The Asia Pacific (APAC) region is leading by example when it comes to embracing new technology. The region’s fintech industry is setting the pace in digital asset innovation. Some regulators and stock exchanges in the region are moving swiftly to put in place new digital asset infrastructure and implement regulatory frameworks to govern trading of these new assets, with Thailand being one of the most proactive among them.
The centre of gravity of digital asset markets has moved to the APAC region, putting local regulators in the global spotlight when it comes to regulation and oversight of digital assets. Thailand was one of the first countries in the region to enact legislation regulating the offering of digital assets and business undertaking digital-asset-related activities. The Royal Decree on Digital Asset Business B.E. 2561 (2018)) – which came into effect on 14 May 20181 – regulates the offering of digital tokens, the trading of cryptocurrencies and digital tokens (digital assets), and governs the operations of exchanges and intermediaries for digital assets under the supervision of the Securities and Exchange Commission of Thailand (SEC). At the same time, the Emergency Decree on the Amendment of the Revenue Code (No. 19) B.E. 2561 (C.E. 2018) amending the Thai Revenue Code was issued to include income and gains derived from, or on disposal of, digital assets in assessable income, as well as to add a withholding tax requirement.
1 Securities and Exchange Commission (2018, May 10). Emergency Decree on Digital Asset Businesses B.E. 2561 (2018).
These regulations mentioned (collectively, the ‘Decrees’) would require all digital asset transactions, including those of digital asset exchanges, brokers, and dealers, to be registered with the relevant authorities.
Although Thailand has one of the most well-defined legislations in place to govern digital asset business operations, the SEC recognises the need to refine the Digital Asset Business Decree to ensure that the regulation remains relevant and continues to protect investors, while at the same time, encourage innovation.2
Thai regulators’ pragmatic and liberal approach has gradually helped to evolve progressive regulations and provide a regulatory framework with an objective of increasing the quality of issuers as well as protecting investor rights. With this approach, Thailand is looking to become the region’s leading digital asset hub.
2 Polkuamdee, N. (2019, November 25). SEC to amend decree on digital asset businesses. Bangkok Post.
There has been much interest in the tokenisation of real-world assets, and the use of distributed ledger technology (DLT) based tokens has been growing.3 The Stock Exchange of Thailand (SET) is keen to be one of the early movers in providing a digital asset ecosystem to enable investors to tap into these new asset classes.
3 OECD (2020), The Tokenisation of Asset and Potential Implications for Financial Markets, OECD Blockchain Policy Series
4 Stock Exchange of Thailand (2019, March 19). SET ready for digital transformation, building digital asset platform.
5 Stock Exchange of Thailand (2019, October 3). Thought Leadership Program Digital Asset Platform Initiative.
6 Stock Exchange of Thailand (2019, December 20). Digital Asset Program: 3rd Digital Asset Industry Forum.
On 5 October 2020, the SET announced that it has initiated the fully integrated DLT-based digital asset investment service, spanning from a linkage with initial coin offering (ICO) portals, digital asset exchanges to digital wallets via a collaborative development with a local bank.7
In partnership with other entities, the SET is poised to create a complete digital asset ecosystem to enhance capabilities at a global level. This digital asset initiative, in compliance with the SEC’s policy, is set to go live in 2021.
The SET’s move is expected to position the bourse as the first established and regulated capital market infrastructure player to set up a digital asset ecosystem in the Southeast Asia region.
7 Stock Exchange of Thailand (2020, October 5). SET forges the first partnership with KBTG to develop an end-to-end platform for digital assets.
To propel Thailand to a digital economy in line with the Thai government’s Thailand 4.0 transformation strategy, and to ensure an early start with digital assets, the Bank of Thailand (BoT) has identified the rapid digital transformation of the financial system as one of the seven strategic challenges it seeks to address over the next three years.8
The development of a central bank digital currency (CBDC) remains as one of the BoT’s key focus areas. A CBDC may result in significant efficiency gains in transaction information tracing and trade settlement, enable innovative payment systems and financial services, and provide better support for the BoT’s monetary policies and financial inclusion efforts.
In August 2018, the BoT initiated Project Inthanon with eight financial institutions to explore the application of DLT. In enhancing Thailand’s financial infrastructure and improving the domestic wholesale fund transfer system’s efficiency using wholesale CBDC.9
To propel Thailand to a digital economy in line with the Thai government’s Thailand 4.0 transformation strategy, and to ensure an early start with digital assets, the Bank of Thailand (BoT) has identified the rapid digital transformation of the financial system as one of the seven strategic challenges it seeks to address over the next three years.
