Bitcoin, the first decentralised cryptocurrency, was introduced a decade ago with the promise of delivering an alternative currency that is more secure, transparent, as well as better controlled than the extensively used fiat money. Despite the throng of benefits that cryptocurrency may have over physical money, there has been but mere cautious and meagre adoptions of digital currency transactions across global financial centres. Initial misunderstandings of Bitcoin’s underlying digital asset technology were prevalent and widespread. Amidst all the confusions, one country decided that the risks that accompany this digital revolution was manageable in contrast to the immense potential it entails. Thailand took a liberal and progressive approach towards cryptocurrencies, making it one of the Southeast Asia’s pioneers to enact cryptocurrency finance regulation and licensing.
When the process of adoption first started, however, Thailand was not an anomaly to the multitude of countries that implemented pre-emptive bans and crackdowns on cryptocurrency. The Thai government has since reversed its stance upon recognising the substantial business and technological opportunities arising from the acceptance of the currency, rapidly developing a sophisticated framework to balance the regulation of the industry and the safeguarding of consumer and investor security.
Establishing Regulations for Cryptocurrency Licensing
Since the launch of Bitcoin in 2009, over 2,000 cryptocurrencies have been introduced to the market, albeit only a modest portion of them have managed to thrive. Forbes reported that in 2018 alone, 743 coins had defaulted, cratering industry credibility and investor confidence. Reality, however, paints a more optimistic picture. Bitcoin represents more than half of the market cap value of all cryptocurrencies and it has certainly fared well in the eyes of investors.
As the digital asset community and industry continues to grow resolutely, it is important that the regulation of greater consumer and investor protection is steadily enforced as well.
In 2018, the Securities and Exchange Commission (SEC) of Thailand outlined the details of its cryptocurrencies and initial coin offerings (ICOs) regulations, including licensing requirements, fees, and a list of seven approved cryptocurrencies. Upon continued assessment of cryptocurrency development and relevant news, the SEC moved to shorten the list of approved currencies to four this year. These changes are not expected to affect any investors or businesses in the country as no ICO had been approved for investment, and licensed exchanges were not using them as base trading pairs. A crucial emphasis put forth by the regulators maintains that these approved cryptocurrencies must not be viewed as legal tender.
“Currently, there are four cryptocurrencies that can be used for base trading pairs. They are bitcoin (BTC), ethereum (ETH), ripple (XRP), and stellar (XLM).” – The SEC, Thailand
The SEC treads the cryptocurrency waters by stabilising the waves of cryptocurrency innovation and regulation; they assume the role of the austere yet liberal administrator, simultaneously allowing innovation while implementing firm guidelines and carefully leading blockchain development and growth in the country. Thailand has licensed three crypto exchanges and one broker-dealer earlier this year, a significant step forward for the crypto industry. Two applications, however, have been rejected on accounts of insufficient Anti-Money Laundering (AML) and Know Your Customer (KYC) processes. Facebook’s stablecoin Libra, a notable example which launch was announced in June, would face mountainous licensing barriers in consideration of scope limitations of the existing laws. Cryptocurrency developers may have to ambulate the legion of regulations in each country carefully and introduce digital assets strategically such that authorities may license them. Fairly recently, cryptocurrency has been placed under heavier pressure and scrutiny as Thailand’s anti-money laundering regulator sets out to modify laws to prevent digital assets from being exploited as the next weapon for money laundering.
Innovation and Blockchain Technology
Through persistent and tireless endeavours in regulating the Thai cryptocurrency industry, Thailand has afforded businesses and consumers with distinct guidelines and security for their participation in the digital economy.
In August 2018, the Bank of Thailand announced the launch of “Project Inthanon”, named after the highest mountain in Thailand, a collaborative project to conceive a Central Bank Digital Currency (CBDC). In partnership with R3, a blockchain software enterprise, and eight other participating banks, a prototype currency has been developed to enable domestic transfers using the crypto tokens between banks yet without borders. It aims “to raise the Thai financial sector’s technological readiness in adopting new financial technologies to enhance operational efficiencies”, readily elevating the country’s digital future. The latent potential of the plan is further enhanced by the high rates of internet accessibility in Southeast Asia that encourages users in their adoption and employment of the digital asset as a part of the digital revolution.
The avant-garde Blockchain technology, foundation of the value of cryptocurrency, has been pervasively exercised by the Thailand government in an array of areas including national, provincial or community e-voting elections. Perhaps the steadfast dedication to cutting edge technology such as the blockchain has laid ground to Thailand’s entrustment in cryptocurrency or perhaps it could be the inverse, but the nation’s acceptance of surfacing technology can be seen as ground-breaking by innovators around the globe.
Thailand is aware that there is always more to be done to achieve a daily and practical usage of cryptocurrency, yet the country’s persevering efforts to ensure a robust and dynamic regulatory framework positions itself as a major player in the cryptocurrency and blockchain arena in Southeast Asia. DesFran has the networks and expertise to help you venture into the cryptocurrency space. Contact us today for more information.
References
https://ihodl.com/topnews/2019-08-06/thailand-regulator-sees-threat-cryptocurrencies/
https://news.bitcoin.com/thailand-crypto-regulations-legalizing-cryptocurrencies/
https://www.bangkokpost.com/business/1636910/sec-bars-3-cryptocurrencies-from-icos-trading-pairs
https://www.bangkokpost.com/thailand/general/1724523/
About the Authors
Joyce Sun is Strategic Communications and Research Intern at DesFran. Joyce enjoys learning as she writes financial news blurbs and editorials involving financial regulatory developments due to her keen interests in equities and finance-related topics. She is a final year honours student at the National University of Singapore hoping to pursue a career in the finance industry, and to continue developing her knowledge in investments.
Joey Tan is Strategic Communications and Research Manager at DesFran. Joey has a flair for creatives and is always keen on improving and upgrading herself within the realm of the financial services industry. She manages the strategic communications and marketing initiatives in DesFran, and has a keen interest in financial licensing and regulations. Joey is a sociology graduate from the University of Buffalo.
