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MNI: Bank of Thailand Says e-Baht May Bear Interest One Day

SYDNEY (MNI)

Thailand's digital baht could one day pay interest, but the authorities are mindful of the potential effect on banks.

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Thailand's new central bank digital currency, due to begin a retail trial next year, could eventually bear interest, a spokesperson for the Bank of Thailand told MNI.

While the central bank is aware of the danger that an interest-bearing CBDC could suck deposits out of the financial system, it has not ruled out such a move in the future, the spokesperson said.

"Many studies indicate the CBDC could be used as a more direct tool for transmitting a policy rate or imposing a negative rate on the general public," the spokesperson said. "If it deems it appropriate, the central bank could later adjust the parameters and impose the interest rate on the CBDC."

A "two-tier model" for CBDC distribution could preserve the intermediary role of banks, the spokesperson said.

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"Under the two-tier model, the central bank would rely on the designated service providers to distribute the CBDC to the people," the spokesperson said. "Financial applications will be developed on top of it."

The Bank of Thailand has also joined with China, Hong Kong and the United Arab Emirates in a cross-border digital payments scheme. But, while China wants to use its digital currency to promote international use of the yuan, the Thais see their participation as a way of leverage its own early leadership in the digital currency stakes in comparison with relative laggards such as India to the advantage of its financial system and to bolster trade.

The BOT has also joined its PromptPay digital payments system with Singapore's PayNow.