The Bank of Thailand (BOT) has issued a warning against the use of Thai baht-denominated stablecoins, labeling them a threat to the stability of the national currency system.

In a press release on Wednesday, the central bank took specific aim against the baht stablecoin THT created on the South Korean stablecoin platform Terra.

"[THT] could cause fragmentation to the Thai currency system should THT or other similar stablecoins come to replace, substitute or compete with baht issued by the BOT," the release reads.

The central bank now deems any activity involving THT "illegal," on the basis the creation, issuance and usage or circulation of any material or token for money violates Section 9 of the country's Currency Act (1958).

Any person is able to issue a proposal on Terra's algorithmically governed platform in order to mint new cryptocurrency that is later voted on by stakers holding the platform's native luna token.

Do Kwon, head of Terraform Labs, told CoinDesk in a Twitter direct message Terra does not initiate proposals, nor does it ever vote on them. "I think it's a very interesting development and quite amused we were able to catch the attention of a central bank," said Kwon. "Great free public relations, right?"

Asked by a user on Twitter whether he believed the central bank could "hurt" the THT ecosystem within Terra, Kwon responded, "lol no," on Thursday.

BOT said the general public needs to exercise caution and refrain from participating in any activity involving THT alleging users could be at risk of cybertheft and money laundering without the necessary legal protections.

Stablecoins linked to national currencies have been received with great trepidation by governments and regulators around the world.

See also: Thai SEC Backtracks on Unpopular Proposal for New Crypto Investor Qualifications

Most notably, the announcement of the diem (formerly libra) Facebook-backed stablecoin caused a wave of pushback, with the U.S., France, Germany and other nations saying it posed a threat to financial stability and even fiscal sovereignty and should be heavily regulated, if allowed to launch at all. Diem has since been reduced in scope for a reported plan for launch this year.

In China, the central bank proposed a change of the banking law last October, pushing to outlaw any yuan-pegged stablecoin except for its own digital currency.

Bank of Thailand did not immediately respond to a request for comment by CoinDesk.