Thailand is paving the way for virtual banking and adding laws for crypto

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2023-01-18 14:16:41

Creating a legal corridor for virtual banking

According to Bloomberg, by 2025 the Bank of Thailand (BoT) will allow virtual banks to operate in this country. Virtual banks are similar to traditional banks but are open 24/7, have no branches and transaction activities take place entirely on the Internet. It is unclear if the concept of “virtual banking” will extend to DeFi products in the future.

The “Consultation Paper on Licensing for Virtual Banks” is expected to be released by the end of 2023. In addition, in 2024, Thailand will issue three different types of licenses to companies interested in the banking sector. virtual goods. These regulations will be similar to that of a traditional commercial bank but need to be ensured within the framework of the three types of licenses granted.

Virtual banks in Thailand are expected to become leverage to promote competition and economic growth in the land of golden temples. However, the BoT side recommends that service providers in the future should not abuse their positions and lend indiscriminately. Thereby, directly affecting customers who trust the service and the stability of the Thai financial market.

Central Bank of Thailand. Photo: Bangkok Post

Allowing the opening of virtual banks is part of the BoT’s master plan to promote Thailand’s financial market to create a new step. Tharit Punpiamrat, Assistant Governor of the Financial Institutions Policy Group, said that the discussion taking place on March 12 or within a month on the issue of virtual banking will help Thailand. move closer to a cashless society.

Thailand always upholds caution in its regulations, in order to adapt to the needs of users and prevent risks that adversely affect the financial system. Therefore, in the early years of operation, virtual banks will be placed under strict supervision to prevent financial system risks. The virtual bank is expected to become a launch pad for central bank digital currency (CBDC) or other crypto-related services.

In August 2022, sensing Thailand’s strong demand for crypto, the BoT planned to test CBDC. The plan is divided into two phases:

  • State 1: The CBDC will be tested in activities such as payments for goods and services with 10,000 users and three banks.
  • Phase 2: Drawing from the testing process, CBDC will be applied in more relevant activities.

The BoT side said that the bank is in no hurry to issue a CBDC, due to the need to carefully consider the risks and benefits to the financial system as a whole. In BIS’s 2019 survey, 85% of central banks said it would be difficult for them to issue a national digital asset in the next three years. Thereby, showing the difficulty in researching and releasing CBDC of countries around the world.

“As other currencies become widely used, it affects the ability of the central bank to monitor the economy.”

Mr. Sakkapop Panyanukul – Director of Bank of Thailand.

Most recently, Thailand was among the countries participating in the successful trial of CBDCs by the Bank for International Settlements (BIS), with $22 million in transactions. The experiment on the part opens up the future CBDC will be widely released in Thailand. In the trial’s report, the authors argue that the legal classification of CBDCs is the most pressing issue:

“Is CBDC classified as a currency or represents an asset class in an account with a central bank? Or does the CBDC correspond to a debt or something else?”

Thai SEC adds crypto regulation

Legal crypto business in Thailand. However, companies involved in the crypto sector need a license from the Ministry of Business & Development and follow specific regulations from the issuing authorities. In particular, the Securities and Exchange Commission (SEC) of Thailand regularly has an impact on the regulations that need to be followed.

After the collapse of FTX, Thailand was among the countries that saw the need to revise crypto regulations in their country. The Securities and Exchange Commission of Thailand recently announced plans to tighten the rules for crypto, geared towards the safety of investors.

Thailand’s main regulator emphasizes the importance of tighter controls on crypto-related ads. Against this background, the popularity of cryptocurrencies in Thailand is increasing and billboards of crypto products appear more commonly on the streets of this country.

According to the Bangkok Post, the Thai SEC expressed concern with recent trends in digital asset advertising. By hiring “financial influencers” to deliver messages, companies can mislead viewers about the returns and risks of crypto investing. The Thai SEC will set up a working committee, in conjunction with officials and stakeholders. Thereby, jointly assess the benefits and risks in crypto advertising to prepare relevant amendments to the current regulations.

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Advertisements for products in the crypto market appear increasingly common. Source: Reuters

In September 2022, the Thai SEC recommended that service providers in the market need clear investment warnings for users. Also this month, the SEC opened a public hearing on the prohibition of platforms in the crypto market from providing or supporting crypto-asset staking and lending services.

The above regulations are intended to protect investors from rug-pulls or prevent the deposit and withdrawal of bankruptcy filings in the market. As recently, the bankruptcy of lending platform Celsius Network had a knock-on effect on Thai investors using Zipmex. Advertising of the above services will also be prohibited if the above regulation is passed.

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Thai SEC. Photo: Bangkok Post

In the latest move on January 17, 2023, the Thai SEC issued a regulation requiring virtual asset service providers (VASP) to set up an electronic wallet management system to monitor transactions. translate and ensure safety more effectively.

Regulations include: providing policies and guidelines for risk management with e-wallets and private keys. At the same time, the authorities require service providers to prepare contingency plans in the event of unforeseen events that may affect the wallet management system.

(The article is being updated)

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