Bank of Thailand to draw ‘red-lines’ on cryptos as frenzy grows

Bank of Thailand to draw ‘red-lines’ on cryptos as frenzy grows

Bank of Thailand governor Sethaput Suthiwartnarueput (Photo: Bank of Thailand)
Bank of Thailand governor Sethaput Suthiwartnarueput (Photo: Bank of Thailand)

Thailand plans to unveil detailed rules for digital assets to minimise risks to the financial system and provide greater investor protection as more people are drawn to cryptocurrencies, according to the central bank.

The Bank of Thailand will release a consultation paper on “Financial Landscape” in January that will seek a consensus around the red lines for those operating in the fields of digital currencies, green finance and related areas, Governor Sethaput Suthiwartnarueput said in an interview Monday. The rules will seek to promote innovation in technology, financial inclusion and manage systemic risks, he said. 

The central bank is working with the nation’s Securities and Exchange Commission and the Finance Ministry to outline “what are the red-lines we don’t want to see,” Mr Sethaput said. For example, “cryptocurrencies cannot become a means of payment,” he said.

Thailand’s rush to enact rules for digital assets comes amid growing appetite of cryptocurrencies worldwide as investors chase better returns from their savings amid low interest rates and an economic slowdown. The BoT last week cautioned commercial banks against “direct involvement’ in trading of digital assets, citing their high volatility and potential risks to financial and payment systems.

“We want to ensure that we strike the right balance between allowing financial innovation and managing risks,” Mr Sethaput said. The new rules will provide adequate safeguards for consumers as “risks are under-appreciated” currently, he said.

Turnover at seven locally licensed crypto exchanges surged to 221 billion baht in November from 18 billion baht a year earlier, according to data from the Securities and Exchange Commission. That’s drawn the interest of banks such as Siam Commercial Bank and Kasikornbank to make investments.

While there’s space for digital assets as an investment vehicle, their extreme volatility posed risks to the financial system, Mr Sethaput said. The BoT will work with the SEC to put in place adequate safeguards for future financial securities, he added. 

A retail central bank digital currency, expected to be tested next year, will be more effective in achieving financial inclusion in Thailand without imperiling the financial system stability, he said, adding its experiment with a wholesale CBDC had already helped lower cross-border transaction costs and increase efficiency.

The consultation paper will also deal with ground rules on financing tied to environmental, social and governance metrics to prevent “green-washing” as the new stream of financing is still in need of the building blocks, Mr Sethaput said.

Other highlights from Mr Sethaput’s interview:

  • BoT committed to pursuing a sustainable debt restructuring that’s beneficial to both borrowers and lenders
  • Debt relief measures may be extended to ensure that “recovery is smooth and there are no cliffs and bumps along the way”
  • BoT’s pandemic responses have been targeted for long-term horizon as the recovery is seen a long and uneven one

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