The hottest tech trends across Asia are undoubtedly crypto and non-fungible tokens (NFTs). Amidst it all, Thailand is making waves in the industry by increasing its support for homegrown crypto traders and investors in a bid to make the country more crypto-friendly.
It hasn't always been a smooth ride.
The Thai government initially banned the trading of such tokens in June 2021, but has recently softened its stance on NFTs and did not express any objection to the establishment of an NFT marketplace by Kasikorn Bank.
So, the only question that remains is how will these regulations change the crypto game for traders.
Why regulations are needed
A low entry barrier and increased crypto adoption have grown in Thailand, both as a means for payment and investment. As a result, it's amongst the world's leading markets for adoption.
Unfortunately, the decentralised nature of crypto makes it the perfect stage for financial crimes, and it also puts Thailand on crypto criminals' radar for scams. In 2018, Thailand became one of the first countries in the world to regulate the trading of cryptocurrencies when it enacted the Emergency Decree on Digital Assets Business BE 2561 ("Decree").
Thai authorities initially feared that mainstreaming crypto could lead to a rise in money laundering, cyber theft, and personal data exposure. They were right to be cautious. In December, a man was arrested on suspicion of conning both Thais and foreigners into investing in a 500-million-baht cryptocurrency scam.
In more positive news, cryptocurrency regulation across Asia has diverged. Following its Asean peers' footsteps, Thailand will also be applying cryptocurrency controls and prospective regulations on digital assets such as cryptocurrencies specifically in relation to their use as a means of payment to balance the benefits with the potential risks of these technologies.
Thai regulators do indeed see the potential for crypto as payment instruments. This change is reflected in the Bank of Thailand's (BoT) central bank digital currency (CBDC) project, slated to undergo testing later this year as an alternative payment method for "cash-like activities within a limited scale".
Elsewhere on the crypto investment front, Pakorn Peetathawatchai, president of the Stock Exchange of Thailand (SET), recently disclosed that the SET is planning to launch its own digital assets exchange sometime in 2022. The exchange will be integrated with the cryptocurrency market and enable investors to convert their cryptocurrencies into fiat money before trading on the SET.
Upcoming crypto payment regulation
Regulations are not new in Southeast Asia, and that should be celebrated rather than feared. Contrary to popular beliefs around regulations curbing innovation in the crypto market, Tokocrypto enjoyed a second wave of crypto adoption and further innovation in Indonesia following new rules. As the crypto regulatory pioneer, Indonesia leads global surge interest in crypto as trust has grown because of increased regulation, not despite it.
Regulations are imposed not to limit the market but to prevent the perceived downside risk of unregulated and volatile assets. When implemented in the right way, they can improve the market's liquidity, giving traders higher trust, prices, transparency, and less volatility.
Having regulated the trading of cryptocurrencies in the country since 2018, the Thai government is taking local crypto regulations a step further through its proposed regulation of these currencies as a means of payment. With the Thai government's public consultation process for its upcoming crypto payment regulation having been completed on Feb 8, the country's crypto landscape is set for some changes in the not too distant future.
For Thai crypto traders, the upcoming crypto payment regulation would likely bring about a shift in their crypto trading patterns, pushing more to use these for financial investment as opposed to payment utility. Whether the introduction of the upcoming crypto payment regulation in Thailand would sufficiently boost the level of trust in the local crypto domain to herald a post-regulatory surge in crypto interest similar to that which occurred in Indonesia, only time will tell.
Pathways forward
Despite the initial scepticism regarding crypto, more governments are now acknowledging that this new asset class is here to stay. However, it's important to remember that, consistent regulations across the region are needed to allow traders in different markets to access the same asset class, similar trading mechanisms, and ultimately liquidity.
It's critical to structure the country's crypto regulatory framework without taking away flexibility. Regulation is part and parcel of Asia's crypto journey. For Thailand, it's all a matter of finding the right balance between encouraging innovation in the sector and protecting consumers from risks. If this balance is achieved, crypto traders will continue their crypto business with a smile on their faces. After all, it's called the Land of Smiles for a good reason.
Pang Xue Kai is the co-founder of Tokocrypto, an Indonesia-based cryptocurrency exchange.
