Blockchain & Crypto investments in Thailand
Thailand is one of the first countries in Southeast Asia to establish a legal framework for cryptocurrency. The Emergency Decree on the Digital Asset Businesses, the Emergency Decree on the Amendment of the Revenue Code (No. 19) and the Royal Enactment on Digital Asset Businesses BE 2561 (REDA) have unlocked many opportunities in Thailand for businesses and startups who operate in the blockchain sector.
The Thai government is placing a heavy emphasis on the Thailand 4.0 Driver i.e promoting a value-based economy which focuses on R&D, science and technology, creative thinking, and innovation. This push from the Government has made Blockchain a market with the potential for massive growth. With our extensive knowledge in Blockchain, Belaws’ experts can help our clients overcome any legal obstacles surrounding blockchain, crypto currency, fintech, and make sure all transactions satisfy all regulatory compliance procedures.
Is my business activity possible in Thailand?
Business feasibility check
Before engaging in any Blockchain related business, you should check whether or not your intended activity is possible in Thailand under the current legislation. If not, a different approach may be required.
We have compiled the relevant knowledge from our Blockchain experts to provide a quick and complete answer to business feasibility.
ICO (Initial Coin Offering) / STO (Security Token Offerings) in Thailand
What is an ICO/STO?
An important distinction has been made between both “security” and “utility” tokens. A security token essentially has equity features and gives the holder certain rights and interests e.g., the right to vote for board members, participate in company governance, or receive part of the proceeds of the company’s earnings. A utility token, on the other hand, allows its holder to make use of a company’s products or services e.g., engage in online transactions, or grant access to the company’s technology.
An initial coin offering (ICO) is permitted by issuers that are limited or public limited companies, incorporated under the laws of Thailand. The tokens must be offered through an approved ICO portal.
Prior to any offering taking place, the issuer must obtain approval and submit a registration statement to the SEC. There will be civil and criminal liabilities for the issuer, the directors, and the executives who certify any false documents submitted during this stage.
The SEC will grant approval for an offering providing the application meets certain requirements. These requirements include:
They must be qualified.
They must have a smart contract consisting of a business plan and mechanism which sets out the rights granted ro holders under the digital.
The SEC will also impose certain conditions on any offerings. For example, they may state that offerings can only be made to a limited group of qualified investors. If an offering is to be made to retail investors, each investor is limited to THB300,000 (approximately US$9,200) worth of digital tokens per person. The offering also MUST not exceed four times an issuer’s equity, or shall not exceed 70% of the total offering size (whichever is higher).
The SEC also offers a private placement regime for the offering of digital tokens to certain groups of investors, e.g., offering to only qualified investors, a limited amount of investors, or offering only up to a limited offering size within a specified timeframe. If an offering is granted a private placement regime such as this by the SEC, the offeror would be exempted from filing a registration statement and prospectus with the SEC.
Any offering of digital tokens must be done through an ICO portal. ICO portals must, be a company established under the laws of Thailand; satisfy the minimum registered capital as required by SEC regulations; establishing issuer due diligence and product screening systems; check and approve issuers’ business plans and source codes of smart contracts; conducting know-your-customer (KYC) and customer due diligence (CDD); and providing suitability tests for retail investors.
Currently, there are only a few approved ICO portals in Thailand. Such approved portals include, Longroot, T-BOX, and SE Digital.
If digital tokens are issued for the sole purpose of the issuer receiving cryptocurrency, the cryptocurrency in question must be obtained from, or deposited with, digital asset business operators licensed under the REDA.
Generally, all ICO/STO operators are subject to licensing and regulatory requirements. However, there are three specific events where operators could be eligible for certain regulatory exemptions. These events are as follows:
(1) Business operations executed by the Bank of Thailand (BOT), which could be considered as Digital Asset Businesses, provided that the Digital Assets are issued and processed by the BOT.
(2) The business operations of a provider who offers Digital Tokens exchange services, where (i) the exchange would be done only among the same types of Digital Tokens and (ii) such Digital Tokens are utility tokens (or other Digital Tokens that grants the holder rights from the utility tokens), which the underlying products or services must be ready-to-use as of the date of the ICO.
(3) Digital Asset Brokers or Digital Asset Dealers who provide services of sale or purchase only for Digital Assets whose value has been pegged against the Thai Baht at a fixed exchange rate and has a clear mechanism to fix such value. The sale or purchase of Digital Assets must be done in Thai Baht and any payments must be made through a financial institution recognized under AML law.
Digital Asset Businesses include:
(1) Digital Asset Exchanges
(2) Digital Asset Brokers
(3) Digital Asset Dealers, or any business designated by the Minister of Finance (MOF).
All parties listed above must obtain a license from the Minister and must comply with all regulatory requirements.
Belaws team of specialist Lawyers will be able to assist you throughout the whole ICO process. Our team will make sure that all legal requirements will be met and help you apply for any licences you may need.
Cashing out your cryptocurrency in Thailand
How can I cash out my cryptocurrency in THB and what obstacles must I consider?
