While global crypto ownership rates averaged around 4.2% in 2022, countries like Singapore and Thailand have significantly higher adoption rates at 11.05% and 6.47%, respectively. This is largely attributed to the tech-savviness of their respective populations and the pro-cryptocurrency stance adopted by both Southeast Asian countries.
Being early adopters of a regulatory framework for cryptocurrencies and other digital assets, understanding the cryptocurrency regulations in both Singapore and Thailand can offer valuable insights for other countries to adopt.
What’s more, the Monetary Authority of Singapore (MAS) is often seen taking the lead in developing governance structures, technical standards, and infrastructure for the blockchain and cryptocurrency space, making Singapore and its strong ally Thailand hotbeds of crypto innovation and development.
Blockchain and cryptocurrency laws in Singapore
Singapore has emerged as a model nation when it comes to adopting a balanced regulatory and legal framework for cryptocurrencies and entities dealing with them. The country’s financial regulatory body, the MAS, has been tasked with monitoring risks associated with crypto-related transactions without suppressing technological innovation.
With this vision, the MAS introduced the Payment Services Act (PSA) in January 2020 as an overarching regulatory structure for traditional and cryptocurrency exchanges. This act brought all payment-related services under a single legislation and detailed license and money laundering compliance requirements for cryptocurrency business operators.
Under the PSA, digital currencies are referred to as digital payments tokens (DPTs), with Bitcoin (BTC) and Ether (ETH) recognized as cryptocurrencies by the MAS. This makes approved cryptocurrencies legal assets in Singapore, allowing them to be treated similarly to other asset classes.
The act also necessitates that any person or business carrying out DPT-related services obtain a standard or major payment institution license, applied for by a company that has its registered office in Singapore. The MAS also brought public offerings or issues of DPTs under the ambit of the Securities and Futures Act (SFA) in May 2020, deeming approved tokens to be treated as capital market products for all purposes.
To address money laundering and terror financing risks, the MAS issued Notice PSN02 or Crypto Travel Rule as it is popularly known that detailed Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) guidelines for DPT service providers. This notice and its subsequent amendments have necessitated that DPT service providers perform customer due diligence, report suspicious customer transactions, and have a detailed transactions monitoring process for signs of misuse.
Additionally, cryptocurrency exchanges and other primary platforms for the issuance of digital tokens are required to obtain a capital market services (CMS) license, subject to them meeting financial requirements as prescribed by the MAS. This has ensured that there is a clear distinction between firms building blockchain-based innovations for the crypto ecosystem and entities involved in market-making activities in the cryptocurrency space.
Blockchain and cryptocurrency laws in Thailand
Although cryptocurrencies are not considered to be legal tender in Thailand, the Royal Decree on Digital Asset Business adopted in May 2018 deems them and other crypto assets such as nonfungible tokens (NFTs) as “digital assets.” Under this classification, cryptocurrencies can be issued, traded or exchanged by digital assets business operators, indicating the Thai government’s switch to an accommodative stance toward crypto-based assets.
The Securities and Exchange Commission, Thailand (SEC Thailand) governs digital assets business operators through the Royal Enactment on Digital Asset Businesses (REDA) that was also enacted in May 2018, including entities such as cryptocurrency exchanges, brokers and dealers under this umbrella term. These operators, along with crypto fund managers and investment advisors, need to apply for licenses from the SEC Thailand, even though local banks and financial institutions are still barred from direct involvement in cryptocurrency transactions.
The Bank of Thailand has even issued a circular to detail what constitutes a cryptocurrency transaction and requires cryptocurrency exchanges to disclose the Know Your Customer (KYC) information of users involved in transferring crypto funds between firms. Initial coin offerings (ICOs) or newly issued cryptocurrencies need prior approval from SEC Thailand and need to have a draft prospectus detailing the nature and details of the underlying blockchain project.
In March 2021, Thailand went one step further and included currency, asset or algorithm-backed stablecoins under the ambit of “digital assets.” In fact, the country has been making large strides in promoting new digital technologies, having recently signed a Memorandum of Understanding (MOU) with Hungary to study and support the introduction of blockchain technology in Thailand’s financial sector.
