The proposed ~$280 handout has all the hallmarks of a programmable CBDC, including expiry dates & geolocation-based restrictions: perspective
Thailand’s Pheu Thai Party says that once it came to power, it would give all citizens 16 years and older a handout of approximately $280 that could only be spent within four kilometers of their homes and would expire after six months.
In a move intended to both stimulate the economy as well as lay the foundations for a digital economy, the 10,000 baht (~$280) programmable handout would be sent to the digital wallets of each eligible citizen that had the application on their smartphone.
For those without the smartphone app, Pheu Thai Party deputy secretary-general Paopoom Rojanasakul said, “There would be no problems […] as they could use their national ID card to get a personal code instead,” the Bangkok Post reported.
“Rojanasakul, who is also the spokesman for its economic committee, said that a Pheu Thai-led coalition government in the making would implement the promised policy once it comes to power,” according to The Nation.
The proposed handout was originally announced in April, but it was put on pause after the Pheu Thai Party came in second in the May 14 election, but the policy was revived last Friday.
“The Pheu Thai party, which won the second-highest number of seats, will lead a government”
“Thailand’s Pheu Thai Party Takes Control—But at a Long Term Cost,” Joshua Kurlantzick, Council on Foreign Relations
Thailand’s prime ministerial vote is expected to take place sometime between August 18 and 22.
According to Reuters, “Pheu Thai will nominate for prime minister Srettha Thavisin, a former real estate mogul with no political experience up until the election.
“To succeed, Srettha needs support from more than half of the joint lower and upper houses, an outcome far from certain.”
The Pheu Thai Party was the runner-up to the Move Forward Party in the election last May, and the two parties formed a short-lived coalition before splitting in July.
“With Move Forward now consigned to the opposition, it is almost certain that Srettha will be confirmed as prime minister,” writes Council on Foreign Relations (CFR) senior fellow Joshua Kurlantzick.
“New capabilities such as programmability, composability and tokenization are not the preserve of crypto, but can instead be built on top of central bank digital currencies”
Bank for International Settlements, Annual Economic Report, 2022
The Pheu Thai handout scheme has all the hallmarks of what a Central Bank Digital Currency (CBDC) could look like, including blockchain technology and programmability features like setting expiry dates and placing transaction restrictions based on a person’s geolocation.
However, the Bank of Thailand, which currently opposes the handout scheme, is still in the CBDC trial stage, and the country hasn’t officially adopted a CBDC.
It remains to be seen whether the handout would actually stimulate the economy or lead to more inflation, but the digital infrastructure laid could very well lead to a digital ID-based CBDC in the long run.
And it’s not just Thailand that is exploring a programmable digital currency.
Well over 100 central banks are currently exploring programmable CBDCs, and they all take their cue from organizations like the Bank for International Settlements (BIS), the International Monetary Fund (IMF), and the World Economic Forum (WEF) when it comes to CBDC policy and implementation.
When bankers and economists talk about programmability in token-based CBDCs, they are talking about rules being applied to when, where, and how you can spend your money.
“You could have a potentially […] darker world where the government decides that units of central bank money can be used to purchase some things, but not other things that it deems less desirable like say ammunition, or drugs, or pornography, or something of the sort“
Eswar Prasad, WEF Annual Meeting of the New Champions, June 2023
Speaking at the WEF’s 14th Annual Meeting of the New Champions, aka “Summer Davos,” in Tianjing, China this year, Cornell University professor Eswar Prasad said that “we are at the cusp of physical currency essentially disappearing,” and that programmable CBDCs could take us to either a better or much darker place.
“If you think about the benefits of digital money, there are huge potential gains,” said Prasad, adding, “It’s not just about digital forms of digital currency; you can have programmability — units of central bank currency with expiry dates.
“You could have […] a potentially better — or some people might say a darker world — where the government decides that units of central bank money can be used to purchase some things, but not other things that it deems less desirable like say ammunition, or drugs, or pornography, or something of the sort, and that is very powerful in terms of the use of a CBDC, and I think also extremely dangerous to central banks,” he added.
While Prasad highlighted that programming CBDC for economic or social policies could affect the integrity of central banks, European Central Bank president Christine Lagarde recently explained that programmability would be left to intermediaries like commercial banks.
“For us [central banks], the issuance of a digital currency that would be central bank money would not be programmable […] Those who can associate the use of digital currency with programmability would be the intermediaries — would be the commercial banks”
Christine Lagarde, BIS Innovation Summit, March 2023
Speaking at the BIS Innovation Summit in March, Lagarde told her fellow panelists that a central bank would not be in charge of programming a digital currency.
“For us [central banks], the issuance of a digital currency that would be central bank money would not be programmable — would not be associated with any particular limitation, whether it’s in time, in type of use — that to me would be a voucher. It wouldn’t be a digital currency,” said Lagarde.
“Those who can associate the use of digital currency with programmability would be the intermediaries — would be the commercial banks.
“And that’s their business. They know how to do that, but if we are to say that a dollar is a dollar, whether it is cash or digital; or a euro is a euro, cash or digital — then for us [central bank] it cannot be programmable.
“It can be associated with conditionality, which is different, but not programmable,” she added.
“By programming CBDC, those money can be precisely targeted for what kind of people can own and what kind of use this money can be utilized“
Bo Li, IMF, October 2022
Speaking at a high-level roundtable on CBDC in Washington, DC in October 2022, International Monetary Fund (IMF) deputy managing director and former People’s Bank of China (PBoC) deputy governor Bo Li said of CBDC programmability:
“CBDC can allow government agencies and private sector players to program — to create smart contracts — to allow targeted policy functions. For example, welfare payment; for example, consumption coupons; for example, food stamps.”
“By programming CBDC, those money can be precisely targeted for what kind of people can own and what kind of use this money can be utilized,” he added.
“Just imagine that you are able to give your kids some money in digital rubles and then restrict their use for purchase of junk food“
Alexey Zabotkin, Cyber Polygon, July 2021
In July 2021, Bank of Russia deputy governor Alexey Zabotkin gave a real world example of what CBDC programmability could look like when he spoke at the annual cybersecurity training exercise Cyber Polygon.
There, Zabotkin explained:
“This [digital ruble] will permit better traceability of payments and money flow, and also explore the possibility of setting conditions on permitted terms of use of a given unit of currency.
“Just imagine that you are able to give your kids some money in digital rubles and then restrict their use for purchase of junk food, for example.
“That would be a useful functionality for a customer, and of course you can come up with hundreds of other similar use cases.”
We are getting more and more glimpses into those “hundreds of other similar use cases” as we look to proposals from countries like Thailand with its geolocation restrictions and expiry dates, as well as Nigeria with its caps on savings and spending.
