China and Thailand Sign MoU to Promote CBDCs

China and Thailand Sign MoU to Promote CBDCs

by May 29, 2024

The Bank of Thailand has signed a memorandum of understanding (MoU) with China to advance the development and usage of Central Bank Digital Currencies (CBDCs).

This partnership aims to promote cross-border payments and enhance financial cooperation between the two countries using digital currencies. The MoU, titled the Cooperation Framework for Bilateral Local Currency Transactions, was signed by Pan Gongsheng on behalf of China and Shethabu Suthiwanalyubu, representing the Bank of Thailand.

This initiative establishes a framework for cooperation and facilitates using local currencies for cross-border payments, reducing reliance on intermediate currencies and streamlining financial transactions. Both countries are members of the CBDC cross-border payments initiative known as mBridge, which was launched by the Bank of Thailand and the Hong Kong Monetary Authority (HKMA). The project aims to create a faster, more efficient, and less costly payment system and includes many countries participating as observers.

This partnership aims to strengthen financial cooperation and foster innovation within the digital finance sector. The joint effort highlights a commitment to exploring CBDCs’ potential in promoting more efficient and secure cross-border transactions, ultimately contributing to advancing financial systems in both nations.

The collaboration focuses on enabling local currencies for cross-border payments, reducing reliance on intermediate currencies, and improving the efficiency of international trade and remittances. As part of the broader mBridge project, China and Thailand will explore the technical and regulatory aspects of making their CBDCs interoperable, paving the way for seamless digital currency transactions across borders.

This cooperation aligns with fostering financial integration and promoting the use of local currencies in the region. By leveraging CBDCs, China and Thailand seek to strengthen their financial ties and reduce dependence on major global currencies.

This collaboration between China and Thailand on CBDC development reflects their shared interest in enhancing financial cooperation and driving innovation in digital finance. The initiative underscores the growing importance of digital currencies in Southeast Asia (SEA), where countries like Cambodia, Singapore, and Thailand are leading the way in CBDC development.

The evolution of CBDCs in SEA represents a significant shift towards modernising financial systems and enhancing economic efficiency. This partnership is crucial in advancing these goals and promoting the benefits of digital currencies for cross-border payments and financial inclusion.

Featured image credit: Edited from Freepik