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 ‘Illegal’ Use of Baht-Denominated Stablecoin

The Bank of Thailand (BOT) has issued a warning against the use of Thai baht-denominated stablecoins, labeling them a threat to the stability of the national currency system.

In a press release on Wednesday, the central bank took specific aim against the baht stablecoin THT created on the South Korean stablecoin platform Terra.

“[THT] 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 release reads.

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The central bank now deems any activity involving THT “illegal,” on the basis the creation, issuance and usage or circulation of any material or token for money violates Section 9 of the country’s Currency Act (1958).

Any person is able to issue a proposal on Terra’s algorithmically governed platform in order to mint new cryptocurrency that is later voted on by stakers holding the platform’s native luna token.

Do Kwon, head of Terraform Labs, told CoinDesk in a Twitter direct message Terra does not initiate proposals, nor does it ever vote on them. “I think it’s a very interesting development and quite amused we were able to catch the attention of a central bank,” said Kwon. “Great free public relations, right?”

Asked by a user on Twitter whether he believed the central bank could “hurt” the THT ecosystem within Terra, Kwon responded, “lol no,” on Thursday.

BOT said the general public needs to exercise caution and refrain from participating in any activity involving THT alleging users could be at risk of cybertheft and money laundering without the necessary legal protections.

Stablecoins linked to national currencies have been received with great trepidation by governments and regulators around the world.

See also: Thai SEC Backtracks on Unpopular Proposal for New Crypto Investor Qualifications

Most notably, the announcement of the diem (formerly libra) Facebook-backed stablecoin caused a wave of pushback, with the U.S., France, Germany and other nations saying it posed a threat to financial stability and even fiscal sovereignty and should be heavily regulated, if allowed to launch at all. Diem has since been reduced in scope for a reported plan for launch this year.

In China, the central bank proposed a change of the banking law last October, pushing to outlaw any yuan-pegged stablecoin except for its own digital currency.

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.