Cashing out your cryptocurrency can be a complicated procedure and there are a few important things you must consider, for example:
Using an exchange
An exchange (also known as a third-party broker) allows you to cash out your cryptocurrency and deposit a fiat currency into your account. A FIAT currency is a Government backed legal tender such as USD, EUR or THB.
Exchanges usually work in the following way, firstly, you deposit your cryptocurrency into an exchange, Once the exchange has received your cryptocurrency deposit, you can then request a fiat currency withdrawal. Usually, the most common way to facilitate such a withdrawal is via a bank transfer.
In order for exchanges to adhere to any relevant money laundering laws, any deposits made from an exchange will need to be made to the same bank account that you have previously made a deposit to (i.e. you need to have deposited money into the exchange previously before you can make a withdrawal). If you have never made any deposits to your exchange, then you will need to make (at least) one deposit first.
If you decide to cash out your cryptocurrency using an exchange, it will normally take about 1-5 days for the money to reach your account. If you need to cash out a larger amount, the exchange may ask you to provide additional information, the most common request is relating to the source of funds. For transactions above 200,000 USD of crypto you may consider using an OTC (Over the Counter) solution
Thailand has currently granted licenses for numerous crypto exchange brokers, such as Bitkub or bitazza.
The Bank of Thailand (BOT) has introduced new know-your-customer (KYC) guidelines for e-money businesses. The regulations are expected to greatly help e-money service providers overcome difficulties in identifying and validating their customers.
Notification Sor Nor Chor 1/2563 Re: Know Your Customer Regulations for Activating the Use of e-Money Services was issued by the BOT on March 13, 2020. The notification replaces the KYC requirements for e-money services set out in the Anti-Money Laundering Act B.E. 2542 (1999) (AMLA). This notification came into force on May 6, 2020.
Identification and Verification
The KYC procedures state that e-money service operators must adopt a two-stage process—firstly, then must identify and then verify their customers. They must also ensure that the information they have received from the customer is legitimate, and that the information is correct, true, and up to date.
The notification sets out specific KYC requirements for different product offerings:
Non-transferable payments in Thailand: Companies must follow the customer identification and verification procedural requirements as set out in the AMLA.
Transferable payments for products or services (domestic or international),companies must conduct additional face-to-face or non-face-to-face verification of customers.
Companies must confirm that the information provided by the customer is correct, true, up to date, and from a reliable source (e.g., the National Credit Bureau). Service operators must also prove that the information received from the customer is the customer’s own information and that a valid proof of identity has been submitted.
When face-to-face verification is not possible, companies must adhere to the following procedures. In addition to confirming and verifying the information received, operators must request a photograph of the customer and record it using specific technology that meets all the required standards. This is done in order to verify the customer’s identity by comparing the individual’s face with any biometric information embedded in the ID provided
For corporate customers, the procedures must enable the identification and verification of the corporate entity’s legally authorized person. Additional KYC procedures set out by the AMLA also require that corporate customers must provide the company name, objectives, address, phone number, etc. Evidence is also required to prove that the person using the service for the first time has been fully authorized to do so by the corporate entity.
In order to combat the rise in popularity of Bitcoin, Thailand’s Anti-Money Laundering Office (AMLO) has amended the existing Money Laundering Laws.
The revised Anti-Money Laundering Laws in Thailand now:
Include cryptocurrency in the current anti-money laundering systems.
Establish a mandatory clause requiring abnormal behavior to be reported to the AMLO.
Establish a set of legal standards for cryptocurrency transaction service providers to adhere too.
USDT or Tether is another popular cryptocurrency that can be used to cashout any holdings. Tether is a cryptocurrency whose coins in circulation are backed by an equivalent amount of traditional fiat currencies (e.g. USD, EUR or GBP). These coins used to back Tether are held in a designated bank account. This makes Tether a very stable coin which allows the seller to easily cash out directly into Thai Baht.
Tether has become a popular way for holders of cryptocurrency to cash out their coins. The most common way is for coin holders to sell their other cryptocurrencies and receive payment in Tether, then use an exchange to withdraw the Tether as a FIAT currency. USDC is another popular stable coin available on Bitkub. Stable coins can be especially useful for buying real estate in Thailand.
Opening a Bank account in Thailand to cash out cryptocurrencies into Thai Baht
In order to be able to cash out your cryptocurrencies into Thai Baht, you need to open a bank account in Thailand.
To open a bank account in Thailand, Banks will require you to present your passport during the application process. It is important to note that some branches may also require you to be in possession of a work permit, or a lease for your condo/home (valid for at least 1 year)
Belaws’ experts can assist you with opening a bank account and identifying a branch that does not require you to present a Work Permit or lease.
Our local and international experts will help you identify and plan for all the scenarios listed above and will accompany you through the whole process of cashing out your crypto currencies.
OTC (Over-the-Counter) options for large transactions
What do I need to do for an OTC transaction?
If you want to exchange or cash out a large sum of crypto currencies (valued at more than 200,000 USD), you may need to go to a specialised dealer who performs OTC deals. The reason for this is because traditional exchanges are not capable of realising big transactions.
