While the world struggles to regulate cryptos and debates being rife about whether to consider them as securities or not, Thailand has just moved ahead in framing a new law that skipping the debate altogether. It has written a new law via emergency decrees instead of fitting cryptocurrencies in their existing securities laws.
The two published Emergency Decrees in the Royal Gazette which would enact the law and regulations related to
(i) digital asset business operations and
(ii) Thai tax ramifications on certain income earned from digital assets. The Law is effective as of 14 May 2018.
Digital asset business operations
The first decree for ‘Digital Asset Business Operations’ lays out rules for businesses that want to operate as an exchange, a broker, or a dealer. Digital asset business activities would consist of:
- a digital asset trading center/exchange;
- digital asset brokerage;
- digital asset trading; and
- other activities related to digital assets as specified by the Minister of Finance.
Digital asset business operators who are engaged in digital asset business activities would be required to seek permission from the Minister of Finance. To everyone’s surprise, the businesses, as part of their permit application, would require a business plan, including an audited financial statement
This decree also formalizes a process for initial coin offerings (ICO’s) that’s similar to the system for issuing debt or equity. One of the most interesting aspects of Thailand’s new rules is that all ICOs and trades must be paired with one of seven specified cryptocurrencies. The SEC hasn’t formally named them, but if experts are to be believed the chosen list comprises Bitcoin, Ethereum, Bitcoin cash, Ethereum classic, Litecoin, Ripple, and Stellar. They were selected because of their liquidity and convertibility to fiat (Thai Baht).
The Interim arrangement for existing digital asset business operators is that they can continue doing their businesses and obtain a license to operate the business by 10 August 2018. The decree also permits them to carry on their business while the license application is pending. But if the application is rejected, they will have ceased their business operation. The decree also states that any failure to comply with the provisions will result in imprisonment and/or a monetary penalty.
Thai tax ramifications on certain income earned from digital assets
The second decree is an amendment of the Thai Revenue Code (No. 19), governing Thai tax implications on income from digital assets. The decree stated
“Shares of profits or any gains derived from holding digital tokens and an excess of the proceeds over an acquisition cost, arising from a transfer of cryptocurrencies or digital tokens are subject to Thai income tax in a manner similar to other ordinary income. Such income received by a foreign person would generally be subject to the 15% withholding tax.”
Thai SEC made stronger
According to the decree, the Thai Securities and Exchange Commission (SEC) has the duty and the authority to regulate digital currencies and their operators. The decree has outlined four areas the SEC will be responsible for.
- To regulate the issuance and offering of cryptocurrencies and digital asset businesses.
- To set the fees and requirements for the registration and approval of cryptocurrencies and their operators.
- To establish a guideline for dealing with potential problems.
- All other areas not previously mentioned.
This law definitely is a good step for making Thailand a crypto hub but its competition is tough Japan, South Korea or Taiwan which are moving at quick pace. But at least with leadership, innovation and clear rules, the country is in with a fighting chance.
Will these regulation change the fortune for Thailand in becoming a crypto hub? Do let us know your views on the same.