Thailand: recent trends toward more stringent regulation of digital assets in Thailand

Wongsakrit Khajangson

Chandler MHM, Bangkok

wongsakrit.k@mhm-global.com

Panupan Udomsuvannakul

Chandler MHM, Bangkok

panupan.u@mhm-global.com

Suphakorn Chueabunchai

Chandler MHM, Bangkok

suphakorn.c@mhm-global.com

Supakan Nimmanterdwong

Chandler MHM, Bangkok

supakan.n@mhm-global.com

Introduction

In some jurisdictions, the regulatory and supervisory functions in relation to blockchain-based assets are separate, based on the purposes of the blockchain-based assets. In such jurisdictions, the securities-like blockchain-based assets are regulated by the securities and exchange commission whereas the central bank would regulate the use of blockchain-based assets as a means of payment. In contrast, the Thai Securities and Exchange Commission (SEC) is in charge of regulating cryptocurrency and digital tokens (which are defined as ‘digital assets’).

Since the enactment of the Emergency Decree on Digital Asset Businesses BE 2561 (2018), the Thai SEC has taken numerous steps to strengthen and expand the regulatory regime over the digital asset operators in Thailand. The aim is to strike a delicate balance between protection for investors and promoting the development of the industry.

The most significant move in 2022 so far, in our view, is the Thai SEC’s notification to impose a ban on operating and facilitating the use of digital assets (including cryptocurrency and digital tokens) as ‘means of payment’ for goods and services.^[1] This monumental step was jointly considered between the Thai SEC, the Bank of Thailand and the Ministry of Finance. This notification put a sudden stop to the trend in the market in which many business operators (including real estate developers) started to accept cryptocurrency as means of payment (some of which may be seen as part of their marketing campaigns during the heated crypto markets).^[2]

In the third quarter of 2022, the Thai SEC further tightened up the regulations on digital asset related advertisements by enacting very extensive regulations and guidelines on digital asset related advertisements.^[3] The Thai SEC also extended the reach of the regulation to regulate digital asset custodial wallet providers which had not been a type of regulated business operator.^[4]

In addition to the enacted regulations, the Thai SEC has several other regulations in the pipeline. In 2022, to highlight a few, it announced a public hearing for a draft regulation to regulate ready-to-use utility tokens and a draft regulation to prohibit digital asset operators from providing or facilitating the deposit taking and lending services.

On the enforcement side, earlier in 2022, the Thai SEC imposed penalties for offences in connection with the fabrication of information on the trading volume of digital assets on a digital asset exchange. The penalties include the maximum civil fines, reimbursement of the Thai SEC’s expenses during the investigation and banning the violator from being a director or an executive of such digital asset operator. These cases involved an arrangement between the digital asset exchange and the market maker who conducted self-order paring to maintain and increase liquidity.^[5] In late September 2022, due to non-compliance with the civil sanctions order, the Thai SEC further requested that the prosecutors proceed with litigation against the alleged violator in the civil courts to enforce the civil sanctions.

It remains to be seen how the Thai SEC will further develop and enforce the digital asset regime, but the direction is becoming apparent.