The Bank of Thailand has set its agenda for a retail central bank digital currency with preliminary testing protocols scheduled to begin in the second quarter of 2022.
The central bank of Thailand announced this in a press release released Friday calling for public comments on the proposed CBDC roadmap.
As part of its plans, the central bank has issued a preliminary release report describing his CBDC thesis. The Bank of Thailand explained its motivation for creating a CBDC, arguing that the success of private stablecoins carries risks to “monetary sovereignty and financial stability”.
In March, Thailand’s top bank indeed considered Thai Baht Digital (THT) – a stablecoin issued by Terra – are illegalAt the time, the central bank called the country’s law that prohibits any other entity, except the central bank, from issuing currency in Thailand.
According to the Bank of Thailands report, the central bank will begin its CBDC development efforts by engaging with stakeholders, followed by a cost-benefit analysis to identify the opportunities, risks and challenges associated with a sovereign digital currency.
For the BoT, “flight to quality”, ie consumers who prefer CBDCs to fiat currency during market disruptions, remains a major risk factor. Therefore, the central bank is proposing to add withdrawal limits in addition to other transaction friction protocols to reduce the likelihood of bank runs when periods of market uncertainty arise.
As part of its preliminary conclusion, the BoT revealed that it left the door open for a CBDC, hence the reason for kickstarting its digital baht testing protocols.
During Friday’s briefing, Vachira Arromdee, assistant governor of the Financial Markets Operations Group at BoT, said the central bank sees CBDCs as a means of providing better 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 striking trend in the emerging sovereign digital currency ecosystem as participants strive for cross-border interoperability.
The Eastern Caribbean Central Bank recently launched a regional CBDC for four of the eight countries in the Eastern Caribbean Monetary Union.