Criticism swirls around the G-Token proposal
Digital Government Tokens Under Scrutiny
The Thai government's proposal to introduce the digital Government Token (G-Token) as a novel fundraising method has sparked controversy, with economic experts voicing concerns that it could potentially breach existing laws and deceive the public.
On Tuesday, the cabinet endorsed the launch of the G-Token scheme, designed to offer retail investors an alternative avenue for bond investments. The G-Tokens promise returns higher than traditional bank deposit interest rates.
However, Thirachai Phuvanatnaranubala, a former finance minister and deputy head of the Palang Pracharath Party's economic affairs team, has raised doubts about the scheme's legality.
He highlighted that the Public Debt Management Act of 2005, which governs public borrowing, was enacted prior to the emergence of digital assets and does not address such instruments.
According to Mr. Thirachai, Section 10 of the Act permits borrowing through contracts or debt instruments, provided there is written proof of debt. However, digital tokens, though legalized under the 2018 Digital Asset Business Emergency Decree, are primarily aimed at regulating the private sector's activities, not government fundraising.
He emphasized the necessity of amending the 2005 Act to grant the Ministry of Finance the necessary authority and establish a legal framework for public debt issuance via digital tokens.
Professor Arnat Leemakdej from the Faculty of Commerce and Accountancy also shared concerns about the initiative's lack of transparency. He pointed out that the government hasn't clarified the functionality of the tokens or explained whether their value would be guaranteed through asset-backed securities to assure investors they could recoup their investment whenever they wished to sell the tokens.
He cited initial government information suggesting the tokens would be backed by five billion baht. This implied, he remarked, that an equivalent reserve must be maintained. He criticized the absence of any mention of a custodian to manage these reserves and questioned the lack of potential capital gains with G-Tokens, which he described as savings deposits offering returns of just 1-2%. In his opinion, the marketing of G-Tokens seemed more like selling a dream rather than genuinely presenting an investment opportunity.
Interestingly, the government and Public Debt Management Office (PDMO) view the G-Token issuance as an innovative move in the digital financial infrastructure, utilizing tokenization technology while adhering to existing legal frameworks. The government seems to interpret the 2005 Act flexibly, considering digital asset formats as representations of government bonds instead of requiring new legislation. No explicit amendment to the Public Debt Management Act of 2005 has been reported yet, suggesting regulatory authorities are applying the Act's provisions flexibly to incorporate the G-Token mechanism within the government bond issuance process.
Business experts question the legality of investing in G-Tokens, the digital Government Tokens, as they potentially breach the Public Debt Management Act of 2005, which does not address digital assets. Professor Arnat Leemakdej also voices concerns about the lack of transparency regarding the tokens' functionality and guarantees for investors' returns.
