As Hong Kong embraces cryptocurrencies, Singapore, Belarus and, more recently, Thailand are introducing restrictions on the use of cryptocurrencies to protect users from potential risks.
Thai SEC introduces new rules
Thailand’s Securities and Exchange Commission (SEC) has introduced a new set of regulations for digital asset service providers. The rules are designed to provide investors with adequate protection through risk warnings, authorization requirements and the prohibition on the use of funds.
With the new guidelines, all digital asset companies must provide adequate warnings about the risks associated with crypto trading activities. They must also ensure that investors are fully aware of the risky nature of cryptocurrency investments.
In addition, all crypto platforms must include a specific message stating:
“Cryptocurrencies are risky. Thoroughly study and understand the risks associated with cryptocurrencies as you may lose the entire investment amount.
The rules also require digital asset service providers to ensure clients have a clear understanding of the potential dangers associated with investing in cryptocurrency before undertaking any further activity.
While trading crypto-assets is not banned in Thailand, using customer funds for loans or investments will soon become illegal, as outlined by the country’s authorities.
Alternatively, the SEC announced a ban on using customer money for loans or investments. This measure is being implemented to protect investors’ funds and prevent them from being misused by digital asset service providers.
The restrictions are seen as an attempt by Thai regulators to protect client funds from potential risks, especially after several crypto lenders went bankrupt, leading the market to a major setback last year.
Two prominent cryptocurrency lenders, Celsius and BlockFi, have filed for bankruptcy protection following price drops and the collapse of TerraUSD, which resulted in brutal monetary losses for many investors.
Thailand’s SEC approved risk warnings in September 2022 and discussed the ban on lending services at meetings in December 2022 and May 2023. The new regulations will take effect on July 31, 2023.
Differences in legal approaches
Thailand joins countries scrutinizing the cryptocurrency market as global policymakers intensify their scrutiny. Belarus and Singapore recently passed rules to strengthen control over cryptocurrencies.
Belarus, one of the early adopters of Bitcoin and cryptocurrency mining in the EU, has taken steps to regulate the market. The Ministry of the Interior of the Republic of Belarus issued a notice on July 2 introducing a new bill that would ban peer-to-peer (P2P) cryptocurrency exchanges in private transactions.
The move comes in response to the surge in cybercrime in Belarus, with a crackdown on 27 individuals involved in illicit cryptocurrency exchange services resulting in nearly 22 million Belarusian rubles ($8.7 million) in illicit earnings.
Singapore has also proposed stricter rules for crypto and cryptocurrency exchanges. By the end of the year, crypto exchanges will be required to hold client assets in a trust to ensure the protection of user funds.
This proposal follows the FTX crash in November and the goal is to segregate client assets from private assets and deposit them with a trustee. In addition, there are discussions about banning individual investors from lending and participating in strikes, as stated by the Sentosa Banking Authority.
Hong Kong, on the other hand, positions itself as a global hub for Web3 technologies. Starting June 1, crypto exchanges that meet specific requirements such as safekeeping of assets, segregation of client assets, avoidance of conflicts of interest, and cybersecurity standards can apply for licenses to legally operate in the country.
These licensed platforms will need to conduct thorough assessments of investors’ understanding of digital assets and establish their risk tolerance and exposure limits. They are also required to form review and admission committees to manage the tokens they offer.