Cryptocurrencies and the potential use of blockchain have caused much financial and social excitement, particularly because of the opportunity that such technologies have to potentially optimise the efficiencies of transferring and using the value for goods and services, and also to reduce the excessive charging and cartelistic organisations often imposed through a joint venture of states and financial institutions in trade0-offs between regulatory oversight and ‘freedom’ to do business and keep markets as liquid as possible if that is there general optimum position.
However, as with all new technologies and innovation, and as was the case when the internet itself first became an essential global tool, a degree of regulation and caution must be applied to acknowledge that abuse and bad faith participants may cause financial injury and by extension other forms of damage to victims of bad practice, fraud, acting outside of any constraints or parameters designed to protect consumers.
Such caution will be scrutinised carefully, to ascertain if regulations are designed to protect, or are designed to choke newcomers in a protected monopoly over monies, exchange and other systems for conducting business. The temptation for states and financial institutions to cling on to the status quo for as long as possible, to continue to milk a favourable dominant position over the movement and store of money and other tangible and intangible objects of value is high given the rewards for doing so.
The conundrum for many states is how to regulate the digital world and assert jurisdiction in systems which are often opaque and may be deliberately designed to be so, excluding other parties to a transaction and not lending themselves to scrutiny or regulation. This conundrum also applies, naturally, to the Thai Government, who face the challenge of dealing with good and bad faith actors in the market of digital currencies. The use of blockchain as a system also causes issues of lack of enforceability and detection of legal violations. Regulations and laws have now been issued and their fairness and efficacy remains untested by any substantial timeline.
The Thai Securities and Exchange Commission has recently filed a criminal complaint against Binance [1] alleging that it has operated illegally without a license under the Digital Asset Business Decree B.E. 2561 [2] (“Digital Assets Decree”). This sends a clear signal to the market that operators who ‘touch’ the Thai jurisdiction but fail to abide by the regulatory regime, will face charges and will have to provide evidence and explanations to their business practices. The outcome is as yet unknown in these cases.
The explanatory summary of the Digital Assets Decree [3] explains:
“The goal is to encourage technological innovation that drives the economy and society towards sustainable development and to provide a variety of fund-raising instruments for competent businesses. Notably, the Emergency Decree also aims to protect investors by facilitating more precise and adequate disclosure of information for investment decision-making, reducing risks of fraud and deception by dishonest persons, and preventing the exploitation of digital assets to support illegal transactions. In addition, other objectives of the Emergency Decree are to ensure that the purchase, sale, or exchange of digital assets are fair, transparent and accountable, and to establish mechanisms for maintaining the stability of the national financial system and macroeconomy.”
This appears to be a well-measured and balanced summary of issues that need to be balanced.
The SEC also provides a list of websites, tokens, and coins which have not applied or been granted approval as a warning to the public [4], and it further provides a list of persons and websites relating to digital assets which have not yet been licensed [5], although at the time of writing the information on the SEC website displayed ‘Data Not Found’.
There is a myriad of unresolved issues that have arisen due to the detached and illiquid nature of cryptocurrency in terms of its tradability and use in traditional markets. These issues are linked to the ‘perfection problem’ – i.e. that regulations cannot perfectly regulate the new entry of cryptocurrency which affects so many aspects of finance and business [6]. Cryptocurrency on a blockchain platform does not ‘fit’ into the models used for lending and collateral. Furthermore, a situation of insolvency is very difficult to unwind when these technologies are at play, because of the lack of traceability of the transactions. As with much debate regarding law which affects business, or business which affects law, across multiple jurisdictions, the need for ‘uniformity’ has been called for to provide certainty to market participants, which carries the usual challenges of buy-in from various states with their different varieties of legal; political and social systems [7].
Finally, the ‘behaviour’, human nature and ‘perception’ aspects of cryptocurrency and associated technology can be very revealing as to the nature of regulation and extent of inherent risks required to be managed by state organisations, which is summarised in a thesis from 2017, written by Mss Natnicha Tangwattanarat “A Study of the Perception of Thai Cryptocurrency Investors Towards the Digital Currency Market” [8] and neatly sets out, amongst other things, a research backed analysis of the characteristics of speculation and investment decision making, across time horizons.
Whether or not we are ‘pro’ or ‘against’ or somewhere in between on cryptocurrency in its current form, it is clear that there is global traction in digital assets and blockchain technology. Therefore, the social benefits and potential abuses must now be considered and how such reflects in society must be reflected in the laws designed to protect citizens from unfair abuse, ill thought out systemic financial risks which may cause widespread financial damage, and criminal activities.
