Widely known for a being a global tourism and hospitality destination, Thailand is looking to expand its tax revenue base by bringing its nascent crypto industry into the mainstream fold. A new law was passed recently with the specific target of regulating cryptos and digital assets, giving them an unparalleled level of government recognition. This has lessons and implications for everyone involved in the cryptosphere.
Establishment versus Upstarts
Around the world, regulators have been struggling with the problem of how to accurately classify cryptocurrencies into ‘security’ and ‘utility’ categories for regulation. The United States SEC, in particular, has contributed to a state of uncertainty in the crypto market with a perceived lack of clarity regarding its classification of different digital assets.
In Thailand, however, due in part to an urgent need to boost government budgets through increased tax receipts, the country’s legislators have taken a bold and unprecedented approach to the issue by writing a new law specifically to recognize and regulating digital assets. The Thai Digital Asset Business Decree gives a regulatory definition of cryptocurrencies and digital assets and makes provision for the extraction of tax receipts from business activities relating to both with a new amendment to the country’s tax code.
Although the move is stemmed in cold pragmatism, it has nevertheless attracted criticism from both the Thai cryptosphere (which does not want increased government monitoring) and the Thai financial establishment, which sees the move as lending credence to a group of young upstart cowboys.
For the Thai SEC, however, moves like this are critical to its balancing strategy. While trying to minimize the use of cryptos for illegal activities or gambling, it also does not want to create a draconian regulatory framework that could cause the crypto capital flight to other Asian hubs like Japan and South Korea. The hope is that with regulation will come legitimacy, which will reduce crime in the space and boost economic growth through widespread adoption.
Competing Against Asian Hubs
Under the new law, a withholding tax of 15 percent is levied on all profits. All trades and ICOs are to be paired with one of a list of seven cryptocurrencies, which according to sources, are Bitcoin, Ethereum, Bitcoin cash, Ethereum classic, Litecoin, Ripple, and Stellar. The reason given for this is their proper level of liquidity and their ease of conversion to fiat. This was no doubt decided with the consideration of easy tax collection in mind.
The law also outlines a regulatory framework for registering and operating an exchange, a brokerage or a dealership. It also standardizes a process for issuing ICOs and lays out requirements such as comprehensive business plans and audited financial statements. When compared to regulatory frameworks in Japan, Taiwan, and South Korea which are the current Asian crypto hubs, these rules compete favorably, offering more protection and recognition than Japan’s famously restrictive FSA for example.
Whether this will lead to the emergence of Thailand as a bona fide Asian crypto hub remains to be seen.