• Dr.Isaraporn & Partners

Cryptocurrencies: Regulations in Thailand and what should be aware

Updated: May 17, 2020

Even cryptocurrencies and digital tokens have been being widely used in the global market in recent years, clear-cut regulatory matters are not globally enforced. In Thailand, there are the Emergency Decree on the Digital Asset Businesses B.E. 2561 (C.E. 2018) ("Digital Asset Businesses Decree") and the Emergency Decree on the Amendment of the Revenue Code (No. 19) B.E. 2561 (C.E. 2018) ("Amendment of the Revenue Code Decree") which have come into effect in 2018. In late 2019, one year after the decree was officially launched, there are five certified businesses in this regard and only two tokens were completely launched. As a result, there are contentious issues of whether the regulations in relation to Cryptocurrencies should be amended as so to facilitate the digital currency market in Thailand.


The Office of the Securities and Exchange Commission (SEC) is a regulator in this space specifically in the Initial Coin Offerings (ICOs) together with the Revenue Department under the Ministry of Finance which handles digital asset taxation space in this regard.


Digital Asset Businesses Decree has drawn a regime on the offering of digital tokens including digital tokens, cryptocurrencies, issuers of such tokens as well as the Initial Coin Offering portals. Apart from the object, participants and processes of operating so, the decree is dealing with the businesses in relation to acting as broker or dealer in digital assets and the matters of exchanging such assets in the territory.


In aspect of taxation, the Amendment of the Revenue Code Decree has set up the framework on the consideration of income which taxes will be levied on including a share of profit or any benefit derived from holding or having possession of digital tokens and capital gains from the transfer of cryptocurrencies or digital tokens. Withholding tax is another matter that this decree brings into effect in relation to digital assets within this operation.


Cryptocurrencies and Digital Tokens are those of the assets under the categories of Digital assets under this decree. However, Cryptocurrencies can be considered as digital token if it is designated to be means of raising fund by the issuer and if such crptocurrencies have characteristics as follows


1.determine rights of an investor to participate in an investment into any particular projects or businesses or 


2. determine the rights to receive specific goods, services or any other rights as agreed upon by the parties.


To explain, the actual Cryptocurrencies are digital assets which are designated to be means for exchange whether for any types of goods, services or other digital assets while digital tokens are designated as determinative object addressing rights including those of investors.


In 2018, there were official 7 types of Cryptocurrencies approved by the SEC including Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, Ripple, and Stellar. This is not an exhaustive list and the SEC might further launch other digital assets to be regulated under these regulations by the consideration of level of decentralization, liquidity and demand of such Cryptocurrencies.


Cryptocurrencies and digital tokens are in common as they are electronic data units created on an electronic system or network but the former are used as a medium of exchanging goods, services, rights, and trade of Digital Assets

While the latter are used as determinants of (1) rights of an investor to participate in an investment into any project or business or rights to receive specific goods, services or as agreed. (investment and utility token)


There are two key operations under these decrees which are the offering of Digital Tokens to the public in the primary market and the operation of Digital Asset Businesses in the secondary market. The investment tokens, utility tokens and Cryptocurrencies as digital tokens are regulated under this decree in relation to the offering activities. However, the Digital tokens by the Bank of Thailand (BOT), Utility token which its underlying products or services are ready-to-use as of the date of the ICO and the Cryptocurrencies are exempted from the regulations of offering activities as such. 


In the offering framework, the issuers must be approved by the SEC as well as the registration statement and prospectus filing prior to the public offering. Such process is limited to be achieved through the ICO Portals approved by the SEC. At the time of SEC’s approval, due diligence and screening processes will be conducted through ICO portals while the SEC might object any issues in relation to contentious public policy or other sound reasons at any point of the process conducting in ICO portals.


ICO Portals in certain aspects in this space seems to have a role as the financial advisors regarding the offering of IPOs as well as the funding portals which investor might be familiar with. To explain, ICOs are responsible for analyzing the characteristics, qualifications, registration and prospectus or any information submitted during the process prior to the offering under the regulatory matter of the SEC. 


Conducting digital asset businesses is regulated under certain decree as previously illustrated. However, there are exemption for certain types of conducting which are excluded from such matters including 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, the business operations of an exchange, broker, or dealer which offer Digital Tokens exchange services, provided that the exchange would be done solely among the same types of Digital Tokens and such Digital Tokens are utility tokens (or other Digital Tokens that entitles the holder to receive the right from utility tokens), which the underlying products or services must be ready-to-use as of the date of the ICO. Additionally, Digital Asset Brokers or Digital Asset Dealers who provide services of sale or purchase only for Digital Assets whose issuer has pegged the value 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 exchange for Thai Baht, at the specified value only and the payment must be made through a financial institution recognized under AML law.


