As people become more interested in cryptocurrencies, the Bank of Thailand will introduce detailed rules to protect investors and minimise risks for the financial system.
Sethaput Suthiwartnarueput, governor of the Bank of Thailand, said in an interview that the central bank will release a consultation paper on “Financial Landscape” in January that will outline the red lines for those operating in digital currencies, green finance, and other areas. In addition to promoting innovation in technology and financial inclusion, the rules are designed to manage systemic risks.
Mr Sethaput said the BoT is working with the Securities and Exchange Commission and the Finance Ministry to define “what red lines we don’t want to see.” Cryptocurrencies, for instance, cannot be used as a method of payment.
Against the backdrop of low-interest rates and an economic slowdown, Thailand is rushing to implement rules for digital assets amid a growing appetite for cryptocurrencies worldwide. The Bank of Thailand last week warned commercial banks against “direct involvement” in digital asset trading, citing high volatility and potential risks to financial and payment systems.
Mr Sethaput said we need to find a balance between allowing financial innovation and managing risks. He said the new rules will provide adequate protection for consumers because “risks are underappreciated” at present.
In November, seven locally licensed crypto exchanges generated 221 billion baht in turnover, a dramatic increase from 18 billion baht a year earlier, according to the Securities and Exchange Commission. There are several banks, including Siam Commercial Bank and Kasikornbank, that are interested in making investments in the sector.
Although digital assets can be used as an investment vehicle, their extreme volatility poses risks to the financial system, Mr Sethaput said. Moreover, he added that the BoT will work with the SEC to implement adequate safeguards for future financial securities.
Thailand’s experiment with a wholesale CBDC has already reduced cross-border transaction costs and increased efficiency, according to him, adding that a retail CBDC will be more effective in achieving financial inclusion in the country without endangering its financial stability.
Mr Sethaput said the consultation paper will also outline ground rules for financing based on environmental, social, and governance metrics to thwart “greenwashing,” since the new financing stream requires the right building blocks.
Source: Bangkok Post