On March 19, 2021, the Bank of Thailand (BOT) issued policy guidelines on how stablecoins are to be regulated. These were issued following the BOT’s recent ruling that stablecoins pegged to the Thai baht violate the Currency Act B.E. 2501 (1958).
Stablecoins were developed to offer a more price-stable alternative to traditional cryptocurrencies, which are defined under Thai law as digital units created to serve as means of exchange for goods, services, or any other rights. As traditional cryptocurrencies (such as Bitcoin) have no underlying assets, they are subject to such extreme fluctuations in value, and therefore people often hold them as investments rather than spend them as currency.
Some stablecoins are pegged to the value of a specific fiat currency, such as the Thai baht, and are sometimes even intentionally created to mirror that fiat currency in name, denomination, and value. The BOT reasoned that such stablecoins—seemingly created to replace Thai baht currency—violate the Currency Act B.E. 2501 (1958), because the public might incorrectly consider them a parallel baht currency.
The BOT’s subsequent policy guidelines on how stablecoins are to be regulated address both baht-pegged stablecoins and those pegged to other currencies or assets.
Stablecoins pegged to the Thai baht (or “baht-backed stablecoins”) that are intended to be used as a means of payment may be considered electronic money (e-money) under the Payment Systems Act B.E. 2560 (2017), which is regulated by the BOT. This type of stablecoin has similar characteristics and risk factors to existing e-money, for which the BOT has issued regulations governing various aspects such as settlement, money laundering, cybersecurity, and consumer protection. Consequently, business operators who intend to launch baht-backed stablecoins in the Thai market should consult with the BOT before doing so. To support their determination on this issue, the BOT notes that their position is consistent with those of other countries, such as Singapore, the UK, and Japan.
The BOT confirmed that stablecoins pegged to foreign currencies or other assets, including those with value backed by a digital mechanism rather than an asset (i.e., algorithmic stablecoins) are currently unregulated. However, the BOT is studying this topic and is open to receiving comments and feedback before deciding whether and how these stablecoins should be regulated.
The BOT itself is developing a cryptocurrency called a retail-type central bank digital currency (CBDC), similar to Digital Yuan of the People’s Bank of China and other government-developed digital currencies, to be freely used by the general public as a stable exchange of value for goods and services. The BOT believes that, when compared to privately issued stablecoins, a CBDC will be more secure and efficient and can meet the demands of all users and business operators.
Cryptocurrency and stablecoins are now at a regulatory crossroads, with Thai regulators set to determine their future. Conceptually, neither traditional cryptocurrency nor stablecoins are regulated under the Emergency Decree on Digital Asset Business Operation B.E. 2561 (2018), but businesses related to them are. The recent BOT rulings indicate some skepticism by Thai regulators toward stablecoins—especially those pegged to the Baht—and the possibility that their widespread introduction into Thailand could create a new and unregulated financial ecosystem that adversely impacts the stability of the financial sector, and by extension the country’s economic development. Nevertheless, the BOT well recognizes this technological development and is therefore actively engaging with it.