BoT warns against any use of THT stablecoin

BoT warns against any use of THT stablecoin

BoT warns against any use of THT stablecoin

The Bank of Thailand is warning people to refrain from participating in any activities involving Thai Baht Digital (THT), as there are no legal assurances or protection with it and users could be at risk of cybertheft or money laundering.

Pruettipong Srimachand, the central bank’s assistant governor of the legal group, said any activities involving the new stablecoin THT that was created abroad on the Terra platform are considered illegal. The creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958.

The central bank said recent developments have seen the private sector attempting to create cryptocurrencies using underlying assets or fiat currencies as an anchor to minimise price volatility. Such cryptocurrencies are known as stablecoins.

More recently, a new form of stablecoins using underlying algorithmic smart contracts was created to replicate the price and movement of various currencies. One unit of the stablecoin THT is denominated in and valued at one baht. Although THT is not used as a medium of exchange, it could cause fragmentation of the Thai currency system should THT or other stablecoins come to replace, substitute or compete with baht issued by the central bank, he said.

“Such usage would ultimately affect the general public’s confidence in the stability of the national currency system, which is the cornerstone of all economic activities,” said Mr Pruettipong.

In a separate development, the Bank of Thailand announced it plans to stop using Thai Baht Interest Rate Fixing (THBFIX), the existing reference rate which incorporates the London Interbank Offered Rate (LIBOR) for interest rate calculation, after June 30, 2023, in line with the upcoming plans to phase out the LIBOR.

The central bank is the THBFIX regulator and it uses the US dollar LIBOR format to calculate rates. The bank announced it will inform commercial banks of the terms of the THBFIX rate through existing channels until its usage comes to an end.

The Bank of Thailand plans to stop new TBHFIX-based financial calculations including loans, debentures and derivatives from July 1 of this year.

BOT Warns Against THB-Denominated Stablecoin

A stablecoin denominated in Thai baht has been developed overseas. Any activity involving the stablecoin is deemed illegal.

The BOT (Bank of Thailand) has told the public to exercise a high degree of caution and refrain from participating in any activity involving a new stablecoin denominated in Thai baht, warning that they will have no legal assurances or protection, and that users could be at risk of cyber theft and money laundering.

The central bank said a new form of stablecoin utilising underlying algorithmic smart contracts to replicate price movements of various currencies have been created overseas, including a new stablecoin created on the ‘Terra’ platform known as THT, which tracks the Thai baht.

The BOT said although THT is currently not used as a medium of exchange, it could cause the fragmentation Thailand’s currency system, should it or other similar stablecoins come to replace, substitute or compete with currency issued by the central bank.

This could ultimately affect the public’s confidence in the stability of the local currency system, the BOT said.

“Therefore, any activity involving THT is deemed illegal, as the creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958.”

The SEC (Securities and Exchange Commission) has likewise urged the public to be wary of THT transactions, saying they may be considered illegal.

Thailand’s central bank warns against ‘illegal’ THT stablecoin

The Bank of Thailand has issued a stern warning against a privately issued stablecoin pegged to the national currency, the Thai Baht.

According to a Bangkok Post report on March 18, the central bank has told citizens that Thai Baht Digital (THT) has no legal assurances or protection and that users could be at risk of cyber theft or money laundering

Citing a sixty-year-old law, the central bank’s assistant governor of the legal group, Pruettipong Srimachand, stated that any activities involving the stablecoin are considered illegal:

“The creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958.”

The stablecoin is issued on the Terra platform which has produced various other stablecoins including the TerraUSD, first issued in September 2020, and TerraKRW. It is also behind the Chai payments app, an e-commerce wallet powered by stablecoins that is widely used across Asia.

The THT is pegged to the Thai Baht raising fears it could cause fragmentation of the Thai currency system should it attempt to compete with the central bank issued currency. Mr Pruettipong added:

“Such usage would ultimately affect the general public’s confidence in the stability of the national currency system, which is the cornerstone of all economic activities.”

Terra was founded in 2018 in South Korea, launching with $32 million in backing from Binance and Polychain. In January 2021 the firm behind the platform, Terraform Labs, raised $25 million in a new funding round from Galaxy Digital, Coinbase Ventures, and Pantera Capital among others.

Thailand’s military backed government has taken a similar stance to that in China where only the central bank issued digital currency will be officially tolerated. China has accelerated its program for the CBDC release, with further infrastructure tests prior to launch, which could coincide with the 2022 winter Olympics in Beijing.

The Bank of Thailand has also accelerated its own research into a national CBDC with the Feb. 23 announcement of a joint effort in coalition with the Hong Kong Monetary Authority, the Central Bank of the United Arab Emirates, and the Digital Currency Institute of the People’s Bank of China.