4. Regulating Stablecoins: A Case Study of Libra Coin
4.1 Background Information
It should be noted that the proposed “Libra coin” is a type of digital asset that was initially proposed as a “global currency”, and hence it should be regarded as a virtual or digital currency that is intentionally designed to be used as a means of payment. Therefore, to contemplate a regulatory framework for the Libra coin, there are a number of laws, regulations and guidance that should be taken into account. Relevant laws and regulations can include laws, regulations and policies in relation to the legal status of stablecoins, laws, regulations and policies in relation to related activities and businesses, as well as an electronic transactions law.
In addition, apart from its currency characteristic, the value of Libra coin will also be backed by a reserve of real assets. This can potentially make its value remain stable, which differs from the majority of other cryptocurrencies in the world, whose value is volatile. Hence, given this characteristic, many countries realized the benefits of stablecoins and aimed to put in place proper regulatory instruments to support their utilization while preventing potential risks. For example, according to a publication by the G7 Working Group on Stablecoins, they could contribute to the development of an international payment system. In light of their characteristics and underlying technology, stablecoin can offer faster, less expensive payment options.
However, stablecoin would offer a variety of benefits, although there are also challenges and risks that should be taken into account in developing its ecosystem. These challenges and risks can include the lack of clarity of a regulatory framework, in particular in relation to the legal status of stablocoins. In this regard, a proper legal foundation for stablecoins arrangements is needed.
It is vital to understand the main functions, features and the common types of stablecoins in order to analyze the most suitable regulatory framework to apply in their case. The most common types of stablecoins are fiat-collateralised, crypto-collateralised and non-collateralised varieties. To be more specific, stablecoins can be categorised into three main types depended on the underlying collateralized assets. This feature of stablecoins was developed in order to stabilize their price, as it tied in with the value of the underlying assets, as mentioned earlier.
4.2 Regulating Stablecoins under Thai Regulatory Regimes
4.2.1 Legal Status under Thai Regulatory Regimes
As per the aforemade statements, Libra coin is a type of virtual currency that, accordingly, should be regulated under the same set of regulatory frameworks as other virtual currencies. To illuminate information pertaining to the laws and regulations governing stablecoins, it is inevitable to comprehend the characteristics of virtual currencies and regulatory responses in particular details.
A virtual currency is a type of digital currency that is by design intended to be used as a means of payment. In other words, a virtual currency is a type of currency available in electronic form. To this extent, even virtual currencies can be used as a means of payment like fiat currencies; however, due to its characteristics, the study found that there is a lack of clarity amongst the relevant regulatory frameworks in terms of the legal status of virtual currencies. In particular, virtual currencies are not considered a legal tender under existing laws and/or regulations by any country in the world.
126.96.36.199 The Currency Act B.E.2501 (1958)
In Thailand, in accordance with the Currency Act B.E.2501, Section 6 of the Act stipulates that Thai currency consists of coins and notes. Furthermore, Section 7 of the Act adds that the official unit of currency is “Bath”. Thus, this Act limited the definition of “currency” under the Thai legal system to two forms, comprising coins and notes. The Act became effective in 1958. Around 60 years ago, at the time of its enactment, there were still limitations in terms of the available form of money circulating in the market. In addition, Section 9 of the Act prohibits any person from performing certain activities in relation to money without authorisation, with exceptions granted by the Ministry of Finance. To conclude, the Act does not recognise virtual currency as Thai currency, and therefore it cannot be regarded as a legal tender under Thai laws.
However, although virtual currency is not a legal tender under the Currency Act of Thailand, for both parties, an obligation can be extinguished if the creditor accepts a virtual currency for payment transactions instead of the official one.
In addition, rather than defining virtual currency as money or currency, authorities in a number of jurisdictions generally define it as a digital representation of value that can be used as an alternative to real money or fiat currency.
In this regard, as Libra coin is a stablecoin whose main functions and features are similar to other types of virtual currencies, Libra coin cannot therefore be considered a legal tender under the Currency Act of Thailand.
188.8.131.52 The Exchange Control Act B.E.2485 (1942)
Furthermore, it is worth analysing whether or not virtual currency falls within the scope of the Exchange Control Act of Thailand. Section 3 of the Act on Exchange Control B.E.2485 defines “foreign currency” as being legal tender in any country other than Thailand. It is worth noting that the Act does not provide a clear-cut definition of “foreign currency”, as it is not limited to the forms of currency provided for in the aforementioned Currency Act of Thailand. However, from Section 3, to date, no legislation in any jurisdiction has ensured the legal tender status of virtual currencies. Accordingly, virtual currency is not classified as foreign currency under the Act.
To this extent, Libra coin also cannot be classified as a “foreign currency” under the Act and therefore cannot be regulated under it. Furthermore, related businesses and activities relating to Libra coin do not fall within the scope of the Act and so are not considered “transact exchange operations” under it.
184.108.40.206 The Payment System Act B.E.2560 (2017)
To consider other types of money that virtual currency might be subject to, electronic money or e-money, which has commonly been used for transactions, should also be considered. E-money is broadly defined as an electronic store of monetary value on a device that might be used in any transactions.
Unlike virtual currency, which is based on blockchain technology, e-money can be centralised or decentralised depending on the objectives of the controllers of the supply of such electronic tender. Furthermore, e-money is not a currency – as mentioned earlier, e-money is fundamentally an electronic store of monetary value on a specific device.
It is also to be noted that while virtual currency is currently not legal tender in any country, e-money is regulated by most of them. This is also because the use of e-money has increased, which has therefore attracted ever more e-money providers to enter markets. Bespoke regulations for e-money were issued in a number of countries, followed by a series of amendments.
