When the Bank of Thailand (BoT) banned the country’s banks from offering services to cryptocurrency exchanges in early 2018, many people were surprised that this tech-literate and forward-thinking country was taking such an extreme approach.
But as Archari Suppiroj, Director of the FinTech Department at the Thai Securities and Exchange Commission (SEC), told the audience gathered for the recent Ripple Regionals event in Bangkok, the ban was always meant to be a temporary solution.
“We were already working with the BoT and other relevant agencies to craft really comprehensive law to govern this space,” she recalled. “But there were a lot of concerns about scams. People were using blockchain and other cool words to con people.”
Balancing protection and innovation
With a ban in place to protect consumers, the group was tasked with implementing regulation quickly. In just three months, a new royal decree classified virtual currencies as digital assets and created a framework for licensing exchanges and required banks to form subsidiaries when dealing with Initial Coin Offerings (ICOs) as a buffer against losses. The BoT’s Thammarak Moenjak admits that his organization was initially unsure about regulation.
“Like most central banks, we kept quiet about digital assets other than warning consumers not to fall for scams,” he said. “But we also want to encourage banks and tech firms to help alleviate pain points in the system. The issues around digital assets were becoming too important, so we sat down with the other agencies.”
One key pain point he noted was cross-border payments, as “Thailand hosts a lot of migrant workers from Myanmar, Cambodia, Laos, and Vietnam who need to send money home.” Instead of using slow and expensive remittance services or informal networks that raise concerns about customer protection and money-laundering, a regulated blockchain-based service could solve the issue for everyone.
This balance between protecting consumers and promoting innovation is also important for the SEC. Though Archari knew that ICOs were a legitimate way for startups to raise funds, the unregulated environment was too risky, especially for investors.
“Previously, anyone could ask people to invest in exchange for project tokens,” she said. “Now only companies under Thai law can issue ICOs and they are screened by ICO portals, which are like financial advisors that ensure there is a solid business plan and then recommends it for SEC approval.”
Working towards one goal
Getting each of its relevant agencies to work together was the key to Thailand’s success in regulating the digital assets industry. Though everyone was equally concerned with AML/CFT issues, each group also had its own specific area of focus.
“The Ministry of Finance was tasked with protecting customers and tax evasion,” notes Thammarak, “while the SEC is about protecting investors and promoting legitimate ICOs. The BoT had three main concerns: financial stability because people were speculating, exchange control, and regulating payments.”
For Archari, it all came down to the shared belief that “if we have the right regulatory framework, we can use the potential of this technology to help the country advance.”
Driving financial inclusion
Collaboration will continue to be the foundation of Thailand’s digital asset regulation as it moves forward. Archari stressed that the SEC and BoT are maintaining an open mind about what players in the space want to achieve and how they go about it.
“We want those with ideas to come and talk to us. We want to facilitate good ideas even if the rules have to be amended. It helps us learn what the technology needs, as well as a chance for people to understand our concerns so we can work together along the way.”
Pointing to the progressive attitude towards blockchain in the Philippines, Thammark noted how important it is for “the whole region to have an ecosystem where banks partner with different firms and technologies.”
This could help tackle Southeast Asia’s biggest pain point: financial inclusion. When the majority of people in the region do not have bank accounts, using mobile technology and digital assets to solve common problems like cross-border remittances could be the key to driving adoption and improving people’s lives.
Thailand’s delicate balancing act of using well-thought through regulation to promote innovation while protecting customers, investors and the country’s overall financial stability is a template for others to follow.
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