Bank of Thailand Issues Warning Against Thai Baht Digital (THT) Stablecoin

Bank of Thailand Warns Against THT Stablecoin, Cites Legal and Financial Risks

The Bank of Thailand (BoT) has issued a strict warning against the use of the Thai Baht Digital (THT) stablecoin, emphasizing potential risks and declaring its use illegal. According to a report by the Bangkok Post on March 18, the central bank highlighted concerns over cyber theft, money laundering, and potential fragmentation of the Thai Baht system.

THT Stablecoin: An Overview

THT is a baht-denominated stablecoin minted on the Terra platform. Each unit of THT is pegged to the Thai Baht (THB) at a 1:1 ratio, aiming to replicate the value of the fiat currency digitally.

About the Terra Platform:

• Minting Stablecoins: Terra has produced multiple stablecoins, including TerraUSD and TerraKRW, designed for e-commerce transactions.
• Chai Payment App: An e-commerce wallet powered by Terra stablecoins, predominantly used in Asia.
• Established in South Korea: Launched in 2018, Terra raised $25 million in January 2021 from prominent investors like Coinbase Ventures, Pantera Capital, and Galaxy Digital.

The Bank of Thailand’s Concerns

The BoT has outlined several key risks and reasons for its strong stance against THT:

1. Legal and Regulatory Risks:

   • THT lacks legal assurances or protections, exposing users to significant risks in case of disputes or cybercrimes.
   • Its use contravenes Thai law, as stated in the BoT’s announcement.

2. Cyber Theft and Money Laundering:

   • Stablecoins like THT may be susceptible to cyber theft, posing a threat to users’ assets.
   • Without proper regulation, THT could be exploited for illicit activities, including money laundering.

3. Fragmentation of the Thai Baht System:

   • The BoT fears that THT’s adoption could undermine confidence in the Thai Baht, leading to a fragmented currency system.
   • Such fragmentation could weaken the central bank’s ability to manage the nation’s monetary policies effectively.

BoT’s Stance on Stablecoins

The warning issued by the Bank of Thailand specifically targets THT but applies to all Thai Baht-denominated digital currencies. The central bank has advised the public to refrain from using THT for any transactions or investments.

Official Statement:

The BoT declared that the use of THT is illegal, cautioning citizens and businesses against engaging in any activity involving the stablecoin.

Thailand’s Progress in CBDC Development

While the BoT warns against private stablecoins like THT, it is actively pursuing its own Central Bank Digital Currency (CBDC) to modernize the nation’s financial system.

Key CBDC Developments:

1. Third Phase Underway: In July 2020, the BoT entered the third phase of its CBDC project.
2. Cross-Border Collaboration: The BoT partnered with the Hong Kong Monetary Authority to test CBDC transactions for international fund transfers.
3. Business Applications: The Thai CBDC aims to enhance payment efficiency for businesses and facilitate flexible fund transfers.

The BoT believes that a state-backed CBDC can provide the benefits of digital currencies while maintaining trust in the Thai Baht and ensuring regulatory compliance.

The Future of Stablecoins in Thailand

While the BoT’s warning against THT highlights regulatory and financial stability concerns, the move reflects broader challenges faced by private stablecoins worldwide.

Implications:

• Regulatory Scrutiny: Stablecoins will likely face increased scrutiny as central banks prioritize their CBDC initiatives.
• Digital Currency Competition: The rise of private stablecoins may accelerate the development and adoption of CBDCs.
• Trust and Adoption: Public trust in stablecoins will depend on clear regulations and protections.

Conclusion

The Bank of Thailand’s warning against THT stablecoin underscores the challenges posed by private digital currencies in regulated economies. While the BoT acknowledges the potential of blockchain technology, it is clear that the central bank prioritizes the integrity of the Thai Baht and the nation’s monetary system.

As Thailand advances its CBDC project, it remains to be seen how the regulatory landscape will evolve to balance innovation with financial stability.

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