Under Thai law, for example, is the Payment System Act B.E.2560 (2017), which prescribes the terminology of e-money as follows: “electronic cards issued by the service provider for the service user”; along with the definition of electronic care stipulated in Section 3 of the Act and Section 1(14) of Thai Penal Code, we can conclude that electronic cards must be created and fixed in a tangible form.
Hence, this contrasts with the characteristics of virtual currency, which is intangible even though the issuer of such virtual currency might be known.
Moreover, as specified in the Thai Penal Code, the meaning of the electronic card concept includes “…data, cipher, account number, any of sets numbers of electron or figures…” that might be compared to virtual currency. However, the Section further states that those substances must be issued for the specific person entitled to use it, and accordingly virtual currency may not be regarded as an electronic card or e-money under the existing legislation.
In this regard, the Libra coin from the titular white paper is intended to address global users by means of the open source Libra Blockchain software. This is indicated in the statement that, “Libra will need to be accepted in many places and easy to access for those who want to use it”. From this, the author initially concluded that Libra coin differs from what is specified as electronic cards under the Penal Code of Thailand, as Libra coin will not be issued for any specific persons. Therefore, it does not fall within the scope of the definition of electronic money under the Payment System Act and any entities involved with Libra businesses will not be designated as businesses offering the designated payment service under Section 16(3).
220.127.116.11 The Securities and Exchange Act B.E.2535 (1992)
In this regard, the Securities and Exchange Act B.E.2535 of Thailand defined “securities” in Section 4 as: (1) treasury bills; (2) bonds; (3) bills; (4) shares; (5) debentures; (6) investment units; (7) certificates representing the rights to purchase shares; (8) certificates representing the rights to purchase debentures; (9) certificates representing the rights to purchase investment units; (10) any other instruments as specified by the SEC.
To date, other instruments under Section 4, Subsection 10 of the Act include a variety of measures; for instance, Transferable Subscription Right or TSR, Derivatives according to Notification of the Securities and Exchange Commission No. KorJor. 20/2541 Re: Additional Types of Securities, codified on June 11th, 1998, clause 1.
Due to the definition of securities specified under the Act, virtual currencies, including stablecoins, do not fall within the scope of any types of securities stipulated in it. However, it should be noted that Section 4 of the Act gave authority to the Thai SEC to stipulate any other types of instruments as securities under the Section. To date, the Thai SEC has still not added virtual currency to the “any other instruments” list under Section 4, subsection 10. However, as for other types of digital assets, such as security token, security tokens are subject to the Securities and Exchange Act of Thailand, as stated by the Thai SEC, to settle conflicts of laws.
18.104.22.168 The Price of Goods and Services Act B.E.2542 (1999)
To consider whether virtual currencies should be regarded as “goods” or not, it is necessary to determine the definition of “goods” under Thai laws and/or regulations. The author considered the definition of goods under the Price of Goods and Services Act B.E.2542 (1999). In particular, Section 4 of the Act defined a good as, “an article which may be used or consumed, including a document of ownership in such article”. From Section 4, it seems that the Act provided a general definition of goods. However, from the publication of the Department of Internal Trade, Ministry of Commerce, goods under the Act should be narrowly interpreted and limited to articles for use or consumption that are considered essential for life. Therefore, a virtual currency cannot be considered a good under the Act.
22.214.171.124 Thai Civil and Commercial Code
Apart from all of the above-mentioned acts, it is necessary to consider the Thai Civil and Commercial Code (CCC) to determine the legal status of virtual currencies. Section 138 of the Thai CCC proscribed the definition of “property” as “things as well as incorporeal objects, susceptible of having a value and of being appropriated”. Virtual currency does not constitute a thing under Section 138, but it is an incorporeal object. This is because virtual currency met two qualifications of incorporeal objects, namely value and the ability to be appropriated. A virtual currency is in digital form; accordingly, virtual currency is an incorporeal object under Section 138. Concerning its value, even the value of virtual currency is volatile. However, it has value, which can be determined by demand and supply.
Besides, Libra coin can also be considered “property” under the Thai CCC; however, the value of Libra coin may not be as volatile as other virtual currencies because of its link to the value of underlying assets.
126.96.36.199 The Emergency Decree on Digital Asset Businesses B.E.2561 (2019)
As for bespoke legislations, in Thailand, the Emergency Decree on Digital Asset Businesses (The Emergency Decree) became effective on 14 May, 2018 with the primary objective of regulating digital asset businesses. The Emergency Decree is the main and only regulation for digital assets supervision in Thailand. In particular, it provides a licensing obligation for digital asset business platforms that intend to operate in Thailand. Apart from the Emergency Decree, the Thai SEC further issued a series of subordinate regulations to supplement the Emergency Decree in detail. It should be highlighted that these subordinate regulations also included exemptions in the case of utility token and stablecoins.
To conclude, stablecoins including Libra could be considered “digital assets” and “virtual currency” under the Emergency Decree. Accordingly, relevant businesses and participants may need to comply with all requirements and exemptions as set by the Decree. However, to this extent, the exemptions concerning the exempted types of businesses under the Emergency Decree may need to be taken into account.
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 Section 16 of the Payment System Act B.E.2560 (2017) provides that, “The Minister with the advice of the BOT shall have the power to issue the notification prescribing the following provisions of the payment services as the designated payment services which shall apply for a license: …
(3) provision of a service of receiving electronic payment for and on behalf of sellers, service providers or creditors;…”
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 The exemption is specified in the notification KorTor 10/2561, KorJor12/2561 and KorTor11/2561 issued by the Securities and Exchange Commission. It became effective on June 16, 2018.