Thai Central Banker ‘Red-Lines’ Crypto Payments as Digital Baht Pilot Looms

Thailand is moving rapidly toward testing a central bank digital currency (CBDC) and does not want any private competition in the payments sector.

“Cryptocurrencies cannot become a means of payment,” Bank of Thailand Governor Sethaput Suthiwartnarueput said in an interview with the Bangkok Post this week.

In doing so, he put Thailand firmly in a group of Asian countries led by China and India that have either formally banned crypto or are seriously considering it at the same time as they work on a CBDC.

Suthiwartnarueput’s comments came while discussing a paper on the financial landscape the Bank of Thailand (BoT) will release in January that will set red lines banning certain activities in the field of digital currency, as well as other areas such as environmentally conscious finance.

This will likely include a ban on commercial banks having any “direct involvement” in trading cryptocurrencies due to their volatility, formalizing a warning the central bank gave last week.

This is not the first time the central bank has spoken out against the use of privately-issued crypto as a means of payment. But it does amount to a step up from a July “caution” the BoT issued in July, saying it “does not support the usage of digital assets as a means of payment for goods and services.”

That announcement cited risks including cyber-theft, price volatility and money laundering. But it also implicitly suggested cryptocurrency payments are legal. Describing such transactions as “barter trade” the BoT warned that if “the use of digital assets as a means of payment for goods and services become widespread,” it would work with regulators to ensure they do not pose a risk to users or the financial system.

Nor is it clear if Suthiwartnarueput was discussing stablecoins. In March, a BoT official said it planned regulate all stablecoins, Reuters reported. This included those backed by currency or assets, as well as stablecoins like Dai, which have an algorithmically controlled currency peg.

That said, Suthiwartnarueput also noted that the rules the Bank of Thailand will issue next month will promote innovation and financial inclusion — the latter generally meaning crypto-powered remittances.

Not all merchants are onboard with the BoT’s position. In late October, the country’s biggest mall developer told Bloomberg that it was testing its own cryptocurrency, the C-Coin, among its 80,000 employees, who could use it at store in the shopping centers.

And in November, Siam Commercial Bank said it had agreed to pay more than half a billion dollars for a majority stake in a Thai cryptocurrency exchange, Bitkub. However, it warned that the deal, excepted to close in the first quarter of 2022, was subject to approval by the BoT and regulators.

In Good Company

The Bank of Thailand’s position matches that of India’s central bank, which has been pushing an outright ban on cryptocurrencies for years. While the government announced a complete ban in November, it now seems like the issue will be pushed back to a new parliamentary session next year.

See: India Again Announces Plan to Ban Cryptocurrencies as Digital Rupee Moves Ahead

The Reserve Bank of India’s ban on banks working with cryptocurrency exchange — which made it very difficult for the industry to grow — was overturned by the Supreme Court in March 2020, at which point there was huge boom in business as pent-up demand was released. The market grew nearly 650% from the beginning of Q3 2020 through the second quarter of this year.

In October, India was ranked No. 2 globally in terms of grassroots adoption of crypto by leading blockchain intelligence firm Chainalysis.

Read more: India Central Bank Eyes Digital Currency Trial Run in 2022

In November, the Central Bank of India announced a soft launch a digital rupee. At the time, it said the trial run could begin by the end of the year, although that now seems unlikely.

China, of course, is the leader in this policy split, having banned cryptocurrencies outright in September while it’s heavily tested digital yuan CBDC is expected to go into full circulation by February.

Related: China Declares All Cryptocurrency, Related Transactions Illegal

If India goes ahead with its ban and launches a cryptocurrency, 2.7 billion people will be paying for goods exclusively with publicly-issued digital assets.

Also read: Indonesia Central Bank Among Latest To Ban Crypto As Payment

In June, Indonesia’s central bank banned cryptocurrencies as a means of payment, and in November, religious authority declared cryptocurrencies “haram” — forbidden. Although the religious decree is not binding, it is powerful. That month, an official of Bank Indonesia said the CBDC project it announced in May would be “a tool to fight crypto,” Bloomberg reported.