To support digital asset businesses and boost the Thai economy, the Securities and Exchange Commission of Thailand (SEC) released new notifications on October 1, 2021 allowing licensed digital asset businesses to apply for foreign exchange quotas. This will enable them to offer services related to the purchase, exchange and transfer of foreign currencies and digital assets between Thailand and offshore jurisdictions.
What we understand from notifications
The two regulatory bodies responsible for implementing these notifications are the Bank of Thailand (BOT) and the SEC; the latter having been responsible for allocating currency quotas to eligible candidates. We understand that the allocated quota is approximately $ 2 billion per year, which will be distributed among different categories of digital asset activities.
The distribution of this allocation is as follows:
- $ 1 million for digital asset trading;
- 1 million USD for ICO portals;
- $ 10 million for digital asset resellers; and
- $ 1.6 billion for digital asset brokers.
However, companies interested in applying for a foreign exchange quota should note that they can only obtain up to 10% of the quota allocated to their category of companies. For example, a digital asset swap will only be eligible for a quota of up to $ 10,000; but they will be allowed to apply for additional allowances from the SEC once they have used up 70% of the initial amount granted to them.
Quota requests will involve a two-step process and will be processed on a first come, first served basis. Applicants must first apply to the BOT to allow them to participate in foreign exchange transactions for offshore digital asset payments, and then submit another request to the SEC for the award itself.
Once a digital asset company has been allocated a portion of the quota, it will need to comply with several reporting requirements, including submitting a monthly report to the SEC describing the use of its allocated quota. Other information expected by the SEC includes:
- Dates of transactions;
- Names of recipients, including digital asset exchanges or overseas banks;
- Foreign currency inflows and outflows; and
- The stock of digital assets that the commercial operator has in pre-financing or deposit accounts.
What do these notifications imply?
The number of digital asset companies in Thailand is growing, making it necessary to protect individuals, investors and other parties. By issuing these notifications, Thai regulators are offering support to digital asset companies and seeking to eliminate illegitimate operators and money laundering.
These notifications can be seen as an initiative by Thai regulators to legitimize the growing industry. Along with existing regulations such as the Emergency Decree on Digital Asset Companies BE 2561 (2018), notifications essentially serve as control reports to ensure competence and accountability.
However, limits still exist. Digital asset companies should apply as quickly as possible to get limited allowances and should specialize in a specific area. This may mean that applications will be limited to the biggest players in the industry. In addition, requests for additional quotas are limited to only ten applicants.
There are also concerns about the application process itself. At this time, it is unclear how the SEC intends to track the number of claims and how this information will be made public. Applicants may need to find a way on their own to keep track of this information. Moreover, although the notifications imposed additional reporting obligations, they do not foresee any consequences in the event of non-compliance with the requirements. Nonetheless, it is likely that additional notifications will be issued in the future to address the existing gaps.
The government’s introduction of additional regulations to oversee digital asset companies can be seen as legitimizing the emerging industry and encouraging economic growth. They are also seen as a way to ensure that digital asset companies are held to an identified standard and are accountable to their customers and investors. However, concerns and limitations still exist. As a result, new regulations will be needed to facilitate a truly strong digital asset industry in Thailand.