Is Thailand souring on crypto?

Written by Kapronasia || August 09 2022

Crypto believers will point to Thailand recently greenlighting four new digital assets companies to say that the kingdom remains a booster of decentralized virtual currencies. These include Krungthai XSpring, a crypto broker affiliated with one of the country’s leading banks, crypto exchange T-BOX Thailand, crypto adviser and fund manager Coindee and Leif Capital Asset Management, which also manages funds. We reckon Thailand is not going to crack down on crypto as China and India have, but the digital assets’ freewheeling days in the kingdom are quickly winding down. Tighter regulation is inevitable given retail investors’ recent losses in the digital assets market.

Thailand’s Securities and Exchange Commission (SEC) said last week that the Thai cryptocurrency trading accounts has fallen by 67% to 230,000 from 707,000 in December 2021, while total trading volume fell to about 54 billion baht on July 25 from 180 billion baht in January. To be sure, macroeconomic conditions are tough. We can blame interest rate increases, quantitative tightening and a generally jittery global economy for some of the decrease in crypto trading.

But the inherent problem with cryptocurrency itself should not be ignored. Crypto remains unusually volatile as an asset class. Due to its decentralized nature, a lack of comprehensive regulation, and the non-transparent qualities of many crypto firms, it is much riskier for investors than equities, bonds, gold or traditional assets.

To that end, the Zipmex debacle could leave a lasting bad taste in Thai investors’ mouths. After all, Zipmex is Thailand’s preeminent digital asset exchange. It should be the most aboveboard. And yet it has forbidden investors from withdrawing their assets that are tied up in the Zwallet with investments related to ZipUp+, a financial product linked to collapsed crypto lenders Babel Finance and Celsius. According to Zipmex Thailand, roughly 60,000 to 70,000 Thai investors with total assets of about 2 billion baht are affected.

Thanakorn Reanrungreung, an affected investor, told The Bangkok Post, "After this, I will stop investing in crypto for a while; I have already withdrawn all investments in other crypto exchanges such as Binance and Bitkub.”

Encouragingly, Thai regulators are moving to more thoroughly regulate the country’s cryptocurrency market. They took an important step in April when they restricted the use of decentralized virtual currencies for payments. Given the volatility of crypto and the fact that using it to pay for goods and services offers few tangible benefits for Thailand – this is a country in which 85% of the population has a bank account and digital payments in fiat currency work well – the SEC’s decision was prudent.

Looking ahead, the SEC may implement stricter qualifications for management and licensing of crypto custodians with the goal of better protecting retail investors.