Central bank digital currency: Applications for domestic and cross-border transactions in Thailand

Abstract

With the belief that Distributed Ledger Technology (DLT) holds the promise of bringing greater efficiency, inclusion and innovation to the financial system, the Bank of Thailand (BOT) began research and development of a proof-of-concept central bank digital currency (CBDC) utilising DLT for wholesale domestic and cross-border funds transfers, beginning with Project Inthanon in 2018. A proof-of-concept corporate CBDC was also subsequently developed, and the exploration of a retail CBDC for the general public is currently under way. In this paper, we discuss the important findings and considerations of each CBDC project. We found that DLT can increase efficiency in both domestic payment systems as well as cross-border transactions by enabling direct transfers between parties and providing enhanced programmability through the use of smart contracts. Several technical shortcomings still exist and will need to be reevaluated. Furthermore, studies on governance structure, regulatory issues and implications of CBDC for monetary policy, financial stability and the future financial landscape must be carried out before proceeding to develop production-ready systems and networks.