During a keynote speech delivered to the Nomura Investment Forum in Singapore this week, the Central Bank chief addressed the growing adoption of blockchain technology across Asia and how the Thailand Blockchain Community Initiative (TBCI) will be looking into digital currencies as a means of transacting interbank settlements.
“Thailand is transitioning to a new era of digital payment system and financial technology in which the Bank of Thailand is fully committed to foster”
The TBCI is comprised of 7 industry leading businesses and over 14 Thai banks, and has already begun piloting ‘letters of guarantee’ banking contracts on the blockchain, along with future plans to extend these services to include supply chain finance and scriptless bond issuance.
Project ‘Inthanon’ is the next big step towards developing Thailand’s digital asset infrastructure, which is primarily concerned with improving Thai banking interoperability. The project will conduct trials using ‘wholesale central bank digital currency’ (CBDCs) as a means of streamlining interbank transactions, which aim to greatly lower intermediary costs and transaction times.
“Like other central banks, our goal is not to immediately bring CBDC into use, but rather to explore its potential and implications for back office operations. These efforts should pave way for faster and cheaper transaction and validation due to less intermediation process needed compared to the current systems.”
CBDCs do however, also carry high risks, as the Bank of International Settlements (BIS) remarked in a report earlier this year, “a general purpose CBDC could give rise to higher instability of commercial bank deposit funding. Even if designed primarily with payment purposes in mind, in periods of stress a flight towards the central bank may occur on a fast and large scale, challenging commercial banks and the central bank to manage such situations”
Nevertheless, project Inthanon showcases Thailand’s firm belief in the value of blockchain technology and its utility across numerous economic areas. Having recently successfully piloted a blockchain-powered remittance to Singapore, Thai banks are showing increased vigor to become a pioneering nation in this technological space.