While the global cryptocurrency ownership rate will reach about 4.2% in 2022, countries like Singapore and Thailand have higher cryptocurrency adoption rates of 11.05% and 6.47% respectively.
This is largely due to the education of the population and the pro-cryptocurrency stance adopted by the two Southeast Asian countries. It should be noted that the Monetary Authority of Singapore (MAS) often plays a leading role in developing technical standards and infrastructure for the blockchain and cryptocurrency space, making Singapore and its counterparts in Thailand significant in the global crypto market. together.
Blockchain and Cryptocurrency Laws in Singapore
Singapore has been a model country when it comes to adopting the right legal framework for cryptocurrencies and their related organizations. The country’s financial regulator, MAS, has been tasked with looking into the risks involved in cryptocurrency-related transactions without hindering technological innovation.
Guided by this vision, MAS introduced the Payment Services Act (PSA) in January 2020 as the main regulatory framework for traditional exchanges in cryptocurrency. This law brings all payment-related services into compliance with the Union’s laws and the full jurisdiction and money-laundering laws for commercial cryptocurrency operators.
Under the PSA, digital currencies are known as Digital Payment Tokens (DPT), while Bitcoin and Ethereum are recognized as MAS cryptocurrencies. This makes cryptocurrencies legal assets in Singapore, allowing them to be treated the same as other asset classes.
The Act also requires any person or company providing DPT-related services to obtain a standard or primary payment company license filed by a company registered in Singapore. MAS introduced the public offering or transfer of DPT under the Securities and Futures Act (SFA) in May 2020, considering that approved tokens should be considered as capital market products for all purposes.
To address the risks of money laundering and terrorist financing, MAS has issued PSN02 or Crypto Travel Rule, commonly known as Comprehensive Anti-Money Laundering (AML) and Counter Terrorist Financing Guidelines (CFT) for DPT service providers. This standard and subsequent changes require DPT service providers to do good customer service, report suspicious customer transactions, and have adequate procedures to monitor transactions for signs of fraudulent use. something.
Cryptocurrency exchanges and other major digital media must have a Capital Market Services (CMS) license, provided they meet the financial requirements set by MAS. This led to a clear distinction between companies that create innovations based on the blockchain for the crypto ecosystem and organizations that participate in market activities in the cryptocurrency space.
Blockchain and Cryptocurrency Laws in Thailand
While cryptocurrencies are not considered legal tender in Thailand, the Digital Asset Business Royal Decree of May 2018 considers them and other crypto assets such as NFTs to be “digital assets.” Under this classification, cryptocurrencies can be issued, traded or exchanged by business operators of digital assets, indicating that the Thai government has switched to an adaptive stance on these assets.
The Thai Securities and Exchange Commission (SEC Thailand) regulates digital asset business operators through the Royal Digital Asset Business Act (REDA), which was enacted in May 2018, including entities such as cryptocurrency exchanges, brokers and dealers under this general term.
These operators, as well as crypto fund managers and investment advisors, need to apply for a license with the Thai SEC, although local banks and financial institutions are still prohibited from directly participating in crypto transactions.
The Bank of Thailand has issued a circular detailing what constitutes a cryptocurrency transaction and is requiring crypto exchanges to disclose information about customers involved in the transfer of crypto between firms. ICOs require prior approval from the Thai SEC and must have documentation that details the nature and details of the underlying blockchain project.
In March 2021, Thailand took it one step further and included algorithm-backed currency, assets or stablecoins in the category of “digital assets”. In fact, the country has made great strides in promoting new digital technologies, having recently signed a Memorandum of Understanding (MOU) with Hungary to explore and support the adoption of blockchain technology in Thailand’s financial sector.
While Thailand’s regulation of digital assets is not as comprehensive as Singapore’s, the country has a unique background check practice for first-time crypto investors.
Starting in September 2021, the Anti-Money Laundering Authority of Thailand has required local cryptocurrency exchanges to ensure the physical presence of new customers before opening an account or making new transactions. The subsequent verification process is completed with a “dip-chip” device that scans the chip embedded in the customer’s Thai national identity card.
Moreover, for cryptocurrency transactions above THB 100,000, crypto exchanges established in Thailand must retain data, including the location of the workplace and contact information of the parties to the transaction, for at least 10 years.
This makes Thailand one of the strictest enforcers of KYC regulations for those involved in cryptocurrencies, and all this is done to prevent illegal activities such as money laundering.
Is buying cryptocurrency legal in countries like Singapore and Thailand?
Buying and using cryptocurrencies is an area where the two Southeast Asian countries differ in their approach.
Singapore considers cryptocurrencies recognized by the MAS as DPTs as eligible for payments, allowing businesses to accept crypto payments made in these approved DPTs instead 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 Singapore Revenue Authority decides on the taxation of cryptocurrencies based on the activities carried out with its use.
Thus, profits from cryptocurrency trading are subject to income tax, and income from the sale of long-term investments in cryptocurrencies is treated as capital gains, exempting them from any taxes, since the country does not tax such income.
ICOs are also treated differently: income from payment token ICOs is taxed, while income from security token ICOs is exempt, as profits are capital in nature.
Thailand does not consider digital assets legal currency and prohibits businesses from accepting cryptocurrencies for the services they provide or the goods they sell. This has been enforced by the Securities and Exchange Commission of Thailand since April 2022 and is ostensibly done to keep Thailand’s economic system stable.
Thailand believes that allowing crypto payments creates volatility risks, even though it has eliminated the 7% value-added tax on investments made in digital assets.
As such, Thailand’s cryptocurrency ban contrasts with its blockchain policy and will need to be addressed as quickly as possible if the country is to establish itself as an important crypto hub for blockchain innovation.
How Singapore and Thailand regulate cryptocurrencies and their trading
Singapore’s detailed rules on cryptocurrencies are often used to draft crypto-related contracts around the world, mainly due to the extensive dispute resolution provisions and the clarity of the law’s language.
In addition to the PSA and SFA, the Singapore Parliament passed the Financial Services and Markets Act 2022 (FSM Bill) in April 2022 to expand the MAS’ powers and control over the country’s financial sector.
The FSM bill improves upon the previous two laws by regulating virtual asset service providers (VASPs) established in Singapore but providing services outside the country as a new class of financial institutions (FIs).
With this bill, MAS has also consolidated its power to set technology risk management (TRM) requirements under one law and is seeking to reissue existing notices and introduce new requirements for TRM and cyber hygiene guidelines applicable to VASPs.
Thailand’s cryptocurrency regulations oblige digital asset providers to submit reports to the Thai SEC on a monthly basis and also require them to simultaneously display them on their official website.
Details of service quality standards and infrastructure capacity utilization are key information to be disclosed in these reports. Failure to do so may result in legal action as the SEC of Thailand has the power to issue temporary suspension or even revocation orders for services and licenses.
Pairing this with Thailand’s ban on lending and betting, it’s clear that Thailand still has a long way to go in terms of regulating the crypto market.