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.

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.

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.