In April, Thailand issued a ban against payments using cryptocurrencies and other digital assets that is set to go into effect this month. While the aim has been to maintain stability in financial markets, lawyers say Thailand’s digital asset industry may grow more slowly due to the restrictions.
Regulators across Asia have been cracking down on cryptocurrency in the past few months as they aim to reduce risks for the broader public. In April, for example, Singapore extended its cryptocurrency regulatory oversight when lawmakers approved the Financial Services and Markets Bill 2022. The law allows Singapore to exercise domestic regulatory oversight on digital token service providers that provide services overseas but operate from the city-state. (See Page 10 for a more detailed analysis).
Thailand has been making moves to reign in crypto use as well. In March, the country issued rules banning digital assets from being used to pay for goods and services from April 1. According to Reuters, the move was in line with earlier discussions between the Securities and Exchange Commission (SEC) and the Bank of Thailand (BOT) on a need to regulate such activity by digital asset business operators as it could impact the country’s ﬁnancial stability and overall economy.
Wongsakrit Khajangson, partner, Panupan Udomsuvannakul, counsel, Tantigar Hutamai, senior associate, and Kanchana Suchato and Shaswat Weeramongkolkul, associates, at Chandler MHM tell Asian Legal Business the new regulations were brought in to limit the widespread use of digital assets as a means of payment “by prohibiting a regulated digital asset business operator from undertaking the activities of operating and facilitating the use of digital assets for means of payment purposes.”
The new regulations, the lawyers say, have come on the heels of growing domestic popularity of digital assets in Thailand’s payment space.
“Some business operators have expanded their businesses to cover services relating to the settlement of payment of goods and services by digital assets,” the lawyers say, noting operators have “provided systems to facilitate certain customers in accepting digital assets as means of payment for goods and services. These developments subsequently raised concerns from the regulatory authorities,” they explain.
Regulator y authorities are concerned too, that widespread use of digital assets as a means of payment could impact the country’s financial stability.
“The use of digital asset as a means of payment will create a unit of account or unit of pricing other than Thai baht which will increase the cost of economic activities, and reduce the efﬁciency in maintaining the country’s economy, ﬁnance, and monetary policy transmission,” say the lawyers.
A VARIETY OF RISKS
Another area of concern for regulators in Thailand is that widespread use of digital assets as a means of payment for the general public could trigger a variety of different types of risks. The Chandler MHM lawyers say these include, “a risk on the price ﬂuctuation of digital assets, information technology risks with no speciﬁc standard or safety measures for payments that may results in cyber espionage, risks on suspension or delay in providing services, and risks due to the possibility of digital assets being used as a money laundering tool and terrorist ﬁnancing.”
As regulators focus on these potential risks and examine regulatory blind spots, their aim, say the lawyers, is to restrict business operators from using digital assets as a means of payment, “and prevent the impact on ﬁnancial stability and overall economic systems due to the use of digital assets as a means of payment.”
But while mitigating against risk is a priority for regulators globally, striking a good balance that allows for innovation and business attractiveness while protecting the public, is no easy task. Since the enactment of the new regulations, Thailand’s regulators have faced a range of criticism from the public, Khajangson, Udomsuvannakul, Hutamai, Suchato and Weeramongkolkul say.
According to the public view there is a risk the recent development may hamper the cryptocurrency market. There is a concern that “Thailand’s digital asset industry may grow more slowly due to the harsh restrictions,” note the lawyers.
“Additionally, some real estate developers have discontinued plans to accept digital assets as a means of payment for home purchases,” they say.
But while there is interest in crypto-currency, regulatory developments are only likely to impact a portion of the businesses market, the lawyers explain.
“Since the price of Bitcoin surged 2017, cryptocurrencies have attracted massive media attention that ultimately drove large number of Thai investors into investing in digital assets. Although entrepreneurs have expanded their business models to serve growing trends by collaborating with business operators to accept digital assets as means of payments, only a handful of Thai business operators and customers have used digital assets as a means of payment,” they say.
“Cryptocurrency is used as an investment rather than a payment option in Thailand. The new regulation was implemented as a tool to stop the widespread use of digital assets as a means of payment but not the use of digital assets for investment purposes,” they add.
While the average consumer may not be signiﬁcantly affected by the changes, lawyers say for business owners and operators in Thailand say that new regulatory developments may spell changes for relevant business operations as they take steps to become compliant with the changes. The changes are likely to affect those who provide goods and services that allow for payment using digital assets.
“This could create legal issues for business operators and their customers, which should be considered and tackled,” Khajangson, Udomsuvannakul, Hutamai, Suchato and Weeramongkolkul say.
To avoid potential risks, and to ensure validity and legality of transactions, business operators should “revisit their operations and relevant agreements entered into or to be entered into with its customers,” the lawyers note.
“Additionally, in cases the said commitment between the business operator and its customers have been established and are still effective on the effective date of the new regulation, advice and solutions on the possible consequences from failure to comply with such commitment should be sought,” they add.
Despite authorities continuing to ﬂesh out Thailand’s regulatory framework, the work in this area is far from complete. While Chandler MHM lawyers say there have been “considerable developments on regulations surrounding digital assets in Thailand,” many activities fall out of the scope of regulations and are not legally recognised under Thai laws, leading to some ambiguity.
Advising caution in such cases, the lawyers tell ALB that for those unsure, “proper consultation with local counsel is necessary to avoid any legal implications this uncertainty may cause.”