Bank of Thailand warns against illegal baht-backed stablecoin

Thailand’s central bank is warning the public against using a stablecoin that purports to be backed by the country’s sovereign currency. The regulator claims that the stablecoin exposes the users to such risks as money laundering and cybercrimes.

The Bank of Thailand (BoT) issued the warning against Thai Baht Digital (THT), Bangkok Post reports. BoT considers any activity involving the stablecoin illegal, Pruettipong Srimachand, the bank’s assistant governor of the legal group stated. He referred to the 1958 Currency Act which criminalizes the creation, issuance and usage of money.

Srimachand revealed that the new stablecoin is created on Terra, a platform supporting the issuance of stablecoins. He added:

“Although THT is not used as a medium of exchange, it could cause fragmentation of the Thai currency system should THT or other stablecoins come to replace, substitute or compete with baht issued by the central bank. Such usage would ultimately affect the general public’s confidence in the stability of the national currency system, which is the cornerstone of all economic activities.”

While deeming other stablecoins illegal, the BoT has been working on its own central bank digital currency under Project Inthanon. In its most recent move, the bank joined forces with China, Hong Kong and the UAE in CBDC research. BoT has been working on the research project with Hong Kong’s Monetary Authority for several months now, recently welcoming the other two countries to “further explore the capabilities of distributed ledger technology.”

Thailand isn’t the only country that has declared it illegal to issue stablecoins pegged to the local currency. As CoinGeek reported, China drafted a law in 2020 that legalized the digital yuan but banned its competitors. Under the law, China prohibits any entity from making or issuing a tokenized note or digital token that may replace the digital yuan’s market circulation.

“For anyone that violates such regulation, the PBoC will halt such activities and forfeit any proceed from the making and selling of yuan-backed digital tokens and issue a fine that is up to five times of the involved proceeds,” the draft law stated.

Most recently, India followed suit, proposing a draft bill that bans “private cryptocurrencies” and paves the way for a digital rupee.

In the U.S, a proposed bill in Congress is seeking to end the era of unregulated stablecoins. Aptly titled the STABLE Act, it requires stablecoin issuers to obtain a banking charter and abide by all banking regulations.

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