In recent years, Singapore has become a global hub for cryptocurrencies, and Thailand is not far behind. Here the authors spell out the latest regulatory developments in both countries.
The Monetary Authority of Singapore (MAS) has implemented legislation to regulate the cryptocurrency industry. The Payment Services Act (PSA) came into effect on 28 January 2020, to regulate traditional and digital token-based payments. MAS Notice PSN02 (Prevention of Money Laundering and Countering the Financing of Terrorism – Digital Payment Token Service) came into effect on the same day, putting in place robust anti-money laundering and counter-financing of terrorism (AML/CFT) controls to detect and stop the illegal flow of funds through Singapore via digital payment token (DPT) activities.
On 4 January 2021, the MAS introduced further amendments to the PSA to keep up with changes to international standards, and to better mitigate the money laundering and terrorism financing risks. The new amendments broaden the definition of DPT service providers to include the transfer of DPTs, provision of custodial wallet services for DPTs, and the facilitation of the exchange of DPTs without possession of moneys or DPTs by the DPT service provider. The amended PSA grants the MAS powers to regulate DPT service providers, such as requiring them to ensure safekeeping of customer assets.
The Securities and Futures Act (SFA) also applies to DPTs if they constitute capital market products. Under the SFA, these products include securities, units in a collective investment scheme, derivatives contracts and spot foreign exchange contracts for purposes of leveraged foreign exchange trading.
Any offer of DPTs that constitutes capital market products will require the preparation of a prospectus in accordance with the SFA, and registration of the offer with the MAS. Entities seeking to establish or operate a DPT exchange are often also required to be licensed as an approved exchange and/or capital market services licence holder.
In July 2020, the MAS proposed introducing the Omnibus Act (OA) to govern the financial sector in Singapore, which includes the cryptocurrency industry. Under the proposed OA, virtual asset service providers (VASPs) created in Singapore but offering services outside the country will be regulated. VASPs will be required to be licensed and be subject to ongoing requirements such as appointment of a resident executive director, being a Singapore incorporated company, and having a permanent place of business in the country. VASPs will also be subject to AML/CFT requirements.
In Thailand, according to the Royal Decree on Digital Asset Business (2018), cryptocurrencies and digital tokens are considered “digital assets”. The trading or exchange of such assets shall be done through digital assets business operators (licensed operators) governed and licensed by the Thai Securities and Exchange Commission (SEC).
At the moment, the cryptocurrencies that are tradable as approved by the SEC include: Bitcoin (BTC); Ethereum (ETH); Ripple (XRP); and Stellar (XLM). Current licensed operators under the royal decree include: the digital asset exchange; the digital asset broker; and the digital asset dealer.
The income generated from the trading or exchange of digital assets shall be subject to taxes applicable in Thailand in accordance with the Royal Decree and the Amendment of the Revenue Code (2018), which stipulate that digital assets are considered as intangible assets and thus follow general taxation principles. Referring to the amendment, the income from the following transactions shall be subject to 15% withholding tax (this tax shall apply to both resident and non-resident individuals):
(1) The portion of profits or any other benefits of a similar nature derived from holding or possessing of digital tokens; and
(2) The benefit derived from the transfer of cryptocurrency or digital tokens which exceeds the cost of the investment (i.e., the realised capital gain amount).
As there is no provision excluding income from the above-mentioned transactions from the annual personal income tax return, individual taxpayers will also be required to include such income in their annual personal income tax returns, and the 15% withholding tax should be creditable against their tax liability.
At present, there is no law specifying the withholding tax on capital gains and benefits from digital asset transactions made by corporate entities.
Kay Yong is a senior associate at JTJB in Singapore. Bunnasomboon Chaiparinya is a partner, and Yukgrit Kantamanee is an associate, at JTJB International Lawyers in Thailand.
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