Testing retail digital currencies involves conducting cash-like activities, such as payment for goods and services. (Document photo)
The Bank of Thailand (BoT) plans to spend more time developing a Retail Central Bank Digital Currency (CBDC) to ensure it provides additional benefits to the financial system through proper risk management.
Several central banks, including the BoT, have developed retail CBDCs, but none have officially implemented the currency in the market.
The development of a global retail CBDC is expected to take more than five years to reach the market, said Central Bank Governor Sethaput Suthiwartnarueput.
He said on Friday that regulators want to better understand the benefits and risks of retail CBDCs, including whether there are additional benefits with respect to PromptPay, the country’s digital payments infrastructure system. Sesaput said the central bank has yet to see such additional gains.
A currency should ultimately benefit everyone and change the country’s financial system, he said.
BoT is working with Siam Commercial Bank, Bank of Ayudhya, 2C2P (Thailand) Co and around 10,000 retail users to test retail CBDC with real applications on a limited scale. The pilot project has his two tracks: Fundamentals and Innovation.
In the foundation track, CBDC is used to carry out cash-like activities such as payment for goods and services. The testing phase will begin at the end of this year and will continue until the middle of next year.
The innovation track focuses on programmability, facilitating the development of innovative use cases for CBDCs and bringing new financial services to a wide range of customers, Sesaput said.
He said the central bank plans to improve its regulatory sandbox process to increase testing efficiency and speed up the testing process for financial innovation and technology.
Sesaput said previous tests in the sandbox took longer, and after finishing, the innovation showed less benefit than expected.
He said the central bank is pursuing wholesale CBDC development as part of a multi-CBDC bridge (mBridge) project to facilitate cross-border settlement areas.
The Bank of Thailand is the first to use a wholesale CBDC as part of the mBridge project, along with the Hong Kong Monetary Authority, the United Arab Emirates Central Bank, the People’s Bank of China’s Digital Currency Research Institute and the BIS Innovation Hub Hong Kong Center, according to a central bank statement. pilot.
The mBridge pilot was conducted from August 15th to September 23rd this year and will support the issuance and redemption of CBDCs between commercial banks and central banks, cross-border payments in local CBDCs between commercial banks, cross-border commercial bank Between local CBDC and foreign CBDC.
A total of 164 cross-border transactions were made during the pilot project, valued at over US$22 million (Baht 827 million).
The mBridge platform has reduced our cross-border transfer time from 3-5 days to just a few seconds.
The technology will help reduce costs, improve business efficiency, mitigate settlement risks and support the use of local currencies in international payments, the Bank of Thailand said.
According to the central bank, the mBridge project will continue to build and test technology and consider policy, regulatory and legal implications in order to improve existing functionality and add enhanced functionality to the platform.
Following this effort, the central bank will consider pursuing experiments in more realistic settings.