The move is expected to inhibit the booming Thai crypto market at a time when Bitcoin prices have crashed.
The Bank of Thailand (BoT) said on Jan 25 that it was drafting regulations to prevent Bitcoin and other cryptocurrencies from being used to make payments on the grounds that the volatility of digital tokens would create risks and losses for both buyers and sellers.
Official implementation of the regulation will come in the second half of February after the closure of a public hearing scheduled for Feb 8.
Those caught breaking the rules, whether they be buyers or sellers, will be liable to 300,000 baht (US$9,000) fines plus 10,000 baht for every day they continue to flout the regulation.
Other members of the Asean, including Brunei, Indonesia and Malaysia, have announced similar rules in recent years.
Even in some countries where Bitcoin is popular, such as Singapore and Vietnam, the central banks do not allow crypto payments.
BoT warned in December that it did not want commercial banks to be directly involved in trading digital assets because of their high price volatility risk.
BoT and the Securities Exchange Commission (SEC) did, however, allow the trade and exchange of cryptocurrencies on exchange platforms with digital asset exchange licenses issued by the SEC.
There are eight crypto exchange platforms with SEC licenses, including Bitkub, Thailand’s biggest. Siam Commercial Bank (SCB), the kingdom’s oldest lender, invested 17.85 billion baht to acquire a controlling 51% stake in November.
“The latest announcement from the BoT has put big companies under pressure, including those that announced major investments in cryptomining – particularly at a time when Bitcoin’s price crashed,” Nares Laopannarai, secretary-general of the Thai Digital Asset Association, told the Nikkei Asia.
He said some companies, which have just announced they accepted crypto payments – such as department store operator The Mall Group and estate developers Sansiri and Ananda – can put a break on matters immediately with minimal impact.
But big companies that have invested in Bitcoin mining would have more of a problem with its loss in value and the impact of BoT’s regulations on the popularity of cryptocurrencies.
Bitcoin reached a record high of US$68,000 in November 2020 but had plunged to US$38,595 by Feb 1.
That will affect companies like Brooker Group, a financial and real estate adviser, which invested 1.2 billion baht (US$36 million) in a Bitcoin trading business and had set aside another 70 million baht for crypto mining.
Jasmine Technology Solution has meanwhile spent some 3.3 billion baht on 1,200 Bitcoin mining machines from China-headquartered Bitmain Technologies.
It has another 5,100 machines ordered for this year as it shifts over to crypto from telecommunications technology.
Gulf Energy made another big play when it teamed up with Binance, the operator of one of the world’s largest cryptocurrency portals, to create a crypto trading platform to vie with Bitkub.
“We cannot avoid the BoT move as it is the duty of the central bank to regulate to cut risk and maintain the country’s financial stability,” said Terdsak Thaweethiratham, an analyst at Asia Plus Securities.
“At the same time, we cannot avoid the incoming financial technology disruption and the use of blockchain and Bitcoin,” he said. “So we just hope the rules are flexible and fair to all market players.”