Crypto Rules via Two Royal Decrees

The control of the digital asset business is currently the responsibility of the Minister of the Ministry of Finance and the Securities and Exchange Commission (“SEC”), in accordance with the Royal Decree on Digital Asset Businesses, 2561 B.E. (2018 A.D.) (“the Royal Decree”), which was published in the Royal Gazette on 13 May 2018, and became effective on 14 May 2018.762

Regulatory Timeline

The Bank of Thailand issued a circular on February 12, 2018, asking financial institutions to refrain from doing any business involving cryptocurrencies.763  Bangkok Bank halted transactions involving the trading of cryptocurrencies with a private Thai company, Thai Digital Asset Exchange (TDAX), on February 24, 2018.764  On February 27, 2018, Krungthai Bank, a state-owned financial institution, halted transactions related to cryptocurrencies with TDAX through the bank’s accounts.765  According to a news article, the ban will continue even after a new regulation (discussed below) is issued.766 Though the government expects new laws regarding cryptocurrencies will be enacted in the future, it decided to implement temporary measures to protect cryptocurrency investors.767  According to news articles, on March 13, 2018, the Cabinet approved the principles of the drafts of two Royal Decrees, one to regulate digital currencies, including cryptocurrencies, transactions, and initial coin offerings (ICOs), and the other to amend the Revenue Code to collect capital gains taxes on cryptocurrencies.768  The Decrees would require all digital asset transactions, including those of digital asset exchanges, brokers, and dealers, to be registered with the relevant authorities.769 (Taken from the Library of Congress here.) (See news from Ethnews here.)

Summary of the Royal Decree

Types of Digital Assets:   Digital assets refer to both Cryptocurrency and Digital Tokens, which are defined as follows: “Cryptocurrency” means an electronic data unit created on an electronic system or network to be used as the medium of exchange for acquiring goods, services, or other rights, including an exchange between digital assets. “Digital Token” means an electronic data unit created on an electronic system or network for the purpose of specifying the right of a person to participate in an investment in any project or business, or to acquire specific goods, services, or other rights under an agreement between the issuer and the holder.

Note: The SEC is empowered to define any other electronic data unit with a similar purpose to cryptocurrencies and digital tokens as digital assets. Controlled Activities Offering newly issued and existing issued Digital Tokens to the public

Restrictions: -  The issuer of newly issued Digital Tokens or existing Digital Tokens must be in the form of a limited company or public limited company. -  The offer of newly issued digital tokens or existing digital tokens must obtain the prior approval of the Office of the SEC, and must be conducted through a service provider of the ICO Portal which has been approved by the SEC.

Note: -  The approved Digital Token must only be offered to investors under the conditions set out by the SEC.

Conducting a Digital Asset Business

Restrictions: -      Entities conducting the following three types of digital asset businesses must obtain the prior approval of the Minister of Finance with the recommendation of the SEC: (1)   Digital Asset Exchange Centre (2)   Digital Asset Broker (3)   Digital Asset Dealer -      To conduct a digital asset business, the entrepreneur approved by the SEC must comply with the rules, procedures, and conditions set out by the SEC, and meet the following criteria: (1)   Have adequate underlying capital resources as a guarantee for business operations and other risks; (2)   Have reliable security measures in place for the protection of customers’ assets; (3)   Have reliable operating systems and data security systems to prevent cyber or other types of attacks; (4)   Have suitable accounting systems based on the type of business, and arrange for an auditor approved by the Office of the SEC to examine its accounts; (5)   Have a reliable Know Your Customer scheme for checking client information, and have anti-terrorism and anti-money-laundering systems in place.

Note: The Minister of Finance is empowered to define any other business as a digital asset business by on the recommendation of the SEC.

Sanctions:  A person who violates or does not comply with any provisions set out in the Royal Decree shall be liable to criminal penalties and civil sanctions.

Transitional Provisions: All entrepreneurs conducting a digital asset business before the Royal Decree comes into effect and that intend to continue doing so shall be required to apply for approval from the Minister of the Ministry of Finance within 90 days of the law taking effect. Such entrepreneurs are able to continue conducting their digital asset businesses only after submitting the application for approval. (From Mazars here.) (See this Ernst&Young guide.) (See also this Baker McKenzie guide.) (See this CoinTelegraph news.)

Sources

Crypto Laws

• (Taken from the Library of Congress here.)
• (See news from Ethnews here.)
• (From Mazars here.)
• (See this Ernst&Young guide.)
• (See also this Baker McKenzie guide.)
• (See this CoinTelegraph news.)