Currently, there are no uniform market standards for private OTC deals. Therefore, the following has been established as good practice for OTC transactions:
1. Ready, willing, and able: A seller and buyer should have a common outcome and requirements. The transaction should be good, clean, clear, and of non-criminal origin.
2. What you need to know: KYC/AML/CDD and other compliance requirements must be adhered too.
3. Payment: The OTC transaction requires an agreement in the following areas; (i) payment amount and currency, (ii) whether the funds are tp deposited in a bank account, cash etc (iii) the location and governing law for the funds, as well as (v) the title, control, and authority of the funds.
4. Escrow: The assets are to be held by a third party on behalf of the buyer and the seller. Crypto or fiat escrow agents hold onto the crypto until the transaction has been approved and the relevant parties confirm the release of the funds. The escrow provider must be approved by both parties.
5. Proof of funds: It is essential to prove that the cryptocurrency in question that makes up the transaction actually exists. Proof-of-Funds (POF) demonstrates that the relevant party has the ability and funds available to complete the transaction. Proof of coins – The cryptocurrency equivalent to POF is Proof-of-Coins (POC). POC methods include a screenshot or video, a physical meeting, a small payment (Satoshis), and a signed message. Such evidence can be provided to the buyer or to a third-party verification service.
Belaws’ experts can assist in identifying and processing OTC transactions as well as providing tax advice.
What taxes are my cryptocurrency transactions liable for?
Income Tax on Capital Gain
Any capital gain derived from a sale of cryptocurrencies will be subject to income tax. Individual investors are subject to personal income tax on a capital gain at progressive rates (between 0% to 35%). Normal corporate investors will be subject to corporate income tax on a capital gain at a rate of 20%. Due to the need to pay capital gains tax, investors must make sure they keep proper records relating to each purchase that is eligible to be taxed.
Under a proposed amendment to the Revenue Code, the Government could introduce a new withholding income tax (WHT) applicable to the sale of cryptocurrencies. This WHT would be set at a rate of 15% for individual investors.
VAT on Sale of Crypto
As cryptocurrencies are not viewed as a currency, any sale of cryptocurrencies in Thailand is subject to 7% VAT. However, in 2018 the Revenue Department waived this additional tax burden for retail investors (individual investors) who trade cryptocurrencies and digital tokens through digital exchanges.
Belaws’ experts can assist you with tax planning to anticipate your tax liabilities when holding or cashing out cryptocurrencies.
Non-Fungible Token (NFT)
Non-fungible tokens or NFTs are cryptographic assets on blockchain. However, unlike cryptocurrencies, they cannot be traded or exchanged at the same value. This is the opposite to fungible tokens such as cryptocurrencies, which are identical. NFTs can be used to represent real life, physical items like artwork and real-estate. NFTs can also be used to represent peoples identities, property rights, and more.
The current market for NFTs mainly focuses on collectibles, such as digital artwork, sports cards etc.
NFTs are digital representations of physical assets and make each token completely unique and really easy to distinguish it from other tokens. You can also combine NFTs with another to create a new third, unique NFT.
NFTs allow owners to add extra metadata or attributes to the token. For example, tokens representing cacao beans can be designated as being of fair trade origin
Non-fungible tokens are also hugely beneficial for identity management. NFTs allow the holder to add their own unique identifying characteristics to the token, which allows for quick and easy validation.
Belaws’ experts can assist with the setting up of NFT projects.
DeFi (Decentralized Finance)
DeFi (decentralized finance) is a new concept that essentially means that financial products are available on a wholly public and decentralized network. Using a model like this means that the products are open for anyone to use rather than having to use an exchange vendor.
One significant advantage of DeFi is that it does not require any verification processes i.e. proof of identity etc, in order to make transactions. DeFi offers its buyers, sellers, lenders and borrowers to interact on a peer to peer basis. This completely removes the need for a middleman as opposed to a company or institution facilitating a transaction. In essence, you are your own bank which in turn allows you to engage in peer to peer transactions or use the DeFi protocols for facilitating en mass transactions or/and peer to peer transactions
Currently, there is more than 100 billion USD locked into the DeFi protocols. This vast sum enables the lending, borrowing, and exchange of digital assets.
DeFi is a relatively new industry whose infrastructure is still being built out. As a result, the trading tokens and money used by DeFi are locked into smart contracts in its ecosystem, however, the platform has been growing steadily. Currently, there is little in the way of regulation for DeFi.
Decentralized finance takes advantage of technology to move away from centralized models and enable easy access to financial services anywhere to anyone who is interested. DeFi also provides its users with far more control over their money as the system has been designed for its users as opposed to an institution or exchange.
When dealing with DeFi transactions we must consider what regulations are applicable. Much like when ICOs first started, there is often confusion between DeFi users as to whether there is an absence of specific regulations or a complete absence of any regulations at all. New technologies such as DeFi are often so new that the legal world hasn’t had time to adapt and establish any regulations. However, this does not mean that technologies, such as DeFi aren’t regulated by existing laws and legislation.
Belaws’s team of experts can assist you with setting up your DeFi project and ensuring compliance with the existing regulations and/or the anticipated upcoming regulations/amendments too.
Question Before You Begin?
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