Introduction to Digital Assets
The global digital asset landscape has seen vast development and growth in recent years. In Thailand, the market is rapidly becoming an alternative investment and fundraising opportunity for established and emerging companies and entrepreneurs. Now, more than ever, foreign and domestic investors are making their way into blockchain-based investment.
Of course, with such rapid growth, Thailand has had to quickly adapt to this new digital market. As such, the Securities and Exchange Commission (SEC) has established regulatory foundations in order to support and manage the digital asset industry.
Digital Asset Law
The predominant piece of legislation governing the digital asset industry in Thailand is the Emergency Decree on Digital Asset Businesses B.E. 2561 (2018) (the ‘Decree’). The Decree regulates all aspects of the digital asset arena, including issuers, portals and the offering of digital assets, as well as the people and services involved in the sale, purchase and exchange of digital assets such as exchanges, brokers, dealers, fund managers and advisors.
In conjunction with the Decree, the industry is also controlled by the Amendment of the Revenue Code (No 19) B.E. 2561 (the ‘Code’), which regulates the share of profits, or any benefits derived from having possession of digital tokens, the capital gains from the transfer of cryptocurrencies or digital tokens and withholding tax obligations.
Types of Digital Assets
There are two types of digital assets to which the regulations apply; digital tokens and cryptocurrencies. Any digital asset which falls under the definition of either a cryptocurrency or a digital token will be subject to the laws regulating digital assets.
Regulated Parties
There are a number of different parties who are subject to regulation in the exchange, purchase and selling of digital assets. These include digital asset exchanges, brokers, dealers, fund managers and advisors.
Digital Asset Exchange
A digital asset exchange is a centre or network which facilitates the buying, selling and exchange of digital assets in the normal course of business. Essentially, the exchange matches a purchaser with a digital asset and operates a system which allows them to enter into an agreement to purchase the asset.
Digital Asset Broker
A digital asset broker is a person or entity who assists another person in the purchase, sale or exchange of a digital asset in exchange for a commission, fee or other form of remuneration.
Digital Asset Dealer
A digital asset dealer enables a person to sell, purchase or exchange digital assets through their own account, outside of the digital asset exchange.
Digital Asset Fund Manager
A person who, in the normal course of business, manages assets for other persons in order to seek benefit from digital assets is a digital asset fund manager.
Digital Asset Advisor
A digital asset advisor is a person who provides advice, whether directly or indirectly, regarding the value, appropriate investing opportunities, the purchase, sale or exchange of any digital asset. This is done for a fee or for some other form of remuneration.
How to Obtain a Digital Asset License
Persons and entities involved in the digital asset market are required to obtain a license from the Ministry of Finance (MOF). The application process involves a preliminary recommendation from the SEC, followed by consideration and approval of the MOF.
Key Criteria for the SEC Approval
Businesses applying for a digital asset license in Thailand must meet the following requirements to obtain approval from the SEC:
1. Have a company established in Thailand;
2. Directors, executive directors, and people with management and power, including the major shareholders, must not have prohibited characteristics or qualifications as prescribed by the SEC;
3. Have a solid business plan, including demonstrating that they have a system ready to operate the digital asset; and
4. Have the audited financial statements comply with Thai Financial Reporting Standards, prepared by an auditor who is on the approved list prescribed by the SEC.
If the applicant is a digital asset exchange, they must not also be operating as a digital asset dealer, and vice versa.
Figure 1. Eligibility criteria for SEC approval
Paid-up Capital Requirements
To be eligible for the license, companies must have the following paid-up registered capital amounts:
Digital exchange:
✓ At least THB 50 million for a regular digital exchange.
✓ At least THB 10 million for a non-asset-keeping exchange.
✓ At least THB 10 million for an asset-keeping exchange that does not have the ability to access or transfer customers’ assets without their approval.
Digital asset broker:
✓ At least THB 25 million for a regular digital asset broker.
✓ At least THB 1 million for a non-asset-keeping broker.
✓ At least THB 5 million for an asset-keeping broker that has no ability to access or transfer customers’ assets without their approval.
Digital asset dealer:
✓ At least THB 5 million.
Digital asset fund manager:
✓ At least THB 25 million for asset-keeping managers or managers who provide services to non-institutional customers.
✓ At least THB 10 million for non-asset-keeping managers who only provide services to institutional customers.
Digital asset advisor:
✓ THB 1 million.
Additionally, exchanges, brokers, dealers, fund managers and advisors must maintain net capital as prescribed by the relevant regulations.
Figure 2. Minimum paid-up capital (PUC) requirements to obtain a license
License Fees
There are prescribed fees that an applicant must pay in order to obtain a license. The initial license fee is THB 30,000, regardless of the type of service applying for the license.
There are further licensing fees, depending on the type of service holding the license as follows:
Digital asset exchange:
✓ A license fee of TBH 2.5 million; and
✓ An annual fee of 0.002% of the total trading value (generally around THB 0.5-20 million).
Digital asset broker:
✓ A license fee of THB 1.25 million; and
✓ An annual fee of 0.001% of the total trading value (generally around THB 0.25-10 million).
Digital asset dealer:
✓ A license fee of THB 1 million; and
✓ An annual fee of 1% of the profit (capital gain) from the trading (generally around THB 0.1-5 million).
Digital asset fund manager:
✓ A license fee of THB 0.5 million; and
✓ An annual fee of 0.001% of the total value of the assets under management each calendar year (generally around THB 0.5-10 million).
Digital asset advisor:
✓ A license fee of THB 15,000; and
✓ An annual fee of THB 25,000.
Application Process and Approval
The application period for obtaining a digital asset license is 150 days from the date of submission to the SEC. After the application is submitted, the SEC will consider the application and forward it to the MOF within 90 days of receipt. The MOF will consider the application for a further 60 days from the SEC’s recommendation and either accept or reject the application.
The digital asset business operator must begin its business operations within 180 days from the date that it obtains approval from the SEC and MOF.
Businesses approved to exchange, purchase and sell digital assets are considered ‘financial institutions’ under Thai law. As such, they are subject to anti-money laundering and counter terrorist financing laws and must comply with the obligations imposed under those laws. This includes customer due diligence, know your customer and transaction reporting regulations.