New policies for digital economy growth
Thailand’s central bank has announced plans to allow the establishment of “virtual banks,” which do not have outlets or branches. It is part of a new policy in the financial sector for the digital economy and sustainable growth.
The virtual bank will allow banking services to be completed entirely online and will comply with the same licenses (regulations) as traditional commercial banks.
It has already been licensed to several companies by the Hong Kong Monetary Authority, positioning it as a commercial bank for those with expertise in cutting-edge technology in Thailand. It is not specified at this time whether crypto assets (virtual currencies) are handled.
Virtual banks will be able to apply for licenses as financial services providers from late 2023, according to the “Consultation Document on Virtual Bank Licensing Framework” issued by the Bank of Thailand.
Bank of Thailand Assistant Governor Tharith Panpiemras explained:
The birth of a new virtual bank can be expected to expand banking operations.
Virtual banks will serve customers who are currently unbanked, and will also deliver cost savings that benefit all customers.
Panpiemras said 2025 is the target date for financial companies to start operating virtual banks, with plans to issue three types of licenses in 2024. So far, 10 companies have expressed interest.
What are NFTs?
Abbreviation for “Non-Fungible Token”, a digital token that cannot be replaced and has a unique value. In addition to being used for exchanging “digital items” in blockchain games, it is also an epoch-making way for rights holders (creators) in the “secondary distribution market”, which was difficult to achieve with second-hand sales, as well as proof of ownership of high-priced art works. It is also attracting attention as a means of reduction.
The Bank of Thailand also addressed risk monitoring. The virtual bank will be supervised according to risk levels to comply with the same regulatory standards as existing commercial banks. We will emphasize good governance and risk response, such as the sustainability of IT services and the efficiency of customer care through digital channels.
The Bank of Thailand said it will be closely monitored to prevent risks to the financial system, especially in the first few years of operation.
Virtual banks must not make irresponsible loans, give preferential treatment to their affiliates, or abuse their market dominance to risk financial stability, depositors and consumers as a whole.
The Bank of Thailand is soliciting public comments on its policy approach around a virtual bank until February 12.
Movements surrounding CBDC
The Thai government is moving forward with initiatives related to financial digitalization.
Since 2020, the Bank of Thailand has been conducting a demonstration experiment of the central bank digital currency (CBDC), and in the summer of 2022, it announced a policy to expand the scope of its development. It said it would work with the private sector to conduct limited pilots of retail CBDCs.
Relation: Central Bank of Thailand to test CBDC for retail by the end of the year
What are CBDCs
A digital currency issued by the central bank of a country or region. It stands for “Central Bank Digital Currency”. The big difference from virtual currency is that CBDC is a legal tender. While cost reduction and efficiency improvement can be expected in currency management and settlement, there are many issues to be considered, such as protection of personal information and privacy, security measures, and impact on the financial system.