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Bank of Thailand starts trial for programmable payments

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The Bank of Thailand (BOT) has initiated a test project for programmable payments under an enhanced regulatory sandbox.

Daranee Saeju, Assistant Governor of Payment Systems Policy at the BOT, announced the project that he said would aim to demonstrate “the potential for applying technology to a wide variety of financial services, accompanied by appropriate risk management processes.”

Programmable payments are automated transactions triggered by predefined conditions, which are associated with the use of smart contracts on distributed ledger technology (DLT).

BOT is teaming up with the country’s securities watchdog, the insurance regulator, and the Ministry of Finance’s Fiscal Policy Office. The four will screen applicants, evaluate the project’s risks and benefits, and establish suitable supervisory policies.

Potential participants have until September 13 to file their applications.

The testing will be conducted under an enhanced regulatory sandbox, allowing participants to experiment with innovations yet to be approved by the central bank.

In addition to programmable payments, BOT will also allow participants to explore escrow services and use tokens as mediums of exchange for asset tokenization.

In 2017, BOT reported that over 90% of the country’s transactions were in cash. Since then, digital payments have grown rapidly, accelerated by the COVID-19 pandemic and a surge in mobile ownership and internet penetration.

Today, one in two transactions is made in cash, and while it’s still the highest ratio in ASEAN countries, it represents massive growth for Thailand in the past seven years. London-based consulting firm GlobalData estimates digital payments will grow 13.7% this year.

BOT has played a central role in pushing for digital payments. This has included exploring a CBDC at a national and regional level. With the latter, BOT is a founding member of mBridge, a cross-border digital asset project with Hong Kong and the Bank for International Settlements (BIS). Along the way, China and the UAE have joined, with Saudi Arabia serving as an observer and hoping to join the project soon.

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