Thailand, which launched a significant pilot of a retail central bank digital currency (CBDC) last year, is moving forward with a new initiative to distribute digital tokens to 50 million lower-income citizens. This 500 billion-baht ($13.7 billion) program, announced last month by Prime Minister Srettha Thavisin, aims to encourage spending within local communities and is scheduled to start at the end of this year.
The initiative was initially speculated to be financed through borrowing, potentially increasing the country’s public debt. However, it will now be funded through Thailand’s fiscal budget over the next two years. Additionally, the state-owned Bank for Agriculture and Agricultural Cooperatives will provide digital capital to include an extra 17 million Thais in the program. The initiative is expected to increase Thai GDP by up to 1.6%.
Last year’s pilot of the retail CBDC by the Bank of Thailand saw participation from 140 merchants, 4,000 consumers, and two major banks, and was recognized for promoting innovation and enhancing competition among financial service providers. Nevertheless, the central bank recently stated that there are no immediate plans to implement a full-scale digital baht.
Brunello Rosa, CEO and head of research at Rosa & Roubini Associates, notes that the Bank of Thailand’s engagement with CBDCs was partly in response to the rise of cryptocurrencies and stablecoins and to the advancements made by China with its e-CNY, or digital renminbi, launched in February 2022.
In contrast, other central banks are still in the development phase of their digital currency projects. Rosa points out that the European Central Bank and the Bank of England are advancing their digital euro and digital pound initiatives, while the U.S. Federal Reserve is cautious, concerned that progress in this area could undermine the dollar’s status as the global reserve currency.
