Bank of Thailand to Release a Consultation Paper on Crypto to “Strike the Right Balance”
This comes amidst a growing appetite for crypto amidst low-interest rates, a record low of 0.5%, and rising prices, with inflation in Thailand rising in November at the fastest pace since April.
Thailand is now planning to unveil detailed rules for crypto assets to minimize risks to the financial system and provide investors protection.
The central bank would release a consultation paper on “Financial Landscape” in January, said Governor Sethaput Suthiwartnarueput in an interview this week.
The apex bank is working with the Finance Ministry and the nation’s Securities and Exchange Commission to “what are the red-lines we don’t want to see.”
For example, “cryptocurrencies cannot become a means of payment,” Sethaput said.
Through this paper, the Bank of Thailand will seek consensus around green finance and red lines for those operating in the crypto industry while promoting innovation, financial inclusion, and mitigating systemic risks, he said.
“We want to ensure that we strike the right balance between allowing financial innovation and managing risks,” Sethaput said. The new rules will provide adequate safeguards as “risks are under-appreciated” currently, he added.
Regulators around the world have been working on regulating crypto assets amidst a growing appetite for them in the current environment of low-interest rates.
According to SEC’s data, turnover at seven locally licensed crypto exchanges surged more than 12x from last year to $6.62 billion in November. The growing potential of crypto has been attracting banks such as Siam Commercial Bank and Kasikornbank Pcl to make investments.
Last week, the BoT cautioned commercial banks against “direct involvement” in trading crypto due to their high volatility and potential risks to the payment and financial systems.
The central bank is also planning the digital version of its fiat currency. While a retail CBDC is expected to be tested next year to achieve more financial inclusion in the country, its experiment with a wholesale CBDC has already helped increase efficiency and lower cross-border transaction costs, Sethaput said.
Besides crypto, the Governor also commented on the monetary policy, saying their focus is on aiding economic growth amidst subdued inflation.
Inflation accelerated to 2.71% in November, the fastest since April. Though inflation may rise even further in the coming months, Sethaput said, it may “not be long-lasting or permanent.”
Thailand’s government cut its policy interest rate to a record low of 0.5% and introduced two borrowing packages worth 1.5 trillion baht (nearly $45 billion) in 2020 and 2021 as a pandemic response.
“Most of our rate trajectory will be dictated by domestic considerations,” he said, adding, “It will be less dictated by what happens in terms of Fed’s responses and earlier than expected tapering.”
According to him, Thailand is not vulnerable to Fed’s accelerated tapering. The BoT is seeing an upside of 0.7% in its growth estimate for this year, while for 2022, the projection is of 3.9% expansion, but it is uncertain. The bank will review the forecasts at the Dec. 22 rate meeting.