Bank of Thailand tightens controls on gold traders to curb strong baht

The Bank of Thailand (BOT) has announced tighter measures to control the inflow of foreign exchange through gold trading, which has been identified as a key factor in the rapid and significant strengthening of the Thai baht. The baht's appreciation has not only been influenced by the weakening US dollar and global economic factors but also by large capital flows linked to gold trading, particularly through online transactions.

During the event “Thailand Next Move 2026: Wealth Creation”, Vitai Ratanakorn, BOT Governor, explained that the baht had appreciated by 2.2% against regional currencies from December 1–16, 2025. While this has been partly driven by global factors, the BOT identified that the gold trading sector, especially involving "paper gold" bought and sold through applications, is a significant contributing factor. The scale of transactions in this sector is so large that it could be as high as 40-50% of Thailand's GDP, reflecting rapid growth and an unusually large market size.

Currently, about 15 major gold traders operate in Thailand, with 3-4 key players significantly influencing foreign exchange transactions. On days when the baht strengthens sharply, these traders account for nearly 20% of total FX market volume, exacerbating the pressure on the baht.

To tackle this, the BOT has instructed commercial banks to rigorously check documents for all foreign exchange transactions linked to gold trading, ensuring full transparency in these flows. Additionally, the Ministry of Finance is being urged to amend regulations to grant the BOT more oversight in foreign exchange transactions linked to gold.

Another new measure includes tighter controls on foreign currency inflows, requiring individuals and businesses to clearly document and specify the origin of funds when bringing dollars into the country. Despite this, Vitai stressed that these measures are not harsh, noting there will be no taxes or restrictions on capital like those imposed in the past (e.g., in 2010). The BOT is committed to ensuring these steps are balanced to avoid severe economic disruption.

“These measures are not drastic; there will be no taxes or restrictions on capital like in the past. We understand the consequences of such measures, and we’ve learned from previous experiences,” Vitai added.

Working with SEC and debt issuers to limit foreign fund impact on baht

The BOT is in discussions with major debt issuers to delay bond issuance during periods of baht appreciation, aiming to mitigate foreign capital inflows.

The central bank has also been coordinating with the Securities and Exchange Commission (SEC) and the Anti-Money Laundering Office (AMLO), particularly regarding the tracking of crypto fund sources, in line with the Travel Rule. This rule helps regulatory bodies trace the origin of cryptocurrency funds.

Vitai clarified that claims about USDT trading being the main cause of the baht’s strength are inaccurate. While some reports suggest that USD trading involving USDT is as high as 100 billion baht per month, the actual figure is closer to 30 billion baht, significantly lower than previously claimed.

It is crucial to note that legal USDT trading does not involve USD/THB transactions, so it does not directly affect the baht’s value. The BOT’s primary concern is the source of funds, especially if large-scale USDT trading reflects foreign capital seeking to convert into baht. The Travel Rule will allow better tracking of these crypto transactions, providing clearer oversight of capital flows, he said.

Concerns over SME bad debt

Another pressing issue for the BOT is the high levels of household and SME debt, with non-performing loans (NPLs) for SMEs reaching around 8-9%. When considering all at-risk loans, this figure could rise to 15-16%, which is alarmingly high. Meanwhile, overall business debt is above 80% of GDP.

SMEs, which are the backbone of the Thai economy, employing about 70% of the workforce, continue to face financial struggles. These businesses represent the vast majority of Thailand’s economy but have been facing 13 consecutive quarters of negative credit growth for over 3 years.

Large businesses, however, are performing well, and financial institutions remain strong, leading to a K-shaped recovery, where small businesses and the grassroots economy are heavily impacted, while large corporations continue to thrive.

This disparity in credit access is directly affecting investment, income generation, and employment, with consequences for the entire economy.

Gold Traders Association to meet BOT

Jitti Tangsitpakdee, President of the Gold Traders Association of Thailand, revealed that the association will meet with the BOT next week on December 22, 2025, to clarify concerns and provide further information.

The association believes that the regulatory oversight will mainly affect around 14 large gold traders involved in imports, exports, and online gold trading, not regular gold shops.

Regarding the impact of the strong baht on gold prices, the association’s research shows that the effect is only 7-8%, not the 80-90% some have claimed. Both the baht’s appreciation and the rise in gold prices are due to the weakening US dollar.

Throughout discussions with the BOT, the association has already shared information but is prepared to provide further cooperation and clarification.