In a move cheered by cryptocurrency enthusiasts, last month former prime minister Thaksin Shinawatra proposed using Phuket province as a Bitcoin sandbox for tourism, aiming to encourage digital currency holders to spend in Thailand.
Described as the de facto leader of the ruling Pheu Thai Party, Thaksin said other countries in the region are keen to hold talks with Thailand about cryptocurrency, viewing it as a means to draw more money into the economy.
He said Thailand is more prepared than other nations in Southeast Asia to move ahead with cryptocurrency, especially after United States President Donald Trump announced his crypto-friendly policies.
Stablecoin is a currency backed by assets such as gold or government bonds, and carries less risk than other digital assets.
A cryptocurrency sandbox is expected to be launched in October, in coordination with the private sector.
However, challenges remain as Bitcoin and other cryptocurrencies are not yet allowed as a means of payment by the Bank of Thailand (BoT).
Crypto exchanges in Thailand are regulated by the Securities and Exchange Commission (SEC).
What is a crypto sandbox?
The idea of a crypto sandbox in tourism destinations such as Phuket is to allow Bitcoin and other cryptocurrencies to be used instead of traditional currencies, as some foreign nationals may spend several million baht to buy condominiums or houses.
The initiative makes it easier for foreigners to spend large sums of money, without having to carry large amounts of cash. The use of traceable cryptocurrencies could help to capture these previously uncontrolled funds that foreigners bring into the country.
Nirun Fuwattananukul, chief executive of crypto exchange Gulf Binance, said the Phuket crypto sandbox could elevate Thailand's position on the global stage.
"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 aligns with Thailand's strategic strengths and reinforces the country's image as a forward-thinking, innovative nation that embraces emerging trends, said Mr Nirun.
The sandbox model also provides a controlled environment for managing risks associated with crypto, he said.
"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 initiative should increase trading volume and drive an ecosystem with new ancillary products and services powered by blockchain technology, he said.
The sandbox should legitimise Bitcoin and cryptocurrencies, paving the way for broader adoption and innovation within the country, said Mr Nirun. This initiative could serve as a blueprint for similar projects nationwide, positioning Thailand as a leader in the global digital asset ecosystem.
What aret the challenges in launching a sandbox?
Mr Nirun said the primary challenge is there is no established legal framework to govern such a project.
"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," he told the Bangkok Post.
"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 the decentralised derivatives platform FWX, said many merchants have been reluctant to accept Bitcoin or other cryptocurrencies because they cannot easily record them in their accounts and have to find ways to convert them into cash.
Another problem is the high volatility of the Bitcoin price. Even stablecoins, while less volatile than Bitcoin, are still subject to exchange rate fluctuations, said Mr Udomsak, who is also a lecturer at Kasetsart University's Department of Mathematics.
"Efforts to allow cryptocurrencies as a means of payment for general retail purchases have been ongoing for a long time. Regulators may have to revisit these discussions," he said.
Pawoot Pongvitayapanu, chief executive of Pay Solutions, a digital payment gateway provider, said many companies tried to offer crypto payment options, but those efforts were halted because of legal concerns about currency regulations that could conflict with recognising cryptocurrencies as a means of payment.
More than 100 countries have designated certain cities for cryptocurrency use, including the US, Switzerland, Argentina and the United Arab Emirates.
What do the regulators think?
Jomkwan Kongsakul, deputy secretary-general of the SEC, said the regulator realises the benefits of distributed ledger technology (DLT) and digital currencies in helping the capital market reach the SEC's goal of widening financial inclusiveness and accessibility.
"We are monitoring the development of digital assets to drive the digital economy and appropriately protect investors' benefits," she said.
The central bank launched the Programmable Payment Sandbox project, which encourages the development of innovations in payments and uses baht-backed stablecoin for payment, said Ms Jomkwan.
"Digital asset business regulations overseen by the SEC must be tested in our Digital Asset Regulatory Sandbox project, such as the trading of stablecoins in the DLT network," she said.
To allow digital assets to be used for payment under specific conditions, within a specific area or given a limited amount, these must be part of the sandbox supervised by the SEC and the central bank, said Ms Jomkwan.
There must be an appropriate regulatory framework that integrates with other relevant laws, such as the Anti-Money Laundering Law, she said.
Meanwhile, the US is the only country to impose a presidential ban on a central bank digital currency (CBDC) following Trump's rapid move to ban a digital dollar. Analysts predict the effort paves the way for dollar-backed stablecoins to become a de facto digital dollar in the future.
Before the ban, the US was one of more than 130 countries, representing 98% of the global economy, exploring a CBDC to try to take advantage of the rapid pace of technological change.
China is among the pioneers in CBDC, along with the Bahamas and Nigeria.
Later this year, the European Central Bank is scheduled to lay out the key features of a digital euro.
What are Thailand's other digital currency initiatives?
In Southeast Asia, Thailand has been a pioneer of alternative payment schemes, focusing on improving banking efficiency and cutting cross-border trade costs rather than undermining dollar dominance.
The BoT started exploring the use of CBDC for domestic uses in 2018 when the banking system was undergoing rapid digitalisation of its services, looking into cross-border possibilities with other central banks in the region.
In 2019, the regulator linked up with the Hong Kong Monetary Authority and launched the joint Inthanon/Lionrock project, exploring payment possibilities between the two economies.
As the third phase of the expanded Thai/HK CBDC project, mBridge was conceived in 2021, with the involvement of the BIS Innovation Hub, the Central Bank of the United Arab Emirates (UAE) and the digital currency of the People's Bank of China.
Kasidit Tansanguan, the BoT's director of the digital currency unit, said the project aims to explore the viability of DLT and a new business model using multiple CBDCs without corresponding banks, addressing stumbling blocks for cross-border fund transfers and foreign exchange transactions by making them cheaper, faster, more transparent and safer, with reduced settlement risk.
"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," Mr Kasidit told The Banker, the Financial Times' financial affairs publication.
