Thailand’s Securities and Exchange Commission (SEC) announced on Wednesday, March 23, that it will ban the use of cryptocurrency as a payment method for goods and services. The ban will come into effect on Friday, April 1, and local industry stakeholders anticipate more stringent regulations to be formulated this year.
The financial regulator said digital asset business operators must comply with the new rules before May 1, according to a statement published by the SEC.
The immediate impact of the ban may not be immense, according to Akalarp Yimwilai, CEO of the digital exchange Zipmex. “When it comes to using crypto as payment means for services and goods, cryptocurrency is merely seen as an alternative,” said Akalarp. He added that using crypto for payments only happens “on a very small scale” in Thailand.
However, the SEC’s new rules will impact startups that operate in the crypto space, including centralized exchanges, where users can swap cash for cryptocurrency for trading purposes. “The ban will impact local operators that facilitate payment services and the development of financial innovations,” Akalarp explained. For example, Zipmex will suspend its services related to crypto payments.
The SEC explained that its decision was made to protect the stability of Thailand’s financial system and economy from risks such as money laundering, cyber theft, and personal data breaches. It indicated that digital asset platforms that serve customers in Thailand will have to warn their clientele about this development and that they must terminate the accounts of users who are found to be violating laws.
This does not impact cryptocurrency trading and investing, but users in Thailand may turn to exchanges that are not licensed to operate in the country, such as Binance, according to Akalarp. Other options may be platforms that offer decentralized financial services and do not require users to share their identities.
In January, Binance, the world’s largest cryptocurrency exchange by trading volume, announced a partnership with Thai power producer Gulf Energy Development to explore the potential of building a new digital asset exchange in Thailand, per Bangkok Post, but the exchange has yet to develop a formal presence in the country. Last July, the SEC filed a criminal complaint against Binance for operating a digital asset exchange in the country without a license.
When the Thai government said it might impose a 15% withholding tax on crypto transactions in January, consumers quickly shifted to using unregulated platforms to evade the levy, Akalarp said. The taxation plan was scrapped that same month after backlash from local industry stakeholders, according to the Financial Times.
The latest ban on using crypto as a payment method is in line with Thai market regulators’ stated goals of strengthening oversight of digital assets due to volatility and compliance risks.
On March 23, the Bank of Thailand (BoT) floated new rules to limit investments in digital asset businesses made by local commercial banks and their subsidiaries. These regulations are expected to be implemented in mid-2022 and will allow commercial banks to invest up to 3% of their capital into firms that offer services related to crypto-assets, per the Bangkok Post.
In response to the ban on crypto payments, Akalarp has urged regulators to develop sandbox programs for platforms that handle crypto assets so that there is a designated space for platform operators and regulators to engage in dialog to understand the risks and opportunities together. “It is healthy for an emerging industry to be regulated, as it provides clarity and creates a level playing field for all players. But regulations should not be implemented to control or hamper the industry’s growth,” said Akalarp.
“Zipmex is ready to work closely with the SEC and BoT in a regulatory sandbox program. We believe that the sandbox would help regulators and policymakers to understand the opportunities that come with crypto payments while minimizing risks involved,” the CEO said.