Regulating Digital Assets under Thai Law: A Case Study of Libra Coin (Part 3 of 4)

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4.2.2 Regulating Related Businesses or Participants

            In addition to the issues surrounding the legal status of virtual currency, particularly stablecoin and Libra coin under Thai regulatory frameworks, it is necessary to identify intermediaries or businesses that might be subject to the regulatory regime. This is because the laws involving digital assets are normally designed to regulate relevant businesses rather than the underlying technology, as there can also be a lack of understanding of fast-growing technologies by regulators.

            Especially for Libra, there are several businesses that might be regulated under relevant legislation, such as authorized resellers, that will interact with the reserve and Association.[1] However, the regulatory clarity may need to be further addressed by the authorities including the Ministry of Finance, Bank of Thailand and the Securities and Exchange Commission.

4.2.2.1 The Business Registration Act B.E. 2499 (1956)

            Under the Business Registration Act B.E. 2499[2] and the Regulation of the Ministry of Commerce on persons who have the duties for commercial registration (No.11), B.E.2553,[3] certain types of business operators must apply for e-commerce registration. According to Section 5(3) of the Regulation, virtual currency businesses are offering their services online; accordingly, the businesses fall within the scope of the Business Registration Act B.E. 2499 and the above-mentioned regulation of the Ministry of Commerce. In addition, if the businesses offer services as an e-marketplace, they are also subject to Section 5(6). Hence, under the laws, virtual currency businesses may need to apply for e-commerce registration.

            In the case of Libra coin, as specified in the White Paper, the so-called authorized reseller that must interact with the reserve and the Association will definitely offer its services online. Accordingly, the authorized reseller may need to apply for e-commerce registration in accordance with the Business Registration Act and the regulation of the Ministry of Commerce.

            However, it should also be noted that the Business Registration Act and the regulation of the Ministry of Commerce only requires businesses to provide general information, for instance, descriptions of their activities.

4.2.2.2 The Exchange Control Act B.E.2485 (1942)

            In essence, the Exchange Control Act B.E.2485 and its subordinate regulations, such as the Ministerial Regulation No.13 B.E. 2497, was enacted in order to provide a legal foundation for exchange control in Thailand.

            The Ministerial Regulation further states that any person engaged in business related to foreign exchange transactions must obtain a specific operational license from the Ministry of Finance through the Bank of Thailand.[4] This provides that, under the Exchange Control Act, the Minister of Finance is in charge of the execution of the Act.

It should be noted that the main subject matter addressed by the Act is “foreign currency”, which is defined in Section 3 as “legal tender in any country other than Thailand including foreign exchange”.[5] In addition, sections 6 and 7 of the Currency Act B.E.2501 stipulates that Thai currency consists of coins and notes and that the unit of currency should be “Bath”; in this regard, virtual currency businesses as well as the authorized resellers of Libra may not be subject to the Exchange Control Act. This is also because, to date, virtual currency and Libra are not legal tenders in any other country outside Thailand and, finally, cannot be designated “foreign currency” under the Act.

4.2.2.3 The Financial Institution Business Act B.E.2551 (2008)

            The Financial Institution Business Act aims to supervise and regulate financial institution business undertakings in Thailand. To consider whether or not virtual currency businesses should be regarded as “financial institution business” under this Act, it is important to consider the definition of all relevant terms specified in Section 4 of the Act.[6] In particular, Section 4 of the Act defined the “financial institution business” as “the commercial banking business, finance business and credit foncier business, and shall include the undertaking of business of a specialized financial institution”, along with the definition of the “commercial banking business” described as a business undertaking specific kinds of activities such as accepting deposits of money from the public over a certain period of time and the buying and selling of foreign currency.[7]

From these laws and regulations, it can be surmised that the virtual currency business is not a kind of financial institution business under the Act, and therefore has no need to register as a public limited company and to obtain a specific financial institution license in order to operate their businesses in Thailand.  

            To this extent, in the case of Libra and authorized resellers, the latter may not be considered as a type of commercial banking business under the Financial Institution Business Act.

4.2.2.4 The Payment System Act B.E.2560 (2017)

            As previously mentioned, the virtual currency business may not fall within the scope of the designated payment service business under the Payment System Act.[8] In particular, Section 16 states that the following payment services may be prescribed in the notification issued by the Bank of Thailand as the designated payment service, Section 16 of which encompasses: “…(1) provision of credit card, debit card, or ATM card services; (2) provision of an electronic money service; (3) provision of a service of receiving electronic payment for and on behalf of sellers, service providers or creditors; (4) provision of a service of transferring money by an electronic means; (5) other provisions of the payment services which may affect the financial system or public interest…”. As a virtual currency business, Libra’s authorized resellers are not the types of business proscribed in Section 16, and therefore the businesses are not subject to the payment service business license requirements.

