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.

Thai Central Bank Warns against Baht-Denominated Stablecoin

The Bank of Thailand (BoT) has issued a warning on Wednesday against Thai Baht Digital (THT), a baht-denominated stablecoin, and asked the public not to make any sort of investment in it.

The central bank raised alarm as it is concerned over the uses of stablecoin in cybertheft and money laundering. The monetary regulator elaborated that there will be no legal assurances or protection offered to stablecoin investors.

Though the warning specifically mentioned the THT stablecoin, it was issued for all Thai baht-denominated digital currencies. The Thai regulator detailed that THT was created outside the country on the Terra Platform. One unit of the THT is denominated in and valued at one baht.

“Although THT is currently not used as a medium of exchange, it could cause fragmentation to the Thai currency system should THT or other similar stablecoins come to replace, substitute or compete with Baht issued by the BOT,” the BoT noted.

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Stablecoins Are Illegal

Stablecoins became popular as traders wanted to trade digital currencies, but offshore exchanges could not offer crypto-fiat pairs due to regulations. These fiat-denominated cryptos are not volatile like other cryptos and found many uses.

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

The regulator clearly mentioned that ‘THT is deemed illegal’ as the creation, issuance, usage or circulation of any material or token for money is in violation of the country’s currency act.

While stablecoins remain illegal, the Thai regulator is trying to regulate the overall cryptocurrency industry. The exchanges operating in the country already need to obtain a regulatory license, and now, the regulator is trying to bring other regulations on crypto investors.

Bank of Thailand Abolishes the Use of THT Stablecoin

Thailand’s central bank has warned against the use of THT stable coin via a circular. Stablecoins currently have a market cap of over $53 billion.

The Bank of Thailand has warned against the use of THT stable coin via a circular. Stablecoins currently have a market cap of over $53 billion.

Stable coins provide a means to hold digital assets without worrying about their inherent volatility. They have amassed popularity recently, and many central banks are considering issuing them.

It released a circular on March 17, 2021, prohibiting the use of THT. The Bank of Thailand outlined that the Baht-backed coin “could cause fragmentation to the Thai system.” It is concerned that widespread adoption of THT would deplete confidence and reliance on Baht.

As a result, it has declared that THT use is illegal. It also issued a warning to the public members to desist from using THT or participating in any activity involving it.

Bank of Thailand’s CBDC In View

Central banks around the world are on edge in light of the current cryptocurrency frenzy. They want to retain the ability to issue and control money. As a result, many are preparing to launch their own digital currencies.

Thailand is one of Asia’s leading nations in the race for a fully adopted Central Bank Digital Currency (CBDC). It launched a trial for the digital Baht in 2019, which eight commercial banks participated in.

A noteworthy fact about the digital Baht is that it may not be publicly available. Financial institutions and markets are likely to be the exclusive users of Thailand’s CBDC.

On March 8, BoT issued a press release on the results of a CBDC test project which commenced in 2020. The project was aimed at analyzing the efficiency of digital currencies as a payment in the business sector. The BoT concluded that “DLT can increase payment efficiency for businesses by allowing users to set various conditions on the CBDC to enhance flexibility in handling business activities.”

China recently started the biggest phase of its digital currency trial in the city of Chengdu. It had already recorded over $160 million in transactions for the CBDC.