To support digital asset businesses and stimulate the Thai economy, the Securities and Exchange Commission of Thailand (SEC) released new notifications on 1 October 2021 allowing licensed digital asset businesses to apply for foreign exchange quotas. This will allow them to offer services related to purchasing, exchanging, and remitting foreign currencies and digital assets between Thailand and offshore jurisdictions.
What we understand about the notifications
The two regulatory bodies in charge of implementing these notifications are the Bank of Thailand (BOT) and the SEC; with the latter having been assigned to allocate foreign exchange quotas to qualifying applicants. We understand the allocated quota amounts to approximately USD 2 billion per year, which will be split among different digital asset business categories.
The breakdown of this allocation is as follows:
- USD 1 million for digital asset exchanges;
- USD 1 million for ICO portals;
- USD 10 million for digital asset dealers; and
- USD 1.6 billion for digital asset brokers.
However, businesses interested in applying for a foreign exchange quota should note that they can only obtain up to 10% of the quota assigned to their business category. For example, a digital asset exchange will only be eligible for a quota of up to USD 10,000; although they will be allowed to apply for additional allocations with the SEC once they have used up 70% of the initial amount granted to them.
Quota applications will involve a two-step process and will be handled on a first-come-first-serve basis. Applicants must first apply with the BOT to allow them to participate in foreign exchange transactions for offshore digital asset payments, then submit another application with the SEC for the allocation itself.
Once a digital asset business has been allocated a portion of the quota, they will be required to comply with several reporting requirements, which includes submitting a monthly report to the SEC outlining the use of their allocated quota. Other information expected by the SEC includes:
- Transaction dates;
- Recipient names, including digital asset exchanges or banks abroad;
- Foreign exchange inflows and outflows; and
- The outstanding amount of digital assets the business operator has in prefunds or deposit accounts.
What do these notifications entail?
The number of digital asset businesses in Thailand is increasing, making it necessary to have protections for individuals, investors, and other parties. By releasing these notifications, Thai regulators offering support to digital asset businesses and seeking to eliminate illegitimate operators and money laundering.
These notifications can be seen as a move by Thai regulators to legitimize the growing industry. Alongside existing regulations such as the Emergency Decree on Digital Asset Businesses B.E. 2561 (2018), the notifications essentially act as check-in-balances to ensure competency and accountability.
However, limitations still exist. Digital asset businesses must apply as quickly as possible to secure limited allocations, and are required to specialize in a specific area. This may mean that applications will be limited to larger industry players. IN addition, applications for additional quotas are limited to only ten applicants.
There are also concerns about the application process itself. Currently, it is not clear how the SEC intends to track the number of applications and how this information will be made publicly available. Applicants may have to find a way of keeping track of this information themselves. Moreover, while the notifications have mandated additional reporting obligations, they do not provide any consequences for not complying with the requirements. Nonetheless, it is likely that additional notifications will be issued in the future to bridge existing gaps
The government’s introduction of additional regulations to oversee digital asset businesses can be viewed as a legitimization of the emerging industry and encouraging economic growth. They are also seen as a way of ensuring that digital asset businesses are held to an identified standard and are accountable to their clients and investors. However, concerns and limitations still exist. Accordingly, further regulations will be required to facilitate a truly robust digital asset industry in Thailand.