Thailand Bank to Allow Virtual Banks by 2025

Thailand has announced plans to allow virtual banks to transform the country's digital economy and boost competition, with the Bank of Thailand permitting virtual banks to provide digital financial services to residents in 2025. Digital banking licenses go by different names worldwide; some call them virtual, digital, or internet-only banks. This variety shows how digital banking is on the rise globally, and Thailand is a recent country to join the movement.

On January 12, 2023, Thailand announced its plans to permit virtual banks to offer services in 2025, amid a push to widen loan access and cut costs for businesses and individuals. The plan is included in the central bank's Consultation Paper on Virtual Bank Licensing Framework, which is scheduled to come out later in 2023. Ahead of the new regime, three virtual banking licenses will be issued in 2024.

According to Assistant Governor Tharith Panpiemras, about ten parties have demonstrated an interest in applying for the permits. It started with the Financial Landscape Consultation Paper on Repositioning Thailand's Financial Sector for a Sustainable Digital Economy, issued in February 2022. Under the licensing framework, supervision and regulations for virtual banks will be similar to those of traditional commercial banks. Still, they will need to be allowed to open physical branches and operate ATMs.

Panpiemras noted, "Virtual banks would be regulated in the same manner as traditional financial institutions, including additional safeguards for investors' protection." Panpiemras added, "Higher competition will strengthen the overall banking system by prompting existing players to improve their services and innovations," as Tharith mentioned in a recent press briefing. "New virtual banks will also expand their services to new, underserved customers with lower costs that would benefit overall customers." Candidates must have a minimal registered capital of 5 billion baht and be scaled up to 10 billion when fully functional."

According to the central bank, virtual banks should not commence a race to the bottom through irresponsible lending, give special treatment to related parties, or abuse the dominant market position, which will pose risks to financial stability, depositors, and applicants as a whole. The central bank also noted, "Virtual banks will be under a ‘restricted phase’ during their first years of operation, which includes close monitoring to prevent systemic financial risks. Thailand's Securities and Exchange Commission recently announced plans to tighten rules for crypto, aiming to expand investor protection. The authority is also developing strict guidelines for crypto ads."

On October 25 2022, Thailand and Hungary signed a bilateral Memorandum of Understanding to support the introduction of blockchain technology to their respective financial sectors. Insiders from Bitcoineer Official mentioned that the technology cooperation agreement will support the adoption of blockchain technology in the country's fast-growing demand for mobile payments, e-commerce, and cryptocurrencies. Thailand has already started tightening the screws on the financial industry, and the virtual currency industry was at the top of the list. Thailand's Securities and Exchange Commission (SEC) has issued strict environmental regulations and ordered all industry-related advertisements to comply.

During the end of 2022, Thailand ran a retail CBDC pilot with corporates to assess the benefits and associated risks related to policies and improve the CBDC design in the future. The pilot was separated into two tracks; the first was the foundation track, where CBDC were tested in cash-like activities. The second phase of the innovation track focused on presenting innovative use cases for CBDC. This is according to Chainalysis, an analytics company in Thailand that is ranked eighth on the Global Crypto Adoption Index.

Thailand is one of several countries in Southeast Asia to look up to for adopting virtual lenders. Bangkok Bank PCL, the nation's largest lender, among other local peers, has boosted its investments, offering various digital services, including online accounts and payments, even though Thailand lacks independent virtual banks. The licensing framework for virtual banks may allow full-service banking businesses to be flexible and accommodate changing client needs. As we congratulate Thailand on taking important steps to establish itself in the crypto world and setting up plans to allow virtual banks in their country for the first time, we promise to keep you updated on any new developments and progress. This article is for informational purposes only and should not be used as legal advice.