Thailand’s CBDC: Pursue for Innovative Economy or a Try to Centralize Power?

The Bank of Thailand’s is going to finish the first phase of its work on Central Bank Digital Currency (CBDC) early next year.

Photo: Karn Bulsuk

Photo: Karn Bulsuk

As it has been recently announced, the Central Bank of Thailand has made significant progress on its way to realization of its cryptocurrency program. The Bank has informed that the first phase of its project is planned to be completed in the first quarter of 2019. According to some data, the first phase of a proof-of-concept trial for a Central Bank Digital Currency (CBDC) should be finished by March.

The first talks about the plans to launch a currency to be used for interbank fund transfers, began in June when the bank’s governor Veerathai Santiprabhob mentioned a necessity to find a solution allowing to facilitate transactions across banking networks.

Namely at that time Santiprabhob announced the launch of the Inthanon project that was a part of the country’s ongoing research of blockchain technology. The project is aimed at developing an innovative way to carry out interbank settlement with application of wholesale central bank digital currency.

The Bank of Thailand has recently published its press release informing that it has managed to establish partnerships with eight Thai-based financial institutions. Such collaboration has an aim to facilitate realization of the above mentioned Inthanon project. The plan of launching a Central Bank Digital Currency presupposes usage of the R3’s proprietary distributed ledger technology platform named Corda.

Meanwhile, despite Corda is open-source, blockchains built on it, (including Project Inthanon), are completely closed and centralized – a common characteristic of DLT solutions. This being said, Thailand’s Bank will not only issue the future currency, but will also solely distribute it – namely this model, as we remember, has brought Ripple Labs multiple lawsuits. However, let’s not jump ahead of the story.

The bank’s press release states:

“The outcome and insights from Project Inthanon will contribute to the design of Thailand’s future financial market infrastructure. This is in line with similar projects embarked upon by other central banks such as the Bank of Canada, the Hong Kong Monetary Authority and the Monetary Authority of Singapore. In addition to Project Inthanon, the BOT is conducting a DLT proof of concept for scripless government savings bond sale to improve operational efficiency.”

Together with its partners, the Bank of Thailand plans to work on design, development, and testing of a proof-of-concept prototype. The major part of all the preliminary testing activities is said to focus on liquidity saving mechanisms and risk management strategies. The Bank promises to make a detailed summary of the project publicly available upon the completion of its first phase.

Thailand is not the only country that has paid attention to the necessity to integrate the most up-to-date and effective technologies into the traditional banking system. As CoinSpeaker has already reported, a group of central banking authorities from all over the world that have decided to apply DLT systems to facilitate interbank and cross-border transactions is constantly growing.

The project of Thailand is quite similar to the initiatives of such financial institutions as the Bank of Canada, the Monetary Authority of Singapore and the Central Bank of the Bahamas. Moreover, European Union study has shown that CBDCs could really reshape the currently existing crypto markets and lead to an end of the decentralized digital tokens era.

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