DAVOS, Switzerland — Thailand is working on a retail central bank digital currency (CBDC), with an initial pilot scheduled for the second quarter of 2022, but the pilot has been delayed to the fourth quarter of this year.
The pilot, or retail CBDC trial, which is designed for use by consumers, is expected to test deposits, withdrawals and transfers. A central bank official said last August that the retail CBDC would be tested as an alternative payment method for “limited-scale cash-based activities.”
Earlier this year, Thailand also revealed plans to regulate crypto as a payment method, announcing in March that it would ban the use of crypto in payments.
CoinDesk spoke with Thailand’s Central Bank Governor Sethaput Suthiwartnarueput about the bank’s plans for a retail CBDC and why the pilot project was delayed following a panel titled “Central Bank Digital Currencies,” last week at the annual meeting of the World Economic Forum in Davos. , Swiss.
The following has been edited slightly for brevity and clarity.
CoinDesk: Thai CBDC pilot was scheduled for Q2 2022, but was delayed. What’s new on the project?
Suthiwartnarueput: He was just pushed back a bit. This is the usual when trying to get alignment. We did a lot more stakeholder consultation to make sure we had the right design for the pilot. So yes, it would be in the fourth quarter of this year if we could release it. It will probably last about six months. But it’s a limited-scale pilot. We just want to make sure we do it end to end, involve the kinds of players we want, both banks and non-banks. We see question marks over when a retail CBDC could scale to production. But when it does, it will justify an infrastructure rather than a product, because central banks are not good at offering products that will resonate with customers. And so, we see it as putting in place the infrastructure on which the private sector can innovate, making sure that the platform on which it innovates is controllable. I think it was the governor of the central bank of France who mentioned that the private sector is much better on the innovation side, that it is much better on the consumer side than the central banks. I think eventually a retail CBDC will co-exist with other stuff. Yes, it will probably replace cash. But not the other stuff that still exists, including the private stuff. That’s kind of how we see it. The reason I went there and mentioned non-banks is because we think we need to have new players involved in the space and in this pilot project.
When central banks start exploring retail CBDCs, they suddenly realize there are a lot of things to think about, but we don’t really hear too much detail about some of these challenges they’ve faced. These are usually vague terms like “design” or “underlying technology”, but what does this really mean to consumers?
Again, this goes back to this point that was raised during the panel, which is that we want to be clear about the problem we’re trying to solve and think about the benefits of it. The existing system works pretty well on payments, if we have a fast payment system [that] works very well. So the additional benefits you would get from using a retail CBDC for payments are not immediately known. So it’s important to get it right, rather than post it quickly. But if you’re asking me if we’re continuing to pursue it, explore it, and make sure we’re ready, the short answer is yes. Why? Because while fast-pay systems can give us a lot of low-hanging fruits that we can leverage, we recognize that there are limits from an innovation perspective. CBDCs and retail CBDCs offer more potential for the private sector to engage and innovate. You can’t put programmability on a quick payout system. It wouldn’t work. There are many possible questions both in terms of benefits, ensuring risks can be addressed and exploring unintended consequences. A retail CBDC is not trivial, which is why we do it regularly.
In terms of the private sector building a retail CBDC, what does this mean for Thailand? Do you see commercial banks issuing digital currency on behalf of the central bank for example?
You will find out in the next pilot.