The Evolving State of Cryptocurrency in Thailand
Listen to the full podcast here with Nye on the Evolvement website: https://evolvement.io/how-cryptocurrency-is-evolving-in-thailand-with-prinn-panitchpakdi/
On this episode of the Evolvement Podcast with Nye, Prinn Panitchpakdi dropped in to speak about the current regulatory environment of cryptocurrency in Thailand. Prinn is a graduate of the London School of Economics and sits on the Board of Governors of the Stock Exchange of Thailand, or SET. The SET is the only stock exchange in Thailand and is equivalent to the NASDAQ or NYSE. The adoption of cryptocurrency in Thailand is still in an early stage, but Prinn is optimistic with the legal and regulatory progress thus far.
From his start in finance in 1998 Prinn has had an interest in the international markets. In 2009 he first heard about Bitcoin from American colleagues during a business trip. After returning to Thailand he was asked to look at cryptocurrencies and help promote it in Southeast Asia. This led him to focus on how cryptos work, and more recently how they can assist small businesses and startups gain access to funding without relying on the national banks.
“I like to think of new ways of allowing smaller guys to be able to compete on fairer ground with the bigger guys … my passion is to push for this agenda on the Stock Exchange of Thailand level”
The Security Exchange Commission of Thailand had to first learn from the mistakes of others before developing its own cryptocurrency regulations. From 2017-2018 over $14 billion was raised internationally by ICOs, or Initial Coin Offerings. These projects included not only successful companies like EOS, Tezos, and Tron, but also many others that either wasted their money or failed to deliver a working product. Similar to Initial Public Offerings (IPOs), ICOs allow companies to raise funds by selling coins or tokens to the general public. While the US has only issued guidelines for ICO investors, Thailand passed the Digital Asset Law in 2018 governing the raising of funds through ICOs. Participating companies must submit ongoing business reports and financial statements to stay in compliance.
The Digital Asset Law also marked a switch from Thailand banning cryptocurrency outright to regulating exchanges. In 2018 it approved seven crypto trading pairs: Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Ripple, Ethereum Classic and Stellar Lumens. These approved exchanges benefit from the full cooperation of the Thai National Bank which allows nationals to withdraw in the local currency (Baht) without issue, something that US citizens have struggled with in the past. This increase in adoption and exposure has helped increase familiarity and comfort with crypto.
“Perhaps the rule of law can play a role in developing a new financial world that is more inclusive, that is allowing the smaller guys more access to capital”
Like many adopters of cryptocurrency, Prinn states that many Thai nationals have been drawn to cryptos with the hopes of making money. Aside from the volatile nature of the cryptocurrency market, Thai ICOs also deal with high taxes in the form of a 20% capital gains tax and a 7% value added tax (VAT). This high barrier to entry is an issue and some savvy investors have already made the switch to Singapore or Switzerland which do not have any crypto-related taxes. The most well known of these projects is Omise Go (OMG), which began in Thailand but moved to Switzerland due in part due to the lenient tax requirements. Prinn is actively working with the SET to make the tax rate on crypto profits the same as stock profits: 0%.
“Too many rules sometimes kill the innovation, and I’m hoping that my drive will allow us to guillotine or cut off some of the unnecessary laws that might prohibit the growth of the use of Bitcoin”
The forward-thinking attitude of Thailand has allowed larger companies to feel comfortable experimenting with blockchain technology. “The PTT, or Thailand’s largest listed company on the stock exchange of Thailand, which is an oil and gas company, they are beginning to use blockchain technology for energy trading platform called Sertis. So they are already doing that in-house and they are beginning to do it more with their big corporate clients.” Commercial banks are already touting the benefits of blockchain. Most recently the Siam Commercial Bank listed several projects by name in an article including Bitcoin and VeChain.
“… one thing I didn’t mention to you, Michael, and the audience is on the potential of legalizing the funds in Thailand for the institutional investor to be able to buy Bitcoin. I think that’s the next step I forgot to mention on the future of cryptocurrency”
In a passing remark, Prinn hints at the potential of institutional investors in Thailand to be able to buy Bitcoin in the future. Briefly, institutional investors are individuals or organizations that have enough purchasing power to warrant preferential treatment. These are typically hedge funds, commercial banks, pension funds, and insurance companies who manage large diversified portfolios. Through the law of Supply and Demand, if institutions were to allocate only 1% of their portfolios into Bitcoin, it would remove a large amount of the remaining supply off the market and increase the price. This upside could potentially further increase as other companies and governments begin to create their own Bitcoin stockpiles.
Perhaps just as exciting is the National Bank of Thailand creating its own blockchain solution to settle inter-bank payments, a use case XRP has been touting for years. Recently several major banks including Barclays, and HSBC, along with the national banks of Sweden and Israel, have investigated creating their own cryptocurrency. In short, these bank cryptocurrencies will allow them to settle their funds in minutes rather than days, and will be backed by the local currency. More information on how stablecoins work and their use case can be found on the Evolvment podcast with Daniel Popa of Anchor: https://evolvement.io/creating-a-usable-scale-for-money-with-daniel-popa/.
“I think that the future of blockchain is very bright for Thailand because a lot of big corporates are beginning to use it both in house and to their customers”
While Thailand’s regulations have been beneficial for cryptocurrencies and blockchain, there is still little mainstream adoption. Aside from a large movie theater and the odd noodle shop, there are very few places in country where Thai nationals can spend their Bitcoin, Litecoin, or Dash. Recently the large retailer J Mart launched an ICO for their Jfin Coin, which allows customers to spend it in stores as currency. Using the coin allows them earn rewards the same way as a credit card and benefits from the J Mart brand name. As more people and companies become exposed to cryptocurrency, businesses will need to adapt, lest they be left behind in the ever-evolving world of finance and technology.
-Kaltoro