The Bank of Thailand is working with three payment service providers to launch its retail central bank digital currency (CBDC), a novel financial infrastructure it claims will improve the convenience and efficiency of financial transactions with lower costs.
The central bank is collaborating with Bank of Ayudhya (Krungsri), Siam Commercial Bank (SCB), and 2C2P (Thailand) Co to test the retail CBDC.
Testing in a regulatory sandbox is expected to take place from June to August this year, said Sam Tanskul, managing director of Krungsri Innovate, a corporate venture capital arm under Krungsri.
Krungsri is one of the first financial institutions to start operating a pilot test for retail CBDC.
In the pilot test, dubbed CBDC Krungsri, the bank invited its staff and around 100 merchants located near Krungsri's headquarters to test the digital currency. The bank expects the number of participants to increase and set a target of 2,000 staff joining the pilot project.
Mr Sam said staff members participating in CBDC Krungsri need to install a mobile banking app and add money to it as an e-wallet, then transfer the money into a form of digital money called "digital baht". One CBDC is worth one baht.
Users can then 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," he said.
Krungsri has not set a limit in terms of transaction value, focusing instead on stabilising the payment system, particularly during peak periods, said Mr Sam.
If the payment service is functional and stable, it could help ease the intensity of transactions made under the PromptPay service during peak periods.
Apart from payments for goods and services, another use case for retail CBDC is state welfare payments, similar to the Pao Tang app or a specific loan programme.
The bank needs to determine a strategy to differentiate retail CBDC from PromptPay service, he said.
The adoption of digital baht should benefit the country's digital economy in the long term, said Mr Sam.
Given its digital form, the central bank does not need to produce physical coins and notes, meaning if adoption of digital baht increases, it would reduce costs associated with supplying money to the economy.
SCB also launched its CBDC SCB Wallet pilot project, which is open to participation among bank staff and merchants near its head office.
The central bank expects the testing of retail CBDC to involve around 10,000 participants in total.