Thailand’s first tokenised bonds target retail investors

It remains to be seen which blockchain standard the government will adopt. — The Nation

THAILAND has just announced plans for its first government-backed digital token, describing it as both an avenue for government fund-raising and an investment opportunity for the public.

While not all details of the technical aspects of the token have been revealed, the issuance is in the same vein as the much talked about central bank digital currencies being explored the world over.

Some governments are also toying with issuing their own stablecoins.

In Thailand’s case, its Finance Ministry says the token represents a digital iteration of government debt and its initial issuance is targeted to raise approximately five billion baht (RM640mil).

The plan is for the token to be tradeable on approved digital exchanges, offering retail investors access to yielding government debt papers.

It is an interesting move, and because Thailand is among the first governments to do this, the experiment will be closely watched.

One of its attractions lies in the fact that it promises a yield higher than Thai bank deposits, which are currently quite low.

Thai banks now offer 12-month deposit interest rates of about 1.25% to 1.5%, below the Bank of Thailand’s benchmark rate of 1.75%.

However, there will be many technical challenges to overcome.

As the bond offering is being sliced into smaller denominations for retail investors, it presents an administrative challenge.

Coupled with the requirement for digital exchanges to conduct their own know-your-customer processes, this could become a cumbersome process. That said, the technology is available.

It also remains to be seen which blockchain standard the government will adopt, and how it plans to build out the entire ecosystem necessary for the issuance to succeed.

Providing access to yielding government debt to retail investors is something that the authorities in Malaysia are striving to do, so it would do well to keep an eye on Thailand’s experience for lessons to be learned.