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The Bank of Thailand (BOT) has progressed to the next stage in its exploration of a retail central bank digital currency (CBDC), although it is playing down the prospect of actually issuing one.
The central bank has said in an announcement that it "deems it necessary to extend the scope of retail CBDC development to a pilot phase”, even if it will not eventually issue one.
“Central banks around the world have focused closely on the development of retail CBDC and see the potential of retail CBDC as being the foundation of the future financial system,” said Vachira Aromdee, deputy governor of the BOT.
The pilot phase will now be split into two stages. The first of these will be a foundation track that will assess the system’s efficiency and safety, including the technological design.
During this phase, CBDC will be used in conducting cash-like activities, such as paying for goods and services. The trial will be limited in scale and geographical area, including 10,000 retail users selected by the BOT along with three companies: Bank of Ayudhya; Siam Commercial Bank; and 2C2P (Thailand).
This phase of testing will adopt technology developed by Giesecke+Devrient (G+D) and is expected to begin at the end of 2022 and last until mid-2023.
G+D has already partnered with the Bank of Ghana for its CBDC venture.
Announced in March, this involved the central bank assessing a CBDC option that could be used either through a digital wallet app managed by a financial institution or a physical product, such as a contactless card that can be used offline and by unbanked consumers.
“G+D’s technology has characteristics that are consistent with what the BOT aims to test, especially with regards to data privacy and security,” the company said in a statement on LinkedIn.
The Bank of Thailand is also launching an "Innovation Track" as part of its pilot phase. This will focus on programmability, facilitating the development of innovative use cases for CBDC, resulting in new financial services for a wide range of customers.
This is intended to help the BOT develop and improve the design of CBDC to suit the Thai context in the future.
For this part of the project, the BOT will allow the private sector and the public to participate in presenting business use cases for retail CBDC via a so-called CBDC Hackathon, which is similar to that used by neighbours Singapore at its Fintech Festival last year.
Those who wish to participate in the Hackathon can apply between August 5-September 12, 2022.
Selected participants or teams will have access to mentorship from experienced financial institution participants from Project Inthanon, with further details due to be announced.
Despite new developments, the BOT has cautioned that it “does not have plans to issue retail CBDC as the issuance requires a thorough consideration of benefits and associated risks for the financial system”.
Although the central bank has been ambiguous about whether it will ever issue a CBDC, it has taken tough action on private digital currencies so far, banning the use of crypto-assets for payments in April of this year.
