Thailand: Direction to regulate the usage of Digital Asset as Means of Payment

Introduction

On 25 January 2022, the Bank of Thailand (BOT) and the Securities and Exchange Commission of Thailand (SEC) jointly determined the regulatory framework to prohibit digital asset business operators in Thailand from supporting and promoting the usage digital assets (i.e. cryptocurrencies and digital tokens) as a means of payment for goods and services.

The regulation being developed aims to prevent extensive risks to the public, the economic and financial system of Thailand arising from the usage of digital assets, such as:

• volatility in digital assets prices that can cause uncertainty for users and recipients;
• the use of digital assets for illegal activities such as money laundering, terrorist financing, tax evasion etc.;
• absence of suitable regulators and adequate safety standards to implement the use of digital asset as means of payment;
• the BOT being unable to provide liquidity assistance to financial institutions in forms other than Thai baht currency; and
• consumers encountering cyber theft, personal data leaks, or any opportunity loss due to the failure of a digital assets system.

The BOT and the SEC jointly held a public hearing on the future regulation from 25 January until 8 February 2022. The feedback from this hearing will be taken into consideration to consider the appropriate regulatory framework in the future. The initial principles arising from this meeting are discussed further below.

Who is being regulated?

The proposed regulation will apply to all types of digital asset business operators (under the Royal Decree on Digital Asset Businesses B.E. 2561 (2018)), comprising of:

• Digital Asset Exchanges;
• Digital Asset Brokers;
• Digital Asset Dealers;
• Digital Asset Fund Managers; and
• Digital Asset Advisory Services.

Who is the regulator?

The SEC will be the regulator for the proposed regulations.

What are the initial principles jointly approved by the SEC/BOT meeting?

The digital assets business operators must not:

• advertise or express that they are ready to provide a service for other merchants in accepting digital assets as payment for goods and services;
• set up any systems or tools which facilitate digital assets as a means of payment;
• provide an electronic wallet service to merchants that allows the merchant to accept payment for goods and services in the form of digital assets;
• provide any service that allows for the transferring of digital assets or money to the account of other persons for the purpose of accepting digital assets as payment for goods and services; and
• conduct any other actions which are deemed as supporting and promoting the usage of digital assets as a means of payment.

In addition, in circumstances where the digital asset seller sells its digital assets in Thai baht, the digital assets business operators must only transfer the consideration in Thai baht to the account of the seller.

What is next?

Subject to the feedback from the public hearing, existing digital assets operators will likely be prohibited from using digital assets as a means of payment and will require to comply with further guidelines and regulations to be further issued by the SEC. However, it is expected that the SEC will need more time to consider the feedback received from the public hearing in order to issue an appropriate regulatory framework in the future.