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Players Clueless as to How to Comply with Thailand`s New Legal Framework

 

It will be recalled that in February of this year, all banks in Thai were instructed by Veerathai Santiprabhob, governor of the Central Bank of Thailand to temporarily halt all cryptocurrency transactions until a regulatory framework has been formulated and made operational.

 

A few months down the line - on the 13th of May, 2018, Thailand made operational a regulatory framework that will govern cryptocurrency transactions and initial coin offerings (ICOs) in the country. Thai is by no means the only country to have taken this audacious and responsible step. Many others have done same.

 

This new regulatory framework was published in Thailand`s Royal Gazette thus bringing cryptocurrency transactions in the country under the supervision of the Thai Security Exchange Commission (TSEC).

 

TSEC`s mandate under the new law

The Thai government never had its sights set on placing an outright ban on cryptocurrencies; it`s over-arching concern had always been to regulate rather than introduce a ban on cryptocurrency transactions. It was therefore not surprising when in March of this year, the Deputy Prime Minister of Thai, Wissanu Krea-ngam made some comments that pointed to the setting in of new regulations.

 

The Prime Minister intimated that in view of the potential for an un-regulated cryptocurrencies market to encourage tax avoidance, crime and money laundry, the government was considering new sets of laws regarding cryptocurrencies and initial coin offerings (ICOs). It is this concern, intention and drive that culminated in the enactment of the new regulatory framework.

 

The Bangkok Post reports that the sentiments of the government was re-echoed by the Thai Finance Minister, Apisak Tantivorawong on the very day the regulatory framework was out-doored. He insisted that the regulations were not intended to restrict cryptocurrencies or ICOs in Thai.

 

Matichon, a local media outlet reports that under this new regulatory regime, TSEC has been mandated to regulate all digital assess businesses of which cryptocurrencies and ICOs are a part. Their regulatory role is far reaching in that their mandate includes the determination of registration fees and other requirements for the registration of cryptocurrencies.

 

The TSEC is also saddled with the responsibility of issuing guidelines to help deal with potential digital currency-related problems. Other areas of digital currencies (crypto) that currently have not been specified in the regulatory framework for whatever reason, still falls under the purview of TSEC.

 

The regulatory framework- still work in progress

The new regulatory framework is currently operational. Dealers in digital assets, crypto currencies included are required by law to duly register with the TSEC before August 14, 2018. Flouting this stipulation (failure to register with TSEC within the specified period of time) will attract some punitive measures, including a fine of a whopping 500, 000 baht (in approximation, the equivalent of $15,700) or payment of an amount twice the value of the unauthorized cryptocurrency transaction. Defaulters, when found culpable also risk a two year jail term.

 

In the coming days, weeks and months, it is expected that many dealers (companies, exchanges, independent brokers) will troop into the premises of TSEC to complete registration processes. The Bangkok Post reports that the regulatory framework is still work in progress. Many issues regarding the registration of cryptocurrency transactions are still quite unclear.

 

The Finance Ministry is working with TSEC to expand the framework; to fashion out a more detailed blue-print that encompasses all the nitty-gritty’s regarding the appropriate agencies to register every digital asset transaction and other such concerns.

 

A crucial meeting is expected to take place on Friday, the 18th of May, 2018 involving the Stock Exchange of Thailand (SET) and J Ventures, a subsidiary of Jay Mart Plc, a company listed on the Stock Exchange of Thailand. The meeting is primarily intended to discuss the new regulatory framework. Jay Mart Plc is reputed to have been the first company in Thailand to successfully launch an ICO which eventually made significant gains in profitability.

 

J Ventures is reported to have conducted a thorough review of the new regulatory framework, highlighting “4-5 sections” to hopefully clarify with SET, “such as filing the white paper and a section about insider trading, which is a criminal offence”, said J Ventures CEO Thanawat Lertwattanarak. “If digital coins are considered to be similar to stocks, I will not give any figure or say something that could be deemed insider trading,” Lertwattanarak noted, further stating that he wants JFin coins to be categorized under securities to qualify for tax-free status.

 

At the meeting scheduled for Friday, J Ventures has some more concerns it will want addressed. They intend to discuss and seek clarity on the future of 100 mkn Jfin tokens that have long been sold in Thai`s first ICO, as well as the 200 mln tokens that could possibly be sold later. The CEO of J Ventures contends that while the government elected to regulate the activities of ICOs, there remains to be found a specific agency that has the capacity to navigate token issuers through new regulations. He stated, “If the government has the legal authority to curb digital [fundraising], they should have an organization to help trading — whether the country has an official digital exchange with high standards like the SET or Market for Alternative Investment or not”.

 

A puzzling new tax section

The tax section of the new regulatory framework stipulates that all crypto dealers are by law required to pay 7% value added tax, coupled with a 15% capital gains tax on returns. This new tax section is quite puzzling to many companies, including BX Thailand, the country`s largest crypto exchange.

 

Clarity on how such a tax law is to be complied with by BX Thailand and other exchange companies remains to be seen. In a comment for Asia Times, representatives of BX Thailand are reported to have stated that while they are making conscerted efforts at informing their users about the capital gains tax, the taxation process remains quite unclear: “BX is relentlessly working to allocate all the information about tax capital gains 15 percent to our customers. But in the meantime, we’re still waiting for the Revenue Department and related departments to clarify the procedure of taxation. According to the Royal Act, customers need to collect and allocate their income and capital gain tax [and send this] to the Revenue Department … as currently BX is the one responsible for withholding the 15 percent tax.”