Interpreting Binance’s first Southeast Asian license: Thailand’s digital asset license

Recently, Binance obtained a digital asset operator license in Thailand, which is Binance's first license in Southeast Asia. The license was granted to their new joint venture Gulf Binance, which will operate as a digital asset exchange and digital asset broker, powered by Binance's technology. The license from the Thai Securities Regulatory Commission (SEC) will enable Gulf Binance to operate digital assets in Thailand, and the joint venture is a collaboration between Binance and Gulf Innova, which has also been licensed by the Thai Ministry of Finance.

The SEC has been actively regulating Thailand's digital asset market, including issuing digital asset wallet regulations and requiring digital asset companies to apply for licenses. In January 2023, the Thai SEC issued digital asset wallet management regulations, requiring digital asset custodians to establish digital wallet management systems for their customers, and requiring digital asset business operators who provide custody services for customers' digital assets to establish digital wallet management systems to accommodate digital assets and private transactions. Efficiently keep keys and ensure the safety of customer assets. The regulations cover the following requirements:

1. Oversee risk management of digital wallets and private keys and manage policies and guidelines;

2. The design, development and management policies for digital wallets and the appropriate and secure creation, maintenance and access of private keys or other related information and procedures;

3. Contingency plans for any incidents that may affect digital wallet and private key management systems. This includes developing and testing action procedures, designating responsible persons, and reporting incidents. It is also necessary to audit system security and conduct digital forensic investigations in the event of any incident that affects system security related to digital asset custody

Thailand also plans to approve the first batch of virtual banks to provide services in 2025 to promote competition, broaden loan channels and reduce costs for businesses and individuals. Assistant Governor Tharit Panpiemras said the Bank of Thailand plans to issue three licenses in 2024 and then start operations in 2025. So far, 10 companies have expressed interest in applying.

The SEC also established governance rules for entities involved in digital asset activities, including digital asset exchanges, brokers, and other related activities.

What are the penalties for not complying with Thai digital asset regulations?

Failure to comply with Thailand’s digital asset regulations may result in penalties such as an administrative fine of up to 5,000,000 THB (approximately $144,500), imprisonment of up to 1 year, or a fine of not more than 1,000,000 THB (approximately $28,900), or both. Digital asset business operators must comply with licensing and regulatory requirements, and the Thai SEC strictly enforces the rules by prosecuting and fining non-compliant business operators.

Here are some questions you may be concerned about regarding Thailand’s digital asset license:

1. What is the definition of digital assets?

In Thailand, digital assets are considered to be any form of digital assets that can be traded or used for transactions. For example, cryptocurrencies, security tokens, tokens, and stablecoins.

2. Does Thailand have a legal framework for digital assets?

The main law regulating the digital asset sector in Thailand is the Emergency Decree on Digital Asset Business BE 2561 (2018), also known as the “Decree.” The Decree regulates all aspects of the digital asset industry, including issuers, portals and products of digital assets, as well as individuals and companies involved in the sale, purchase and exchange of digital assets, such as exchanges, brokers, dealers, fund managers and advisors.

The Tax Law Amendment (No. 19) BE 2561 also plays a key role in the regulation of the industry. The Revenue Law provides for the distribution of profits or benefits arising from the ownership of digital tokens, capital gains from the transfer of cryptocurrencies or digital tokens, and withholding tax obligations.

3. How to obtain a digital asset license?

Digital asset licenses are issued by the Ministry of Finance (MOF). All applicants must first obtain an initial recommendation from the Thai SEC before being considered and approved by the MOF.

4. What are the criteria for obtaining SEC recommendation?

Digital asset businesses must meet the following requirements to obtain approval from the Thai SEC:

1. Establish a company in Thailand;

2. Directors, executive directors and persons with management rights and powers must meet all qualifications required by the Thai SEC;

3. Prepare a feasible business plan that can prove that the company is ready to run the system of digital assets;

4. Audited financial statements that comply with Thai Financial Reporting Standards must be provided. In addition, the auditors who prepare these statements must be on the list approved by the Securities and Exchange Commission of Thailand (SEC).

If the applicant is a digital asset exchange, they may not simultaneously operate as a digital asset dealer, and vice versa.

5. What are the paid-in capital requirements?

To qualify for a digital asset license, a company must meet the following paid-in registered capital amounts:

1. Digital asset exchanges:

Ordinary digital asset exchanges: at least 50 million Thai baht

Non-storage exchanges: at least 10 million THB

Exchanges that require customer authorization to access customer assets: at least 10 million THB

2. Digital asset brokers:

Ordinary digital asset brokers: at least 25 million baht

Non-storage brokers: at least 1 million THB

Brokers who require client authorization to access client assets: at least 5 million THB

3. Digital asset traders:

At least 5 million baht

4. Digital asset fund manager:

Managers who can store client assets or provide services to non-institutional clients: At least 25 million baht

Non-depository managers who provide services only to institutional clients: at least THB 10 million

5. Digital Asset Consultant:

1 million THB.

In addition, exchanges, brokers, dealers, fund managers and advisors must maintain net capital as required by applicable regulations.

Once the application is submitted, the Thai SEC will review it and, if appropriate, forward it to the Ministry of Finance within 90 days of receipt. The Ministry of Finance will review the application within 60 days of the SEC's recommendation. After 60 days, the Ministry of Finance will either accept or reject the application.

As you know, digital asset operators must start operating within 180 days of obtaining approval from the SEC and MOF. If they fail to start operating activities after the deadline, their operating license may be revoked. In addition, the initial license fee of 30,000 baht is non-refundable.

Under Thai law, businesses permitted to exchange, buy and sell digital assets are considered financial institutions. As such, they are subject to relevant anti-money laundering and counter-terrorist financing laws. This includes customer due diligence, know your customer and transaction reporting regulations.