In offering the Digital Tokens to the public, the company must be established under Thailand’s regulation with the registered capital of equal to or more than 5 million Baht. Subsequently, such company must have a well-organized system with a reasonable number of workers working within the company. The executive directors or other position with managing power must not be considered as having prohibited qualifications imposed by the SEC. Finally, the company must not be at risk of financial stability or having conflict of interest against the company.


In aspect of Digital Tokens, they must be clearly categorized as investment token or utility token with evident rights which person or entity would have while hold such tokens. The smart contract used in the transaction must be revealed and the document demonstrating status and process of the project must be handed to the SEC as a designated period of time.


The business plan of the company as well as the system applied must illustrate the capability of terms and conditions compliance of the smart contract that they are implementable and not deceitful towards the investors.


As previously mentioned, the issuers have to file the registration document as well as prospectus draft to the SEC and the issuers are capable of pursuing the process of offering when those documents are approved by the SEC.


To finalize the process of the offering, it has to be approved through the ICO Portal and limited types of investors are allowed as follows


  • Institutional Investors, Ultra High-Net Worth, Private Equity and Venture Capital are able to invest without limitation.

  • Retail investors are allowed to invest with the ceiling of THB 300,000 per person per round of offers. However, they are allowed to invest up to THB 300,000 in other ICOs without limitation to invest in only one particular ICO.


It is noted that the limitation of retail investors in each round of offer is the higher of ≤ 4 times the shareholders' equity of the issuer; or ≤ 70% of the total offering amount and the offering can be made as one time or shelf offering.


The issuer of the tokens is entitled to obtain Thai Baht currency or the approved Cryptocurrencies as the SEC may impose in transaction of exchange the digital token in the market. The  Cryptocurrencies as such have to be received from sale, exchange or deposit with the Digital Assets Businesses approved by related bodies.

In aspect of fee, the applicant has to pay in relation to the submission of registration document and prospectus for the initial revelation of information with THB 300,000 (law as of May 2020). Subsequently, the applicant is subject to 0.05% fee of the total value of digital token for sale in the stage of filling the document with the purpose of the tokens to be effective.


Another issue that should be mentioned is the Cryptocurrency and digital token tax which the Decree has additionally imposed types of taxable income into Section 40 (4) of the Revenue Code which states as follows


1.The share of profits or any benefits of a similar nature derived from holding or possessing digital tokens (Section 40 (4) (g)); and

2.The benefit derived from the transfer of cryptocurrency or digital tokens which exceeds the cost of the investment (Section 40 (4) (h)).


To explain,  the Decree imposes that those transactions previously stated are subject to 15% withholding tax which is implemented to resident and non-resident individuals according to Section 50(2)(f) and Section 50 (2)(a) respectively and such withholding tax will be credible to tax liability. 


Taxpayers are required to include transactions within assessable income at the time filing personal income tax (PIT) returns for that calendar year.  15% withholding tax is subsequently credited against tax liability.  As taxpayers are not able to exclude such income from their PIT return, it leads to the scenario that taxpayers have to pay more than 15% tax on income arising from Digital Assets where the marginal tax rate is over 15%.


There is no clear-cut regulatory matter stating that if the withholding tax will be applied in case the recipient is registed juristic company within the territory. Additionally, it lacks the provision implemented in the Revenue Code which imposes that the withholding tax has to be withheld to a registered juristic company in Thailand apart from those of interest and dividend. This is in accordance with the pragmatic operation of securities and certain instruments which are excluded from withholding tax.


In aspect of withholding tax in relation to non-resident entity, even the provision does not impose that it should be levied to non-resident entity as 15%, it is clear that it falls under the Section 70 of the Revenue Code which taxpayers have to deduct 15% as withholding tax in relation to transaction made with foreign enterprise which is not conducting any business in Thailand.


In international tax space, treaties in relation to domestic taxation has essential role within the territory when it comes to matters with international or multijurisdictional elements. However, it is not clear that how those international tax treaties will affect the practice of digital asset in this regard specifically in tax levying in income and gain arising from these types of asset. It should be further observe that how practice will be adapted or how those provisions in international level will be applied to this circumstance.


Our law firm is up to any regulatory changes in this regard sp as to provide the most pragmatic and effective legal framework to our clients while the very fast pace of financial technology has stepped into almost all of the global business sectors. We deliver strong practice of traditional legal matters ranging from domestic to international transactions together with the adoption of updated legal technology which effectively enhances the quality in all aspects of practice provided by our millennial lead law firm in Thailand.