August 26, 2023

Thailand Banks Launch CBDC Payment Service

The Bank of Thailand revealed its intentions to launch a retail central bank digital currency (CBDC) pilot project in a regulatory sandbox this month. This is the first central bank to look at the possibilities of retail CBDC for the future of their economic environment. Last year, the project was delayed; now, it looks to enlist bank employees and nearby businesses for the pilot.

According to local media, three payment providers will participate in the project, and each provider has launched its app available to selected users, including a QR code scanner and a wallet. The project will cover up to 10,000 users and run through August 2023. The Thai central bank will partner with the Bank of Ayudhya (Krungsri), Singapore-based payments service provider 2C2P and Siam Commercial Bank.

Collaboration of the Bank of Thailand with CBDC

In 2018, the Bank of Thailand announced that it was creating a wholesale CBDC that would use R3’s Corda platform, according to experts at Crypto minded. The Bank of Thailand partnered with eight financial institutions on the CBDC project, which included Krung Thai, Bangkok Bank Public, HSBC, Standard Chartered Bank, and Siam Commercial Bank. According to the published report, R3 was defined as a distributed ledger technology (DLT) platform designed to work within the financial service sector and use a permission system to restrict data access to required participants only.

The Bank of Thailand took part in the Project Inthanon-Lion Rock project with the Hong Kong Monetary Authority and participated in the bridge cross-border payment initiative with the Bank for International Settlements.

On August 5, 2022, the Bank of Thailand (BOT) first announced that it would launch a pilot study of retail CBDC. BOT announced that the pilot would be tested in a limited retail setting with 10,000 players by the end of 2022. BOT noted:

“The BOT will assess the benefits and associated risks from the Pilot to formulate related policies and improve the CBDC design in the future.”

Furthermore, to boost the growth of the digital token industry, the Thai government waived corporate income tax and value-added tax for companies issuing investment tokens. A government spokesman highlighted that Thailand might lose over $1 billion in income, but it anticipates investment tokens to bring in $3.7 billion over the next two years.

Details of the Pilot Programme

The new pilot program would be in addition to earlier wholesale CBDC experiments and retail CBDC proof-of-concept research, both of which were supported by private enterprises. The pilot will be done on a modest scale with a limited number of participants as part of a study to evaluate the possibilities of technology and design.

The pilot was separated into two phases. The first is called the Foundation track, where the CBDC will be tested in cash-like activities such as purchasing services and products. This pilot will be confined to specific locations and will only involve 10,000 retail customers. The Foundation track phase will test the system’s safety and efficiency. The second track, the Innovation track, will focus on presenting innovative use cases for CBDC.

The public and private sectors will be granted a chance to represent their use cases for the retail CBDC through a CBDC Hackathon, where selected participants will receive mentorship from experienced financial institutions.

According to the announcement, Krungsri is one of the first financial institutions to start operating a pilot test for retail CBDC. The report noted:

“The bank invited its staff and around 100 merchants near Krungsri’s headquarters to test the digital currency. The bank expects the number of participants to increase and set a target of 2,000 staff. Furthermore, the project will broaden the initiative to include its Ploenchit branch.”

Managing Director of Krungsri Innovate, Sam Tanskul, said that staff members participating in CBDC Krungsri must install a mobile banking app and add money to it as an e-wallet. From there, they can pay for goods and services at participating stores by scanning a QR code.

Tanskul added: “The bank educated merchants and staff about retail CBDC before launching the pilot project, and the testing has run smoothly. Krungsri has not set a limit in terms of transaction value, focusing instead on stabilizing the payment system, particularly during peak periods.”

If the payment service is functional and stable, it could help ease the intensity of transactions made under the PromptPay service during peak periods. Sam Tanskul noted: “The bank needs to determine a strategy to differentiate retail CBDC from [its] PromptPay service. Adopting digital baht should benefit the country’s digital economy in the long term.”

Moreover, Siam Commercial Bank’s pilot will operate like Krungsri, with staff and neighboring merchants participating. The testing in a regulatory sandbox is expected from June to August 2023.

About the author 

Elle Gellrich

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