Cryptocurrency enthusiasts celebrated last month when former prime minister Thaksin Shinawatra suggested Phuket province as a Bitcoin sandbox for tourism, aiming to attract digital currency spending in Thailand.
Thaksin, seen as the unofficial leader of the ruling Pheu Thai Party, mentioned that other countries are eager to discuss cryptocurrency with Thailand, viewing it as a tool to boost economic inflow.
According to Thaksin, Thailand is better prepared than other Southeast Asian countries to adopt cryptocurrency, particularly after the announcement of crypto-friendly policies by former US President Donald Trump.
A stablecoin is defined as a currency secured by assets like gold or government bonds, posing less risk compared to other digital currencies.
Plans are in place to launch a cryptocurrency sandbox in October, in collaboration with the private sector.
However, obstacles persist as the Bank of Thailand (BoT) does not yet recognize Bitcoin and other cryptocurrencies as legitimate forms of payment.
The Thai Securities and Exchange Commission (SEC) regulates crypto exchanges.
What is a crypto sandbox?
The concept of a crypto sandbox in tourist areas like Phuket allows for the use of Bitcoin and other cryptocurrencies as alternatives to traditional currencies, facilitating large transactions such as real estate purchases without the need to carry significant cash amounts.
This initiative simplifies transactions for foreigners, allowing them to transfer substantial sums electronically, potentially capturing funds that previously bypassed formal financial channels.
Nirun Fuwattananukul, CEO of Gulf Binance, believes the Phuket crypto sandbox could significantly enhance Thailand’s global reputation.
“Given Thailand’s heavy reliance on tourism, introducing a crypto-friendly environment in a high-profile destination such as Phuket could attract not only tourists but also digital nomads, crypto investors, and innovative startups to the region,” he said.
This approach, Nirun added, supports Thailand’s image as a progressive, tech-savvy country ready to embrace new trends.
The sandbox offers a regulated framework to manage crypto-associated risks, according to Nirun.
“As the baht is not a free-floating currency, this approach allows regulatory authorities such as the central bank to monitor progress, evaluate benefits, and mitigate potential challenges while ensuring financial stability,” said Mr. Nirun.
For local crypto businesses, the sandbox is expected to boost trading volumes and foster a new ecosystem enriched by blockchain technology, Nirun noted.
He further stated that the sandbox should legitimize cryptocurrencies in Thailand, setting a precedent for wider acceptance and innovation, potentially serving as a model for other regions.
Nirun acknowledged that the absence of a legal framework is a significant hurdle.
“The government will need to develop new regulations, policies, and legal structures, while defining the roles and responsibilities of various authorities involved in overseeing the sandbox.”
“Managing risks will be crucial, as a tailored regulatory framework needs to be designed specifically for the sandbox, striking the right balance between risk control and innovation. Technical infrastructure is also vital as this initiative is new to the country.”
Udomsak Rakwongwan, co-founder of FWX, noted that many merchants hesitate to accept cryptocurrencies due to accounting challenges and the need to convert them into fiat currency.
Udomsak, also a mathematics lecturer at Kasetsart University, cited the high volatility of Bitcoin prices as another issue, even though stablecoins offer a somewhat steadier option.
“Authorities have long tried to integrate cryptocurrencies into everyday retail transactions,” he stated, suggesting that these efforts need reassessment.
Pawoot Pongvitayapanu, CEO of Pay Solutions, remarked that previous attempts to integrate crypto payments were stalled due to legal concerns over currency regulations.
Numerous countries, including the US, Switzerland, Argentina, and the UAE, have designated specific cities for cryptocurrency utilization.
In contrast, the US stands alone in prohibiting a central bank digital currency (CBDC) following Trump’s swift move to ban a digital dollar, setting the stage for stablecoins to potentially act as a digital dollar alternative.
Previously, the US was among over 130 nations, accounting for 98% of the global economy, exploring a CBDC to capitalize on rapid technological advancements.
China, along with the Bahamas and Nigeria, is a frontrunner in the CBDC arena.
The European Central Bank is set to outline the main attributes of a digital euro later this year.
Thailand leads Southeast Asia in pioneering alternative payment methods, focusing on enhancing banking efficiency and reducing cross-border trade costs, rather than competing with the dollar.
Since 2018, the BoT has been exploring domestic applications of CBDC, coinciding with the banking sector’s swift digitalization.
In 2019, the BoT collaborated with the Hong Kong Monetary Authority on the Inthanon/Lionrock project, examining payment options between the two markets.
Launched in 2021, the third phase of the Thai/HK CBDC project, known as mBridge, involves the BIS Innovation Hub, the Central Bank of the UAE, and the digital currency from the People’s Bank of China.
Kasidit Tansanguan, BoT’s director of the digital currency unit, explained that the project explores the use of Distributed Ledger Technology (DLT) and a new business model involving multiple CBDCs without intermediary banks, aimed at reducing costs and risks in cross-border financial transactions.
“The intention is for businesses to have greater flexibility in using local currencies as one option to help mitigate exchange rate risks. In other words, it avoids the use of the US dollar as an intermediary currency,” Kasidit told The Banker, a Financial Times publication.