Digital asset business operators have expanded their business to cover services related to the use of digital assets as a means of payment for goods and services. Some have solicited businesses by offering to facilitate merchants and businesses in accepting digital assets as payment for goods and services such as by setting up digital asset settlement systems. This may result in a wider adoption of digital assets as a means of payment, aside from its usage as investment, which could potentially impact financial stability and the overall economic system. The use of digital assets in this manner could also pose further risks to consumers and businesses through price volatility, cybertheft, personal data leakage, or money laundering, etc.

Recognizing such risks and implications, regulators will consider exercising power in accordance with the relevant legal frameworks to limit the widespread adoption of digital assets as a means of payment for goods and services. Further regulatory guidelines will be issued for certain digital assets that are supportive of the financial system and financial innovation while not posing systemic risks. Feedback from relevant stakeholders and the general public will be taken into consideration to determine the appropriate regulatory frameworks.

Mr. Sethaput Suthiwartnarueput, Governor of the BOT, states that the BOT takes into consideration both the risks and benefits of digital assets, including the underpinning technologies. At present, widespread adoption of digital assets as a means of payment for goods and services poses risk to the country’s economic and financial system. Therefore, clear supervision of such activity is needed. However, technologies and digital assets that do not pose such risks should be supported with appropriate regulatory frameworks to drive innovation and further benefit for the public. 

Ms. Ruenvadee Suwanmongkol, Secretary-General of the SEC, states that the SEC, as the regulator for digital asset business operators, has a policy to promote the development of digital asset businesses alongside consumer protection and places emphasis on utilizing digital assets to develop the country’s economy and society. After discussion with the BOT and MOF, the SEC has conducted a public hearing regarding the guidelines for using digital assets as a means of payment for goods and services* to determine the appropriate frameworks in due course.

The Bank of Thailand
The Securities and Exchange Commission
Ministry of Finance

25 January 2022

Note:

* The SEC has published the consultation papers regarding the guidelines in accordance with the SEC Board’s resolution at Meeting No. 1/2022 on 6 January 2022, at the SEC website: https://www.sec.or.th/EN/Pages/PB_Detail.aspx?SECID=777 Stakeholders and interested parties are welcome to submit comments and suggestions via the website or email: anons@sec.or.th or ekarit@sec.or.th until 8 February 2022.

Q&A on Digital Asset Guidelines

 1. How would the usage of digital assets as a means of payment for goods and services pose risks to consumers and financial/economic stability?

Answer

Widespread adoption of digital assets as a means of payment will pose risks to stakeholders in several aspects, as follows:

1)     Users or recipients of digital asset payments i.e. consumers and businesses

1.1) Volatility risk: Volatility in digital assets prices can cause uncertainty for users and recipients. While some digital asset business operators may offer to convert the digital assets into Thai Baht for the receiving merchant, price fluctuation can incur costs to users and recipients e.g. digital asset conversion fees.

1.2) IT risk: Consumers may face cyber theft, personal data leaks, or opportunity cost in instances of system failure.

1.3) Compliance and legal risks: Given the ability to transfer digital assets to/from private wallets where the user’s identity is unverified, digital assets may be used for illicit activities such as money laundering, terrorist financing, tax evasion, etc

2)     Payment system stability

Widespread adoption of digital assets as a means of payment could affect the effectiveness, stability, and security of payment systems. As most digital assets are developed using public decentralized technology (public blockchain), they are unregulated and not subjected to safety standards. If problems arise, consumers may not receive any protection. In addition, widespread adoption could result in fragmentation and redundancy within the payment system, leading to higher costs for consumers and businesses.

3)     Financial stability

The creation of a unit of account other than the Thai baht could cause consumers and businesses to incur greater costs, from exchanging multiple currencies in a back-and-forth manner. In addition, a decline in demand for holding the Thai baht would reduce the effectiveness of monetary policy transmission in maintaining price stability. In the event of a liquidity crisis, the BOT would be unable to provide liquidity assistance to financial institutions in forms other than Thai baht.

The above perspectives are consistent with that of regulators in many countries such as the United Kingdom, European Union, South Korea, and Malaysia. Some countries have recently restricted the usage of digital assets primarily for investment purposes, such as Indonesia and Vietnam, while others are considering appropriate oversight of such activities.

2. Do these guidelines reflect government agencies’ unwillingness to support the digital asset industry?

Answer

                The issue of concern for regulators is the risks associated with the widespread adoption of digital assets as a means of payment, as discussed above. As the current payment system in Thailand is already highly efficient, the use of digital assets to pay for goods and services would not add much benefit to consumers and businesses.

Nonetheless, the BOT, SEC, and other relevant government agencies support the role and development of financial technologies such as blockchain in enabling financial innovation, without preventing investment in digital assets. Thailand is one of the first countries to enact a law that supports digital asset business operators, issued by the SEC to appropriately supervise the industry and ensure consumer protection. In addition, the BOT is among the first central banks to embark on a central bank digital currency (CBDC) to serve as the infrastructure for future financial innovation and diverse financial services.

3. Regarding the regulatory guidelines mentioned in the press release, which regulations have already been issued?

Answer

          The SEC is open to receiving feedback from relevant stakeholders to determine the appropriate regulations to prohibit digital asset business operators from providing services related to using digital assets as a means of payment, aside from as a means of investment. More information can be found at: https://www.sec.or.th/EN/Pages/PB_Detail.aspx?SECID=777