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(Kitco News) - The Bank of Thailand has announced the launch of its retail central bank digital currency (CBDC) pilot project as part of its efforts to improve the convenience and efficiency of financial transactions and lower overall costs.
According to a report from the Bangkok Post, the Thailand central bank has partnered with the Bank of Ayudhya (Krungsri), Siam Commercial Bank (SCB), and Singapore-based payments service provider 2C2P to run the trial in a regulatory sandbox.
Sam Tanskul, managing director of Krungsri Innovate, a corporate venture capital arm under Krungsri, said that the project will run from June to August and involve up to 10,000 users.
Krungsri, one of the first financial institutions to start operating a pilot test for a retail CBDC, has invited its staff and roughly 100 merchants located near Krungsri's headquarters to test the digital baht.
The bank is expecting that its pilot test, dubbed CBDC Krungsri, will see a large number of participants join in the coming months and has set a target of 2,000 staff joining the project.
According to Sam, staff members participating in CBDC Krungsri will be required to install a mobile banking app and add money to it as an e-wallet. From there, the money will be converted into digital baht at the rate of one CBDC worth one bhat.
The new digital currency can then be used to pay for goods and services at participating stores by scanning a QR code. “The bank educated both merchants and staff about retail CBDC before launching the pilot project, and the testing has run smoothly,” Sam said.
He added that Krungsri has not set a limit on transaction value and is instead focused on stabilizing the payment system and monitoring how it operates during peak periods of activity.
The new payment service is expected to help ease the intensity of transactions made under the country’s PromptPay service during peak periods once it has been successfully trialed.
Sam said that aside from retail payments, the digital baht can be used for welfare payments, similar to the Pao Tang app, and the bank will need to determine a strategy to differentiate the CBDC from the PromptPay service. “The adoption of digital baht should benefit the country's digital economy in the long term,” he said.
SCB has also launched its CBDC SCB Wallet pilot project, which is open to the banks' staff and merchants near its head office.
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In addition to helping modernize Thailand's payment infrastructure, another major benefit offered by a digital baht is that it would help reduce the costs associated with supplying physical money to the economy.
The retail CBDC project was originally announced in August and was intended to launch in 2022, but unforeseen delays pushed its launch into Q2 2023.
The Bank of Thailand first announced that it was developing a wholesale CBDC in 2018, and the central bank participated in the Bank for International Settlements’ mBridge cross-border payment project in Sept. 2022. The mBridge platform is a subset of the larger Project Inthanon-LionRock, a distributed ledger technology (DLT) CBDC cross-border payment endeavor involving the Thai and Hong Kong central banks that launched in Sept. 2019.
