Thailand is quickly proving itself to be an innovative blockchain hub in the region. The Bank of Thailand (BOT) plans to roll out a digital currency of its own as a wholesale Central Bank Digital Currency (CBDC). It has been dubbed Project Inthanon, named after the highest peak in Thailand. CBDCs have gained traction around the world over the past year or so. So much so that the Bank of International Settlement (BIS) has ordered a study report on the matter and has been the basis of BOTs trialing in the scheme.
The idea of a central bank having its own digital currency, as a tool in their implementation of monetary policy is not new and various papers have been discussing this since the 1980s. In fact, many central banks in the world already provide digital money in the form of reserves or settlement account balances held by commercial banks. However, we seem to have reached the tipping point in digital currency with the proliferation of Bitcoins, Ethereum and other private digital tokens. There is also a general trend towards using less cash as the new generation has embraced e-payment system more so than the previous. This is also largely in part due to the technological advances such as smartphones that have allowed a much safer and transparent way of transferring digital money. We see this in Thailand with PromptPay and PayNow in Singapore. PromptPay in Thailand has almost 30 million users which makes up for one third of the population.
CBDCs then looks like a natural progression for the evolution of the economy and its underlying role in controlling monetary policy. It can be seen as a new form of central bank money. Meaning that it is a central bank liability, denominated with a unit of account and serves as a medium of exchange and a store of value. The distinction with digital currency is that it is by nature token-based whereas traditionally cash systems have always been account-based. Just as the problem with cash is counterfeiting, the same problem of “double spending” applies to digital currency. As many of us in the blockchain community agree, this is where blockchain can shine. We finally have the technology to overcome this safely and transparently.
Implementing CBDCs could be a good way of embracing the New Economy while still keeping elements of central banks relevant. Central banks still have a vital role in keeping the stability of the economy in check even though potentially the disintermediation power of the blockchain can bypass its role in the future. Before we reach this point though, society will need to be at a point where economic incentives and trust factors among the economic stakeholders have fundamentally shifted.
However, for our present purpose, there is no doubt that the implementation of CBDC by the BOT will enable faster and cheaper interbank settlements between local domestic banks. This project is also part of the Thailand Blockchain Community Initiative which involves 14 of the largest banks in Thailand, several major key players in the business and corporate sector and the BOT. Although this still looks like it is early days for the platform, it is clearly a good indicator that Thailand realizing the value of the blockchain.