4.2.2.5 The Securities and Exchange Act B.E.2535 (1992)

            As mentioned in the previous part about the legal status of virtual currency, it is obvious that, to date, virtual currency as well as stablecoins are not securities under the Securities and Exchange Act of Thailand. Also, as the Thai SEC enacted bespoke regulations to regulate digital asset businesses, this can reflect that digital asset businesses are a new kind of business. In other words, it should be noted that the Thai SEC separately regulated digital assets through the Emergency Decree, which is different from traditional securities-related businesses that are subject to the Securities and Exchange Act. Therefore, the Emergency Decree is the main law pertaining to digital asset businesses.

4.2.2.6 The Emergency Decree on Digital Asset Businesses B.E.2561 (2019)

            Under Thai laws, digital asset businesses are regulated by the Emergency Decree on Digital Asset Businesses B.E.2561 (2019). While a digital asset is defined as a “cryptocurrency and digital token”, a cryptocurrency and digital token is also defined under the Emergency Decree as “an electronic data unit created on an electronic system or network for the purpose of being used as a medium of exchange for the acquisition of goods, services or any other rights, or the exchange between digital assets, and shall include any other electronic data units as specified in the notification of the SEC”, and “an electronic data unit created on an electronic system or network for the purpose of: (1) specifying the right of a person to participate in an investment in any project or business;

(2) specifying the right of a person to acquire specific goods, specific service, or any specific other rights under an agreement between the issuer and the holder, and shall include any other electronic data units of right as specified in the notification of the SEC”.

In this regard, it means that the Emergency Decree regulated both digital token participants and cryptocurrency participants, including under the scope of digital asset businesses. Accordingly, stablecoin-related businesses might also be regulated under the Decree, as a stablecoin is regarded as a type of cryptocurrency due to its characteristics.

In other words, the Emergency Decree provides the legal foundation for digital asset business operators and digital token portal service providers. In general, the Decree included requirements relating to the public offering of digital tokens (Section 16-25), restrictions on digital asset businesses (Section 26-31) and details on competent officers (Section 51-56) under the Act. In particular, Section 3 of the Emergency Decree categorised “digital asset businesses” into four main types. These include digital asset exchanges, digital asset brokers, digital asset dealers and other businesses that may be allocated by the Minister under the recommendation of the SEC. Moreover, Section 26 stated that all of these businesses must obtain an operational license in order to conduct their operations legally in Thailand. In terms of licensing requirements, the subordinate rules set out detailed requirements that include paid-up capital requirements and the company’s registration requirements. However, the rules also specify an exemption for some types of digital assets, including utility tokens and stablecoins.[9]

With regard to the exemptions, that issued under the notification of the Securities and Exchange Commission KorTor 11/2561 (The Notification)[10] pursuant with Section 3 and 10(1) of the Emergency Decree should also be taken into account to determine whether or not the authorized reseller falls within the scope of the existing legislation. To this extent, the Notification prescribes types of services that are not considered digital asset exchanges, brokerages or dealer businesses.

In accordance with the Emergency Decree, the authorized reseller may not be regarded as a digital asset exchange business under Section 3 of the Emergency Decree. This is because Section 3 of the Emergency Decree defined a “digital asset exchange” as a centre or network that was designed for the trading or exchange of digital assets. More specifically, a digital asset exchange under the Emergency Decree means a platform operating the system to facilitate relevant parties that wish to trade in or exchange digital assets.

            In addition, Libra’s authorized reseller may not fall within the scope of “digital asset broker”, as the authorized reseller of Libra is neither a person who is a broker nor an agent acting on behalf any person for the purpose of the trading or exchange of digital assets in the normal course of business, subject to fees or other remuneration.

With the term “digital asset dealer”, the Emergency Decree defines the term as a person who offers services concerning the trading or exchange of digital assets for its own account in the ordinary course of business out of the digital asset exchange platform. The authorized reseller, which is the only entity authorized by the Libra Association to interact with the reserve and users in exchanging Libra with fiat, may be considered a business within the scope of “digital asset dealer” under the Emergency Decree. As previously mentioned, Libra is a blockchain digital currency that can be regarded as a type of cryptocurrency under the definition stated in Section 3 of the Emergency Decree.[11] However, it is worth noting that the Thai Securities and Exchange Commission does not allow all types of cryptocurrencies in the market to be traded as pairs. For this, the authorized reseller may need to obtain a digital asset business license in order to legally operate the business under the Thai regulatory framework. Furthermore, Libra will need to be qualified by the Thai SEC.

