I bet the government never thought of this when they thought of the Digital Wallet scheme. It probably does not make sense to it that there could be millions of people shunning pseudo money, namely Digital Wallet Tokens (DWTs). Perhaps, in the government’s mind, a DWT is almost on a par with genuine money — fiat money.
For recognition purposes, I will refer to genuine money as cash.
Wrong. Very wrong. A DWT is inferior money. I, myself, had also never thought of its second-class status until I heard comments from market vendors that most of them will not accept DWTs.
The inferiority of DWTs comes from (1) not being freely used on all goods and services, (2) being non-transferable from person to person, and (3) their unclear legal status.
Just imagine the situation when one needs to give school money to one’s kids or give money to one’s family members to prepare today’s dinner or to pay overdue rent to a landlord. All of that has to be done with cash. The problem is that if one’s income is received in DWTs, where does the cash come from?
I have the opinion that DWTs will dominate, if not take over, all businesses accepting DWT’s cash registers. The reason is that DWT recipients are fully aware of its inferiority regarding limited usage and naturally want to dispose of it before hard earned cash. Most importantly, DWTs are given to them free.
I go through the NESDC’s private consumption data to estimate the portion of day-to-day expenses where DWTs are not applicable. The portion is 34.9% of total consumption expenses, namely transport (11.5%), housing and utilities (8.9%), and health (5.2%). If one includes debt repayment expenses and daily cash given to kids and family members, the cash requirement portion could easily exceed 50% of one’s income.
Do readers now understand why market sellers make the logical decision not to accept DWTs?
Let me give an illustration. A market vendor makes 1,000 baht in sales per day, all in DWTs, but needs 500 baht in cash for cash expenses. For a one month period, that market seller would be 15,000 baht short in cash. This 15,000 baht has nowhere to come from except savings or from loan sharks.
On this point, the government would argue that a particular market seller would lose his/her business to another market seller. Think again. Rich boys and girls sitting in air-conditioned ivory towers. Most, if not all, market sellers are cash strapped and have no savings. Therefore, they cannot afford cash advancements. In reality, there would be few cash-loaded market sellers accepting DWTs.
The cash shortage pain is not limited to small, impoverished market sellers, roadside food carts, and micro-sized SMEs. It would affect medium- and large-sized businesses as well. Medium- and large-sized business all have cash burdens. They need cash to pay wages, transport, utilities, communications, loan repayments, and, surprisingly, taxes. VAT alone is 7% on all sales.
There are 3.2 million SMEs with 2.7 million of those, or 84.4%, micro-sized. They are unlikely to participate in the DWT scheme because of cash shortage problems.
I can think of three possible solutions to remedy DWT’s inferiorities and improve the acceptance of DWTs.
Obviously, the first is to extend spending coverage to cover utility payments and transportation expenses. By including those two categories, DWTs would cover 20.4% more of consumption expenses. However, the government is likely to say “no.”
These two spending categories bring in substantial cash income to the government and government agencies. Fuel tax revenue is about 12 billion baht per month. The government does not want to have tax revenue in pseudo money as they cannot pay salaries with DWTs. Fuel suppliers to Thai power companies also do not accept payment with DWTs.
It is rather funny that the government and its agencies refuse accepting DWTs because of their inferiority, but they want to ask the private sector to accept this inferior money.
However, DWTs can never be allowed to service debt as that would make DWTs legal tender. All cabinet members would go to jail for authorising fake money which is a clear violation of the Currency Act.
Person to person transfers cannot also be allowed. If such a loophole is opened, people would use DWTs for illegal activities such as gambling and drugs.
This might be the right moment to point out that DWTs are not legal tender and has no legal status. No one can sue someone who fails to honour a DWT transaction. One could face a situation like this: “If you do not like the product, I am happy to refund your purchase. Please advise me on how to return the DWTs to your account.”
The second solution is to expedite the process of converting DWT pseudo money into fiat money. Currently, the first-round business recipients of DWT are not allowed to convert DWTs into cash. It would have to be done with the second-round business recipients of DWTs.
The government has not indicated anything about the holding period for conversion from DWTs into cash. I think businesses assume immediate conversions and they would be shockingly surprised at the government’s answer.
By the way, the conversion issue might be the real reason why the Ministry of Commerce (MoC) postponed the announcement of DWT participation criteria for businesses. It could be that the MoC cannot reach an agreement with the Ministry of Finance (MoF) on the conversion method and holding time.
The perfect conversion rules are to be converted at any banks and within one business day after the DWT transfer. The half-half copayment scheme of the previous government reimbursed participating businesses the next business day.
My guess is that the MoF is likely to say no as it does not have enough cash ready for the conversion. According to my estimation, under the assumption that DWTs are widely accepted and used at a regular pace, the conversion would be 19.2 billion baht per day, 23.5 days straight.
In other words, the MoF has to issue 19.2 billion baht of government bonds every day, including weekends and holidays, to raise cash for conversion. Crazy?
According to a survey by the University of the Thai Chamber of Commerce, recipients of DWTs indicated they would use DWTs as soon as and as much as possible. Many said that they would spend all 10,000 baht in one go.
The last solution is for first-round recipients who are likely to be negatively affected by accepting DWTs. As one senator asked: “Is the scheme meant to help people or hurt people?”.
The benefit of allowing them to have hard-earned cash far outweighs the economic gain of forcing them to use pseudo money to buy products, not on daily necessities. Please allow them to convert DTWs into cash with the next business day holding period rule.
With all these problems, readers might think why bother to invent DWTs? Why not hand out cash like the half-half copayment programme? My answer might be “No cash”.
