The Thai central bank, the Bank of Thailand, has taken the unprecedented step of banning a fiat baht-pegged stablecoin, claiming that it could undermine the Thai public’s confidence in the existing financial system.
The stablecoin in question is the THT, the brainchild of the South Korean blockchain firm and terra (LUNA) token issuer Terra (also known as Terraform Labs). The latter has recently launched the Anchor protocol for lending and saving, and has issued stablecoins that peg to fiat currencies in a decentralized fashion.
Earlier this week, the company claimed that Anchor, which launched on March 17, per Maeil Kyungjae, would target 20% fixed APR, making it the “highest stablecoin yield on the market by far.”
But it appears the Bank of Thailand (BOT) wants no part of it. In a press release, the bank wrote,
“Although THT is currently not used as a medium of exchange, it could cause fragmentation to the Thai currency system should THT or other similar stablecoins come to replace, substitute or compete with Baht issued by the BOT. This would ultimately affect the general public’s confidence in the stability of the national currency system, which is the cornerstone of all economic activities.”
As such, the BOT ruled, “any activity involving THT is deemed illegal,” adding that Thais “should exercise caution and refrain from participating in any activity involving THT, as there are no legal assurances or protection, and users could also be at risk of cyber theft and money laundering.”
An undaunted Do Kwon, the Terra co-founder responded on Twitter,
“They always fear you before they join you. [Terra is] now putting central banks on guard. THT will be adopted whether [the] BOT likes it or not.”
Regardless, LUNA prices took a hit on the news. At the time of writing (08:18 UTC), LUNA, ranked 17th by market capitalization, trades at USD 18.24 and is down by 5% in a day, trimming its weekly gains to less than 64%. It rallied by 236% in a month and 13,304% in a year.
LUNA price chart:
Jake Chervinsky, General Counsel at Compound, labelled the decision a “short-sighted move that will primarily harm Thai citizens as the rest of the world keeps innovating.”
Qiao Wang of the DeFi Alliance opined that the ruling “seems to me like a big deal,” musing:
“Is this the first instance of a stablecoin being declared illegal? Look forward to seeing how this plays out.”
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