However, more importantly, the authorized reseller will only interact with the reserve and users in exchanging Libra with fiat. The authorized reseller is different from other digital asset businesses, as it was specifically designed for so-called Libra and not other types of digital assets or virtual currencies. Along with the characteristics of Libra, whose value will be tied with that of underlying assets (Libra reserve), the notification KorTor11/2561 (The Notification) accordingly issued by the Securities and Exchange Commission regarding the exempted digital asset businesses should be further taken into account.

In general, Section 2 and Section 3 of the Notification outline types of businesses that will not be regulated under the laws. Section 2 of the Notification clarifies that providing exchange services for “utility tokens” or tokens specifying the right of a person to acquire specific goods or services will not be regarded as businesses regulated under the law.

More importantly, Section 3 provides an exemption for brokerage and dealer businesses in the case of the purchasing or selling of digital assets, of which its value is backed by Thai Baht currency.

In the Libra white paper, it is stated that Libra will be backed by a reserve of assets intended to give it stable value.[12] The reserve in this context means the reserve of real assets, and more specifically it can be a bank deposit and short-term government securities.[13] In particular, money in the Libra reserve consists of commitments by founding members and users of Libra, proving that Libra will be purchased for fiat and that fiat transferred to the Libra reserve. In this regard, the authorized reseller will act as an intermediary to interact with the reserve and users. This reflects that the authorized reseller will be the main entity to deal with the exchange transaction. Thus, Libra’s value will not be as volatile as some other types of virtual currencies, such as Bitcoin, because of its tie with the reserve. The Notification is still limited in terms of the types of stablecoins. As per the aforementioned statement, stablecoins can be categorised into many types depended on the underlying collateralised assets. This means that the collaterised assets may not only be fiat, as specified in the Notification. Furthermore, the Notification is limited to stablecoins, which are backed by Thai baht.


[1] Supra, note 10. p. 10.

[2] The Business Registration Act B.E.2499 (1956), <https://www.dbd.go.th/dbdweb_en/download/pdf_law/BUSINESS_REGISTRATION_ACTBE2499/act_bussi_be2499.pdf> accessed 1 December, 2019.

[3] The Notification of the Ministry of Commerce Re: on persons who have the duties for commercial registration (No.11), B.E.2553, <https://www.dbd.go.th/download/PDF_law/registe_2553c11.pdf> accessed 1 December, 2019.

[4] The Ministerial Regulations No.13 (B.E.2497) issued under the Exchange Control Act B.E.2485, <https://www.bot.or.th/Thai/FIPCS/Documents/FOG/2497/EngPDF/24971501.pdf> accessed 1 December, 2019.

[5] Ibid.

[6] The Financial Institutions Businesses Act B.E.2551 (2008), <https://www.bot.or.th/English/AboutBOT/LawsAndRegulations/SiteAssets/Law_E24_Institution_Sep2011.pdf> accessed 1 December, 2019.

[7] See Section 4 of the Financial Institution Business Act B.E.2551, provides that the “… “commercial banking business” means the undertaking of business of accepting deposits of money or accepting money from the public subject to withdrawal on demand or at the end of a specified period and of employing such money in one or several ways such as granting of credits, buying or selling of bills of exchange or any other negotiable instruments, buying and selling of foreign exchange…”

[8] The Payment System Act B.E.2560 (2017), <https://www.bot.or.th/English/AboutBOT/LawsAndRegulations/SiteAssets/Law_E40_Payment.pdf> accessed 1 December, 2019.

[9] The exemption is specified in the notifications KorTor 10/2561, KorJor12/2561 and KorTor11/2561 issued by the Securities and Exchange Commission. It became effective on June 16, 2018.

[10] The Notification issued by the Securities and Exchange Commission KorTor 11/2561 Re: The designation of the businesses which not be regarded as the digital asset exchange, broker or dealer, <https://capital.sec.or.th/webapp/nrs/data/7683s.pdf> accessed 1 December, 2019.

[11] Section 3 of the Emergency Decree on Digital Asset Businesses states that:

“Section 3. In this Emergency Decree: “cryptocurrency” means an electronic data unit created on an electronic system or network for the purpose of being used as a medium of exchange for the acquisition of goods, services or any other rights, or the exchange between digital assets, and shall include any other electronic data units as specified in the notification of the SEC…”

[12] Supra, note 10.

[13] Supra, note 10. p. 3.

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