Bank of Thailand to Crack Down on Grey Money and Gold Trading to Stabilise Baht

 

 

Governor Vitai Ratanakorn unveils unprecedented measures to track suspicious transactions and regulate gold trading amid structural economic challenges.

 

The Bank of Thailand (BOT) is dramatically expanding its regulatory reach to combat grey money flows and unregulated gold trading, as Governor Vitai Ratanakorn announced a sweeping transformation of the central bank's role from passive observer to active problem-solver of Thailand's structural economic challenges.

 

Speaking at the KKP Year Ahead 2026 seminar on Tuesday, Vitai unveiled unprecedented measures to track suspicious banknote exchanges, regulate digital gold trading, and monitor cryptocurrency transactions — all aimed at stabilising the volatile baht and addressing what he described as deep-seated structural weaknesses in the Thai economy.

 

"We will no longer limit ourselves to just analysis," Vitai declared. "We will extend our hand to lead in solving structural problems. If these issues are not addressed, they will eventually impact macroeconomic stability in the long term."

 

 

 

Targeting Gold Trading's Outsized Impact

The most significant intervention targets Thailand's massive but largely unregulated digital gold trading market, which Vitai revealed accounts for approximately 50-60% of GDP in transaction volume — a figure he described as "enormous."

 

The BOT discovered that on days when the baht strengthened, between 45% and 62% of all dollar selling in the country came from gold shops, creating severe exchange rate volatility.

 

"This is truly a structural problem," Vitai emphasised.

 

 

 

 

The central bank is seeking authority from the Ministry of Finance to regulate gold transactions that affect the baht, including requiring transaction reporting and potentially limiting trading volumes for large players.

 

The measures are expected to be implemented by late January.

 

"Gold trading is a business that no one regulates," Vitai said. "But what the Bank of Thailand is requesting authority for is to regulate the buying and selling transactions on apps, because it affects the exchange rate."

 

 

 

 

 

Tracking Grey Money Flows

In an unprecedented move, the BOT will leverage expanded powers to trace suspicious money flows, including large cash exchanges.

 

Commercial banks will now be required to report unusual transactions to the central bank.

 

"We will track the money trail," Vitai stated. "Anyone exchanging large amounts of cash — such as over 1 million baht in small banknotes — commercial banks must report to the BOT."

 

The governor candidly acknowledged the challenge: "When I asked around, I know that money will be used in elections. I know that people will come to exchange 100-baht, 500-baht, and 1,000-baht notes."

 

The BOT is also tightening controls on money exchange services and e-wallet transfers to prevent money laundering, with clearing systems expected to be operational by the end of this month.

 

Foreign currency inflows exceeding 200,000 US dollars will now require declaration of income sources.

 

 

Cryptocurrency Under Scrutiny

The central bank is also examining the cryptocurrency market, where Vitai revealed that 40% of USDT (stablecoin) sellers on Thai platforms are foreigners who "should not be trading in Thailand."

 

 

Whilst the crypto market's daily trading volume of 2.8 billion baht remains small compared to the foreign exchange market's 10-15 billion baht, the BOT is monitoring it for potential grey money activities.

 

 

 

 

Limited Room for Monetary Policy

Vitai painted a sobering picture of Thailand's economic challenges, noting that GDP growth has declined from an average of 5% to just 2% currently, with projections of 1.5-1.7% for 2026 against a potential growth rate of 2.7%.

 

The governor emphasised the limited effectiveness of traditional monetary policy tools. Despite four interest rate cuts totalling 1%, the stimulative effect on GDP was merely 0.18% over two years.

 

"If we cut interest rates by 0.5%, it will increase inflation by only 0.1%," he explained.

 

With Thailand's policy rate now the third-lowest globally, Vitai stressed: "Interest rate policy is just one tool. It cannot solve everything because these are structural problems."

 

 

 

SME Credit Crisis

Particularly alarming is the SME credit situation, which has been negative for 13 consecutive quarters (36 months).

 

"If credit is negative, the creation of liquidity in the business activity system disappears. This is a real problem," Vitai warned.

 

To address this, the BOT signed an agreement on 15th January to establish a new guarantee mechanism for SME loans in competitive sectors including smart electronics, processed agriculture, tourism, and logistics.

 

 

 

Structural Challenges Ahead

Thailand faces multiple structural headwinds including high household debt (amongst the world's highest), ageing workforce, political uncertainty, corruption, and low productivity due to years of underinvestment.

 

"We have inequality issues — both in terms of income and access to opportunities," Vitai noted, adding that the country had seen seven finance ministers during his five years at the Ministry of Finance.

 

The governor stressed that solving these problems requires collaboration: "Economists analyse for us to understand, but what I want to invite is — I think we are at a point where we need to help each other. We need to help solve problems together."

 

Despite the challenges, Vitai expressed cautious optimism: "If we can overcome obstacles and get through this difficult year, next year, 2027, we hope will be a much better year. The Thai economy will return to normal."

 

The BOT's aggressive pivot from analysis to action marks a significant shift in Thailand's approach to addressing its economic vulnerabilities, with the central bank acknowledging that structural problems cannot be solved through interest rate adjustments alone.