Thailand’s central bank is the latest to announce plans to test a retail digital currency or CBDC, which it expects to launch by late this year to mid-2023. Digital currencies have been gaining popularity in recent years as an alternative to traditional fiat currencies.
The Bank of Thailand (BOT) has announced that the retail central bank digital currency (CBDC), which is yet to be released, will be used in cash-like transactions such as paying for products and services within a limited number of locations and among about 10,000 retail customers.
CBDC pilot project
This is the foundation track of the pilot project, which aims to assess the system’s efficiency and safety, including the technological design. Meanwhile, the innovation track will focus on programmability to facilitate the development of innovative use cases for CBDC, resulting in new financial services.
“This will help the BOT develop and improve the design of CBDC to suit the Thai context in the future. The BOT will allow the private sector and the public to participate in presenting business use cases for Retail CBDC via a “CBDC Hackathon,” the announcement added. Those who are interested in joining the Hackathon can apply from 5 August to 12 September 2022 via the BOT website.
BOT Deputy Governor Vachira Arromdee said that the BOT has been focusing on the development of retail CBDCs and sees their potential as the foundation of the future financial system. Thailand’s BOT was quick to recognize the importance of CBDCs as a novel financial infrastructure, being one of the first central banks to do so.
According to them, CBDCs can increase opportunities for businesses and the general public to have more convenient and greater access to various financial services with lower costs.
As early as 2020, central banks worldwide have been actively researching and testing CBDCs. Some countries, such as the US, China, Singapore, Japan, Australia, Sweden, and the Bahamas, have even progressed to the stage of piloting or launching their own CBDCs. Early this year, India also announced its plans to launch a digital version of the rupee by the next financial year.
Digital currencies show promise
Digital currencies show a lot of promise and the ability to drastically influence global monetary policy, according to a study by the Asian Development Bank in collaboration with Visa. The report also recommends financial institutions build their CBDC roadmap around new technologies as they open new opportunities to develop products and services.
From consumer-facing wallets to tech that custody CBDC keys and accompanying KYC and AML tools for digital payments transactions, financial institutions have a lot to consider as they develop their CBDCs.
“For any technology to gain widespread adoption, it must work for people in various locales and contexts. As more central banks actively explore CBDCs, financial institutions also need to invest in digital currency education, explore various use cases, and prepare their digital currency strategy,” said Catherine Gu, Visa’s Central Bank Digital Currencies Lead.