Regulating Digital Assets in Thailand: Problems and Future Prospects
Pawee Jenweeranon - Faculty of Law, Thammasat University; Cambridge Centre for Alternative Finance (CCAF), University of Cambridge; Chinese University of Hong Kong
-- In Thailand, before 2018, digital assets were used as fundraising instruments and mediums of exchange without laws or regulations to govern these activities. This led to concerns from the Thai governmental authorities about the potential impact of the activities on national financial stability and public risk.
There are a number of potential use cases for digital assets; however, to date, there have been several problematic legal issues potentially arising from their utilization. These include the lack of clarity of the relevant regulatory frameworks, the lack of co-ordinated activity between regulators, information asymmetries, as well as problematic issues pertaining to the unclear legal rights and obligations of token issuers and token holders. As a result, the advantages of digital assets are potentially undermined unless regulators put in place a proper regulatory framework.
From a regulatory perspective, Thai policymakers have recently sought to make laws keep pace with technology. This can be seen from the issuance of legislation in response to innovative products and services that are not addressed by existing laws and regulations. To this extent, there have been regulatory responses to support emerging technologies including the issuance of the Emergency Decree on Digital Asset Business B.E.2561 (2018) (the Emergency Decree).
With regards to digital assets laws and regulations, the legal status of certain types of digital tokens remains unclear according to existing laws and regulations. In short, there is a lack of clarity amongst the relevant regulatory frameworks in terms of the legal status of digital assets. Particularly, digital assets including virtual currencies are not considered a legal tender under existing laws and/or regulations.
In terms of related businesses and participants, the Emergency Decree is intended to be an emergency measure for national security, public safety or national economic stability with the primary objective of regulating digital asset businesses to prevent any possible risks that would be involved in digital asset businesses. In other words, the law provides the legal foundation for digital asset business operators and digital token portal service providers.
In particular, Section 3 of the Emergency Decree categorised “digital asset businesses” into four main types. These include digital asset exchanges, digital asset brokers, digital asset dealers and other businesses that may be allocated by the Minister under the recommendation of the SEC. To this, it further provides a licensing obligation for digital asset business platforms that intend to operate in Thailand (Section 26). In addition, the subordinate rules set out detailed requirements that include paid-up capital requirements and the company’s registration requirements for the platforms as well as the exemption in the case of utility token and stablecoins.
However, some of the concerns associated with this including various matters such as limitation of the types of digital asset businesses under the Emergency Decree. In specific, it is notable that the types of digital asset businesses under existing Thai laws and regulations are still limited and do not cover all possible types of digital asset businesses in the market. In addition, the exemptions under the Notifications issued by the Thai SEC are still limited and may need to be retrofitted in response to emerging technologies.
Overall, in general, it should be noted that one of the key challenges facing regulatory perspectives on digital asset at the domestic level is that different authorities have different viewpoints on the use of cryptocurrencies. These inconsistent stances, as well as the lack of collaboration amongst different agencies, can lead to a problem in the use of cryptocurrencies and their supervision.
For example, with regard to ICOs, there are bespoke regulations in some countries for their activities; however, it is still challenging for regulators to provide clear-cut guidelines and/or subordinate regulations, such as the criteria to differentiate utility and security tokens.
Moreover, due to features of digital assets as well as DLT, other complex legal issues for which there is still no regulatory support may arise, such as the legality of so-called “smart contracts” and law enforcement or the confiscation of cryptocurrencies.