The government should consider issuing stablecoins backed by the baht for use within the country, including the proposed Phuket crypto sandbox, as fiat-backed stablecoins are less volatile than other digital assets, notably Bitcoin, says the Thai unit of Binance.
Nirun Fuwattananukul, chief executive of Gulf Binance, said an option for the Phuket sandbox, an initiative of former premier Thaksin Shinawatra, is to explore stablecoins, which are pegged to a specific currency and designed to minimise volatility.
For example, US dollar-backed stablecoins such as USDT and USDC are widely used. Thailand could create a baht-pegged stablecoin for local use, he told the Bangkok Post.
"However, this approach has challenges. Regulators would need to define a comprehensive framework to ensure the stability and security of a baht-backed stablecoin," said Mr Nirun.
Unlike Bitcoin, which already enjoys global recognition and adoption, a new stablecoin would require a significant effort to drive user acquisition and build trust, he said.
The Phuket crypto sandbox, which is expected to be launched this October, would allow foreign tourists to use crypto to purchase goods and services there.
By increasing the purchasing power of digital nomads, the initiative would present Thailand as progressive in adopting financial innovations, said Mr Nirun.
The Bank of Thailand remains mum on using cryptocurrencies as a means of payment, citing concerns about the possible impact on the baht and risks to financial stability.
Finance Minister Pichai Chunhavajira said recently the government intends to tokenise government bonds, converting them into a digital asset as a stablecoin.
"Government bonds are highly trusted assets. The government issues a large number of new bonds each year, but they primarily end up in the hands of financial institutions. We want to make these bonds more accessible to individual investors," said Mr Pichai.
He also said the ministry would consult with the central bank on this initiative, expressing confidence that issuance of a stablecoin would not affect the baht's stability, as no new money would be created within the system.
Meanwhile, Mr Nirun suggested the government weigh the pros and cons of using Bitcoin as a means of payment in the sandbox.
"Bitcoin is the largest, most recognised, and most widely adopted cryptocurrency globally, making it a strong contender. However, it does come with limitations that cannot be overlooked," he said.
"Its price volatility and relatively slower transaction times make it less than ideal for everyday payments. These factors require careful consideration when deciding on its use for payments."
The decision should focus on maximising the benefits of the sandbox initiative, said Mr Nirun.
"The decision requires balancing innovation with practicality, while considering the regulatory, technological and adoption challenges of the chosen cryptocurrency. There is no one-size-fits-all answer," he said. "The right choice should align with Thailand's economic objectives and the overall goals of the sandbox project."