Thailand central bank governor on digital technologies and policy

Excerpts from speech by Bank of Thailand governor Veerathai Santiprabhob: Digital technologies, financial system and central bank policy, at the SEACEN (South East Asian Central Banks) Research and Training Centre-Bank for International Settlements high-level seminar, Bangkok, 15 September

Many powerful developments are taking place today, from the growing influence of fintechs and bigtechs to introduction of cryptocurrencies and electronic payment technologies. For many of us, central bankers, when dealing with new developments that can transform our financial system and how we conduct our policies, several key policy questions are often brought up:

  • What are the risks and rewards of these developments? Should we regulate them? If so, how best to regulate them?
  • How can we make use of these digital developments in our policy setting? And, what roles could central banks play in promoting new technologies and new digital platforms?

For the “known territory,” essentially developments that we have begun to identify use cases, can control the risks, and believe that the benefits will outweigh the costs, we must continue to refine our understanding, expand our knowledge, and find ways to streamline them into our policymaking process. This is so that the perception or the extent of what we know becomes clearer.

For instance, growing popularity of internet-of-things—from usage of smartphones to various data-transmitting devices—has created massive amount of individual-level and transaction-level data. These “big data” can help unlock our understanding of the behavioral patterns, perhaps, not even realized by individual data owners.

At the Bank of Thailand, we have begun employing big data analysis in macroeconomic, banking sector, and financial market assessments to complement our policymaking process. This has helped ensure that our policy actions are evidence-based and timely. At the same time, necessary steps are taken to validate the integrity and quality of data used as well as to safeguard data privacy. We are just scratching the surface of the potential usage of big data and much more work will be done in this area in the years to come.

Many other “known” areas still require further refinement:

  • understanding the impacts of deepening adoption of digital technology on productions, labor markets, inflation dynamics, and hence conduct of monetary policy;
  • the emergence of cryptocurrencies and associated payment technologies that may improve financial inclusion and incorporate ‘smart-contracts’, but may have implications on financial stability, consumer protection and even the environment; and
  • to the various proof-of-concept initiatives using DLT or Blockchain on wholesale Central Bank Digital Currency (CBDC), where design and technology choices are being explored.

Meanwhile, there remain many puzzles and unknowns, where the costs and benefits are unclear and require much more research, study, and debate to identify potential impacts or to assess whether a particular development should be pursued. These include unknowns such as introduction of retail CBDC (central bank digital currency), which can have implications on the business model of banks and the financial sector and on transmission mechanism of monetary policy.

Or, broader issues such as the autonomy of central bank’s policy, which will be challenged by bigtechs and cross-border technologies, as much of central banking has been designed based on a world with national borders. Other unknowns will arise in the future; all of which dictate that we have to be nimble and forward looking.

Ultimately, when facing the challenges from the knowns and unknowns, the role of central banks is not only to understand key issues and provide stewardship in the right direction but also to ensure that benefits and costs are well balanced and unintended consequences minimized.

During the period of rapid digital transformations, there is no denying that digital divide can worsen, especially in emerging economies. There will be those with access, are able to take advantage of technological advancement, and prosper; and those who lack access or capability to leverage on modern technology, fall behind, and perish.

Finding that right balancing will certainly be a challenge for us, central bankers, but it can be an area where international collaboration and networking platforms, like the SEACEN Centre, can play a role. Refining the knowns, looking ahead for the unknowns, and balancing our actions. These are how we should approach our policy questions.

Read the full speech

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