While digital assets regulation in Thailand is not as comprehensive as that in Singapore, the country does follow a unique verification practice for first-time cryptocurrency investors. Starting in September 2021, the Thai Anti-Money Laundering Office has mandated local cryptocurrency exchanges to ensure new customers are physically present before opening an account or making new transactions. The subsequent verification process is completed through a “dip-chip” machine that scans the chip embedded in the customer’s Thai national identification card.
Moreover, for cryptocurrency transactions valued in excess of 100,000 Thai baht, cryptocurrency exchanges established in Thailand need to preserve data, including the location of the workplace and contact information of the transacting parties for at least 10 years. This makes Thailand one of the strictest enforcers of KYC guidelines for those involved in cryptocurrency, all in an effort to prevent illicit activities such as money laundering.
Is buying cryptocurrency legal in Singapore and Thailand?
The purchase and use of cryptocurrencies is an area where the two southeast Asian countries differ in their approach. Singapore treats cryptocurrencies that are recognized as DPTs by the MAS as being eligible for making payments, allowing businesses to accept crypto payments made in these approved DPTs in lieu of goods or services.
Payment-related transactions made using approved cryptocurrencies are considered barter trade, and therefore, strictly speaking, cryptocurrencies are not legal tender in Singapore like other fiat currencies. Moreover, the Inland Revenue Authority of Singapore decides on the taxation of cryptocurrency based on the activity being carried out using them.
So, profits from cryptocurrency trading are subject to income tax, while returns from selling long-term cryptocurrency investments are treated as capital gains, exempting them from any taxes, as the country doesn’t impose taxes on such gains. ICOs are also treated differently, with proceeds from the ICO of a payment token being taxable and those from a security token ICO being exempt since the gains are capital in nature.
Thailand doesn’t consider digital assets to be lawful currencies and prohibits businesses from accepting cryptocurrency for services delivered or goods they retail. This was enforced by the SEC Thailand starting in April 2022 and was ostensibly done to maintain the stability of Thailand’s economic system. Thailand believes that allowing crypto payments introduces risks associated with their price volatility to creep into the traditional financial system, even though it abolished a 7% value-added tax for investments made in digital assets.
This was followed up with an explicit ban on crypto firms offering staking and lending services in September 2022 and is another blow to Thailand’s burgeoning domestic crypto ecosystem. Thus, Thailand’s crypto ban is in contrast with its pro-blockchain policy and will need to be addressed sooner if the country aims to establish itself as an important crypto hub for blockchain innovation.
Are cryptocurrencies and crypto trading regulated in Singapore and Thailand?
Singapore’s detailed cryptocurrency regulations are often used to draft cryptocurrency-related contracts across the globe, largely due to advanced dispute resolution clauses and clarity of the wording of the law. In addition to the PSA and SFA, the Singapore parliament passed the Financial Services and Markets Bill 2022 (FSM Bill) in April 2022 with the intent of enhancing the MAS’ powers and controls over the country’s financial sector.
The FSM Bill improves upon the previous two acts by regulating Virtual Asset Service Providers (VASPs) created in Singapore but providing services outside of the country as a new class of financial institutions (FIs). Additionally, the bill extends persons or entities involved in expanding financial advice related to crypto assets and wallet services providers to the enhanced Financial Action Task Force (FATF) standards.
Through this bill, the MAS has also consolidated its powers to impose requirements on Technology Risk Management (TRM) under one act and aims to reissue existing notices and introduce new requirements on TRM and cyber hygiene guidelines applicable to VASPs. It will also regulate VASPs for money laundering and terror financing risks, having the power to conduct AML and CFT inspections when necessary and aligning the treatment meted out to VASPs in line with DPT service providers.
Thailand cryptocurrency regulations task digital asset providers with the duty of submitting reports on a monthly basis to the SEC Thailand, also requiring them to display them on their official website at the same time. Details regarding service quality standards and infrastructure capacity utilization are key information that needs to be disclosed in these reports.
Failure to do so can invite legal actions, with the SEC Thailand having the power to issue temporary suspension orders or even cancellation of services and licenses. Correlating this with the ban on lending and staking services in Thailand, it is apparent that Thailand still has a long way to go in terms of regulating the cryptocurrency space using advanced technological tools.
Written by Murtuza Merchant