Thailand moves to regulate crypto-currencies
Due diligence is overdue in the world of digital currencies, according to Thailand’s financial regulators. The Securities and Exchange Commission (SEC) said last week it wants the Ministry of Finance to begin regulating crypto-currencies and requested authority to regulate Initial Coin Offerings (ICOs), as the Anti-Money Laundering Organization said it would step up surveillance of digital currency transactions because they are sometimes used for money laundering by criminal syndicates.
ICOs are a new tool being used by companies, often tech startups, to raise funds by issuing digital tokens that are valued at or can be exchanged for crypto-currencies such as bitcoin. They rely on blockchain technology. Thailand’s major banks and fintech startups have gotten on the blockchain bandwagon, significantly investing in the technology, piloting the use of blockchain or outright adopting it.
Thailand, however, has been taking a cautious, perhaps ambivalent approach to crypto-currencies. Respected former Minister of Finance Korn Chatikavanij, who is now chairman of the Thai Fintech Association, has been an advocate of ICOs, and recently told reporters that three non-listed companies in Thailand are preparing ICOs as a means of raising funds.
Rapee Sucharitkul, secretary-general of the SEC said, however, that a study on ICOs found that 95 percent of ICO investments are a failure, but the remaining 5 percent result in very high returns. The SEC does not oppose ICOs, but because of the high risks and failure rate, ICOs need government supervision, he said. By contrast, China and South Korea have banned ICOs.
“The SEC has proposed a balanced regulatory framework for Initial Coin Offerings. We will open a specific ICO track called ‘investment participation’. But first the scheme needs to be approved at the government level [by the Finance Ministry] to supervise digital currencies and the direction of the regulatory framework,” Rapee said.
The Ministry of Finance, the Bank of Thailand, the Anti-Money Laundering Office, and the SEC are engaged in talks to develop an ICO regulatory framework. Rapee said ICO regulations would most likely be unveiled within the first half of this year.
Rapee cautioned that ICOs have sometimes been used to exploit investors or commit fraud. More ominously, criminal syndicates around the world are using crypto-currencies as a means to engage in financial transactions concerning illegal activities.
That has prompted the Anti-Money Laundering Office (AMLO) to announce last week that it will require anyone who engages in a digital currency transaction to report that transaction to AMLO. In addition, AMLO will increase surveillance of crypto-currencies, who is using them and for what purposes.
Romsit Viriyasan, the acting chief of AMLO, warned that investing in digital currencies is a high risk because they are not recognized as legal tender by Thailand. That makes those buying or using them vulnerable to being cheated or defrauded, he said.