Financial Technology (FINTECH) sounds novel to some people, but in fact it has been in existence since the 1950s, starting with the credit cards, then the arrival of the automatic teller machines or ATMs in the late 1960s, followed by online banking in the 1980s.
Over the past few years, many newly start-up companies in Thailand have brought in new financial technology innovations such as electronic payments or e-payments into the market which rapidly replaced cash payment. Such disruptive technology has created a massive impact on many commercial banks in Thailand for there has been a huge swing in consumer behaviour as people gravitate towards online and mobile platforms. More than 300 branches of the top five Thai commercial banks were shut down over the past four years as the demand for physical branches decreased. Now, all Thai commercial banks have, in unison, waived all bank transfer fees and have inevitably been forced to improve their technologies in order to compete with the fast-growing e-payment applications.
The Bank of Thailand plays a major role in pushing forward the development of electronic payment systems as part of the National e-payment Master Plan which aims to promote the use of e-payments in all sectors; for example, the Image Cheque Clearing and Archive System (ICAS) and BAHTNET, which are categorized as highly important payment systems, together with the introduction of PromptPay. The latter is a Government transfer service which was first used for the transfer of welfare payments. The Revenue Department has been paying out tax refunds to individuals via PromptPay since 2017, allowing the general public to receive their refunds promptly.
The Payment System Act B.E. 2560 (2017) governs designated payment services as defined in the said Act. These are: 1) the provision of credit card, debit card or ATM card services; 2) the provision of electronic money services; 3) the provision of accepting electronic payment for and on behalf of others; 4) the provision of electronic money transfer services; and 5) other payment services which may affect payment systems or public interests. Providers of the said businesses are required to obtain a licence from the Minister of Finance or register with the Bank of Thailand, as the case may be.
Other than the e-payments, the distributed ledger technology, commonly known as blockchain and digital assets; such as, crypto currency and digital tokens, inundated Thailand so rapidly that the Securities Exchange of Thailand (the “SEC”) had to issue an alert note on its website to warn the investors of the risks in entering into any transaction with the unauthorized operators named thereon. Currently, only four digital asset business operators have been licensed by the SEC to operate digital businesses in Thailand, namely; Bitkub Online Co., Ltd. (BITKUB), Bitcoin Exchange Co., Ltd. (Bx), Satang Corporation Co., Ltd. (Satang), Pro and Coins TH Co., Ltd. (Coins TH) and BiTherb Co., Ltd. (BiTherb).
Digital asset businesses are governed by the Royal Decree on Digital Assets Business B.E. 2561 (2018) (the “Decree”). Pursuant to the Decree, ‘digital asset business operators’, or commonly referred to as ‘startups’, are operators licensed to conduct digital asset businesses; these exclude commercial banks, which are regulated under the Financial Institutions Business Act B.E. 2551 (2008), insurance companies which are regulated under the Life Insurance Act B.E. 2535 (1992) and Non-life Insurance Act B.E. 2535 (1992) and securities companies which are regulated under the Securities and Exchange Act B.E. 2535 (1992). Digital assets, according to the Decree, is defined to mean cryptocurrency and digital tokens.
Digital asset businesses are categorised into: 1) digital asset exchange centre; 2) digital asset broker; 3) digital asset dealer; and 4) other businesses as announced by the Minister of Finance upon the advice of the SEC.
Those wishing to operate digital asset businesses are required to obtain licences from the SEC prior to commencing their operations. The prerequisites that the potential digital asset business operators must have are an established presence in Thailand and possession of reliable business plan and cyber or IT security systems in accordance with the SEC’s standards and rules. They also need to have qualified systems to conduct “Know Your Customer” or “KYC” investigation, as well as anti-terrorism and anti-money laundering due diligence.
The Decree also governs initial coin offerings or ICOs of newly- issued digital tokens. ICO in Thailand is different from ICO in other parts of the world in that it can only be done via a qualified ICO portal which has been approved by the SEC, whereas in other countries ICOs can be done straight away. So far, the SEC has only approved three ICO portals namely Longroot, T-Box and SE Digital, none of which has commenced operation just yet.
Other than providing a reliable system approved by the SEC, one of the main duties of the ICO Portal is to conduct a due diligence investigation on the ICO issuers and pre-approve the applications and supporting documents, such as, prospectus or white paper, prior to submitting the same to the SEC for approval.
The ICO issuers must indicate in their application forms, the type of digital tokens to be issued, indicating the right of a person to either participate in an investment in any project or business (Investment Token), or to acquire specific goods or services or the right under an agreement between the issuer and the holder, including any other electronic data units of right as announced by the SEC (Utility Token).
Previously, the SEC allowed 7 cryptocurrencies to be legally used for investing in ICOs and as base trading pairs against other cryptocurrencies, but currently, many of them have been removed by the SEC for lack of market liquidity, a well-designed decentralized system and trading pair capability. Now there are only four approved cryptocurrencies, namely; bitcoin (BTC), ethereum (ETH), ripple (XRP) and stellar (XLM), which can be used in Thailand for the aforementioned purposes. The list of approved cryptocurrencies may be revised periodically by the SEC; thus, all investors need to keep themselves apprised of any sudden change in the SEC’s rules and regulations at all times.