Cabinet approves draft law on digital currencies
The trade in digital currencies got a green light last week from the cabinet of Prime Minister Prayut Chan-o-cha, which imposed a 15 percent tax on crypto currency transactions as one company announced plans to open Thailand’s third crypto currency exchange in April and others said they were readying initial coin offerings.
The new tax and other regulations were contained in a decree that was approved in principle on March 13 and then sent to the Council of State for review, a standard procedure to assess the legality and constitutionality of new laws and decrees. The Council narrowed the definition of digital assets to crypto currencies and digital tokens, eliminating other assets such as electronic data that had been included by the ministry. If new digital currencies were introduced, it said the Cabinet should consider each one individually for inclusion in the decree.
Crypto currency investing, trading and initial coin offerings (ICOs) have been gaining favor with some investors in Thailand. Two crypto currency exchanges have been established, and owners of a third exchange named JIBEX said it is ready to launch in April. Several companies have announced their intentions to issue ICOs. But those plans and other digital currency ventures were put on hold when the central bank and the Securities and Exchange Commission announced they would be formulating rules to regulate the digital financial markets and transactions. The regulators instructed Thai banks to avoid supporting digital currency ventures until the rules have been established.
The Thai government and financial authorities have been trying to strike a balance between allowing space for innovative and cutting-edge financial technologies to develop and grow in the Kingdom, and concerns over use of crypto currencies for money laundering and criminal activities. The authorities also want to protect less-savvy investors from unregulated frontier financial markets and instruments that may carry high risks while promising high returns.
While digital issuers and investors are now poised to gear up activity, not all advocates of digital market development were pleased with the provisions of the decree.
Korn Chatikavanij, a respected former finance minister and now chairman of the Thai Fintech Association, said his organization disagreed with taxing capital mobilization through ICOs, and taxing income and dividends from digital currency investing. Governments and regulators often forego taxes on young sectors to support their growth, and Thai authorities may end up driving Thai companies to issue ICOs overseas to avoid local taxes that would make their ICOs uncompetitive.
“Regulating digital currencies is good for more clarity. But certainly, by having regulations which we have never had before it is a difficult thing to see if it fits properly and, at the same time, to not obstruct growth,” Korn said.