8 Bank of Thailand (2020). Bank of Thailand’s Strategic Plan 2020-2022.
9 Bank of Thailand (2019, January 29). The outcome and findings of Project Inthanon Phase 1 and the Project’s next steps [Press release].
In addition, to explore interoperability among ledgers, Hong Kong Monetary Authority (HKMA) and the BoT collaborated in May 2019 for Project Inthanon-LionRock, which studied the application of CBDCs to cross-border payments. The project was completed in December 2019 and a DLT-based proof-of-concept (PoC) prototype was successfully developed together by participating banks from both jurisdictions.10
In June 2020, BoT further unveiled plans to build a prototype of a payment system for businesses using CBDC.11 The prototype will be integrated into supply chain management to bring higher payment efficiency to domestic businesses.
10 Bank of Thailand (2020, January 22). Joint press release on The Outcomes and Findings of Project Inthanon-LionRock and the Next Steps [Press release].
11 Bank of Thailand (2020, June 18). The Bank of Thailand announces the prototype development project of Central Bank Digital Currency (CBDC) [Press release].
The number of active blockchain initiatives in Thailand indicates the eagerness of local regulators and market infrastructure entities to advance capital markets using emerging technologies.
In September 2020, the BoT successfully launched a blockchain-based platform for government savings bonds issuing a total of about USD1.6 billion in a week.12
Like the BoT and the SET, the SEC also revealed plans to implement DLT as part of its Master Blueprint to improve the Thai capital market and announced the launch of a pilot project for corporate bonds.13
COVID-19 is expected to provide additional momentum to modernise legacy systems and infrastructure in the market. In the months to come, local regulators and market infrastructure entities are expected to accelerate the transition from a successful PoC to full-scale implementation for various ongoing projects in the Thai capital market and step up their efforts in advancing their research in CBDC. However, some challenges remain. Despite the fresh impetus to move from PoC to implementation status, there is difficulty of resolving the ‘coopetition’ (cooperation between players who are competitors) paradox to establish common standards and achieve interoperability. The integration of existing systems with these new systems also remains a complex issue.
In September 2020, the BoT successfully launched a blockchain-based platform for government savings bonds issuing a total of about USD1.6 billion in a week.
12 Bank of Thailand (2020, September 11). New Government Bond Infrastructure launched with Blockchain Technology [Press release].
13 The Securities and Exchange Commission, Thailand (2019, November 15). SEC announces Master Blueprint for Thai Capital Market to kick off DLT platform with corporate bond as pilot project.
As Thailand continues its CBDC research, some important considerations need to be made before a CBDC can be introduced. The distribution structure of CBDC would determine if the consumers and businesses would have a direct claim on BoT depending on whether the issuance and distribution of CBDC is centralised or decentralised through the intermediaries. A detailed assessment on the costs and benefits, and potential effects of CBDC issuance on the financial system and the economy needs to be undertaken especially on the risk of disintermediation, operational challenges, cyber-security and the readiness of consumers and businesses for CBDC usage.
When designing a CBDC, an important consideration is if the CBDC would be account-based or token-based. An account-based CBDC allows for easy identification of the holders; while a token-based CBDC would normally sit on top of a blockchain, which allows for a flexible degree of anonymity, but may pose more challenges to integrate with existing financial system. If the CBDC is intended for both local and cross-border payments, it needs to be available 24/7 instead of only during business hours. BoT would also need to assess if the CBDC is going to be interest bearing, because that is likely to create an impact to existing bank deposits and asset investments. In the early stage of CBDC launch, it is advisable to limit both the value and the volume of transfer to ensure that the underlying infrastructure can be progressively scaled up to handle the load.
BoT would also need to assess if the CBDC is going to be interest bearing, because that is likely to create an impact to existing bank deposits and asset investments.
Nevertheless, the recent announcements and ongoing projects in the Thai capital market will certainly put Thailand fairly ahead of its counterparts in the region; and is a step in the right direction. This is reflective of the local regulators’ progressive attitude towards innovation and evolving market dynamics.
The distribution structure of CBDC would determine if the consumers and businesses would have a direct claim on BoT depending on whether the issuance and distribution of CBDC is centralised or decentralised through the intermediaries.
