Central banks worldwide sprang into action in response to the supposed threat that cryptocurrencies pose to traditional finance.
As a result, central banks began exploring ways to effectively accommodate the rising demand for digital assets by creating one pegged to fiat currencies.
Accordingly, the central bank digital currency (CBDC) emerged as the answer to the dominance of privately issued digital tokens.
Reports indicate that the Bank of Thailand (BOT) is on the verge of starting the pilot test phase of its CBDC.
Thailand to Begin Pilot Test of Retail CBDC
For more than four years, the Bank of Thailand has been exploring how retail CBDC will accelerate economic growth. It is currently working on testing the concept to see if it would be suitable for people to use in retail transactions in the country.
The future of finance is going partly digital, and central banks are working on ensuring they have a say in the supply and circulation of digital currencies.
Vachira Arromdee, the bank’s deputy governor, stated that the BOT’s focus is now on retail CBDC and its potential to spur economic development. In addition, the bank noted that now is the perfect opportunity to push for retail CBDC development to the pilot phase.
The bank executive disclosed that the pilot stage would determine the real-life applications of the retail CBDC. However, the testing phase will involve one selected private enterprise over a specific period.
In contrast to retail CBDC, wholesale CBDC is for financial institutions to use via interbank settlement and other wholesale transactions.
On the other hand, retail CBDCs are for daily transactions with the broader populace. It is akin to fiat but in digital format.
Phases of the Pilot Test
According to the BOT statement, the pilot phase is split into two; the foundation and innovation tracks. The foundation tracks will involve close to 10,000 users who could use the retail CBDC to pay for goods and services. This phase will start at the end of this year and last until 2023.
Meanwhile, the innovative tracks will involve research on new financial services to meet the demands of users. In addition, this stage will also determine if the retail CBDC is suitable for the Thai economy and the BOT objectives for digital payments.
Supporters of CBDC have continuously called for the government to quicken its development so as not to give crypto assets the upper hand.
With the rapid adoption of decentralized digital tokens, advocates of CBDC are emphasizing making it an all-around utility for payment. Moreover, the supporters regard the CBDC as the perfect measure against illicit financial dealings.
However, critics of the CBDC slammed the centralization of the asset. They want authorities to concentrate on controlling physical cash instead of creating a digital payment version. Moreover, according to them, the CBDC will erase individual privacy because it will be issued and tracked by the government.
However, digital assets, or CBDC, are inevitable as the world evolves and the authorities are aware.
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