BOT closes accounts receiving direct yuan to curb grey economy

The Bank of Thailand (BOT) is intensively elevating its supervision of the financial system.

This follows a previous disclosure by Chayawadee Chai-Anant, Assistant Governor, Corporate Relations Group, that the BOT had coordinated with Alipay and WeChat Pay providers to suspend at least 5,000 accounts using person-to-person (P2P) QR codes for commercial payments.

She reiterated that service providers in Thailand must only accept payments in Thai baht, warning that violators will face legal penalties.

Most recently, Vitai Ratanakorn, Governor of the BOT, disclosed the regulatory direction for foreign exchange (FX) transactions and the use of foreign payment applications.

He stated that the central bank has a clear policy to close loopholes in the Thai financial system, including the illicit acceptance of yuan payments and speculative FX trading, which do not benefit the real economy.

Vitai said the BOT's core principle is that transactions occurring in Thailand must correctly enter the Thai financial system.

QR code payments, whether through Alipay or WeChat Pay, must always be converted into baht.

Direct yuan payments between buyers and merchants are not permitted.

"If a QR code is used in Thailand, it must be converted into baht. If we find direct spending in yuan, we must close the account. If they open a new one, we close it again. We will keep doing this to make this type of business difficult," Vitai said.

The BOT Governor noted that the problem is clearly visible in the Huai Khwang area, which has been dubbed "Huai Khwang province", and is beginning to spread to other areas such as Bo Win.

This reflects that the use of unregulated payment systems is not merely an isolated issue but is becoming more widespread.

Vitai also observed the role of commercial banks, stating that the banking system can already see money flows and transaction patterns, and therefore should be able to detect anomalies.

For example, accounts receiving repeated transfers throughout the night in similar amounts could indicate the use of an account for commercial payments.

"How could banks not know, since all the data is in the system? If found, they must be closed to clean up the financial system," Vitai said.

The BOT Governor explained that the measure does not only aim to close accounts receiving yuan, but is part of an effort to reduce the size of the grey economy and cut off underground transaction channels, which are often linked to grey businesses and illegal activities.

On another front, Vitai confirmed that the BOT has no policy or intention to allow retail investors to trade foreign exchange (FX) for speculation, as it views such activities as not benefiting the real economy.

However, business operators and the public who need to exchange foreign currency for trade, investment, travel, or hedging can continue to do so normally through commercial banks or BOT-authorised money changers and money transfer providers.

Vitai added that although the baht has depreciated by around 5-6% in line with the strengthening US dollar, it remains at a level consistent with regional peers.

Meanwhile, Thailand still holds about US$300 billion in international reserves, foreign capital has not flowed out abnormally, and credit rating agencies maintain a "Stable Outlook" on the Thai economy.

Therefore, there is no need to ease measures to allow for currency speculation.