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The existence of a domestic instant payment system does not set aside use cases of a general-purpose central bank digital currency (CBDC), the Thai central bank governor said at DC Fintech Week.
DC Fintech Week kicked off on Monday (October 18) with its first day centering around CBDCs.
Speaking on the "Central Bank Innovation - Building Bridges with CBDCs" panel, Vachira Arromdee deputy governor of the Bank of Thailand, said that CBDCs are a new foundation for future payment systems.
The country started to look at the possibility of a CBDC from the wholesale side in 2018 to improve cross-border payments and reduce reliance on correspondent banking.
Thailand is now participating in the mBridge project, a cooperation between the Bank for International Settlements (BIS), and the central banks of Thailand, Hong Kong, China and the United Arab Emirates, with an aim to build a multi-CBDC platform for international payments.
The Bank of Thailand began this year to also examine the possibility of a retail CBDC.
Even though Thailand already has a successful instant payment service called PromptPay, Arromdee believes that the technology behind the CBDC will be the foundation for new payment systems.
“When we use an example of a use case, we always compare this to a typing machine and a computer. In the beginning, when you do a report, it does not matter if you use a typing machine or a computer. Later you find out that a computer can do much more than just write the report,” she explained.
The CBDC technology has the potential to transform the payment system similar to that of the computer, she concluded. However, Arromdee did not elaborate further as to what "computer"-like additions a CBDC can do over existing payment systems.
Although Thailand is still at a relatively early stage of examining CBDCs, further north, China is expected to introduce a general-purpose CDBC next year.
Speaking at another session, Mu Changchun, director-general of the Digital Currency Institute, People's Bank of China (PBOC), said there are various use cases that prompted the country to develop a retail CBDC.
With the digital yuan, China aims to improve financial inclusion, increase the efficiency of the central bank payments system, and provide a back0up for retail payments systems that are currently dominated by two private-sector giants — AliPay and TenPay, Changchun explained.
The digital yuan project has been followed closely by Western countries, with some worrying it would give too much control to the Chinese government over their citizens’ financial transactions.
Changchun defended the privacy concept included in the digital yuan project as such that strikes the right balance between protecting users’ privacy while allowing traceability of illicit fund transfers.
The so-called "managed anonymity" provides anonymity for small value transactions, but it offers traceability for high-value transfers, according to Changchun.
In the case of small-value transactions, the PBOC will collect information only on phone numbers, he assured, pointing out that access to identifying information will be protected under China’s privacy protection law. That law allows the PBOC and law enforcement agencies access to personal information linked to specific telephone numbers only if they present a legal warrant to the telecom companies.
