out a feasibility study. The pilot testing will likely conclude by the end of the year. If successful, there is room for expanded use of the payment system.
In the statement, the Bank of Thailand recognized and offered support to financial innovation and technology. This, they say, is necessary for preparing the business sector for the digital age. The stated purpose of this project is to broaden CBDC’s scope and adoption to wider audiences, beginning with large institutions.
By making use of the payment system, companies will have access to immense benefits. These include higher payment efficiency, such as increased flexibility for fund transfers. There will also be improved payment protocols between suppliers.
Once the project is completed, the Bank of Thailand intends to publish its findings and outcomes. This is, however, not the only project that the Central Bank has undertaken with regards to Central Bank Digital Currencies in recent times. Another one of these is Project Inthanon, which was done in collaboration with eight top financial institutions.
The project was involved with the study and development of proof-of-concept for domestic wholesale funds transfer. This was done with wholesale Central Bank Digital Currencies. This was concluded in January 2020, with a cross-border transfer prototype being developed with the Hong Kong Monetary Authority.
Blockchain Sees More Attention From Thai Government
Following the successful completion of the first stage of Project Inthanon, the Bank of Thailand invited more financial institutions to join in. Even Colin Pou, executive director of financial infrastructure at HKMA, stated that he was confident that the project would attract more participants. He also stated that the two banks would select real bilateral trades to conduct further testing.
This is significant as the two countries are on track to see increased bilateral trades. In 2018, this figure was $19.6 billion, and it is expected to top $20 billion in 2020. Krungsri, Siam Commercial Bank, and Kasikorn from Thailand have joined in the project, with Zhong An Technologies International joining from Hong Kong and participation from HSBC.
It is not just the Central Bank in Thailand that is giving attention to digital assets. In June 2020, it was announced that the public debt management office of Thailand would be distributing government saving bonds via blockchain. Bonds of $6.5 million in total value would be issued with this new pilot test.
This change in the Thai financial landscape has been impossible to ignore with the former secretary-general of Thailand’s Securities and Exchange Commission (SEC) Tipsuda Thavaramara speaking on the matter in 2019. According to her, she developed an interest in blockchain after reading a book on the subject recommended by her son. She now feels that while large institutions might take time to catch up, the technology could change the global economy.
The same year, Thailand’s National Legislative Assembly approved an amendment to its Securities and Exchange Act. The amendment would allow for securities issuances and tokenized securities to be created using blockchain technology. Besides this, it also paved the way for a new digital asset platform to be developed.
Do you think this pilot program will be successful? Will Thailand’s efforts to embrace blockchain continue? Let us know your thoughts below.