To Protect Investors, Thailand Opts to Ban Lending by Cryptocurrency Exchanges

Thailand has become the second country in southeast Asia to announce a ban on cryptocurrency exchanges that offer lending services, aligning with the country’s commitment to safeguarde investors in the crypto market. The Thai Securities and Exchange Commission (SEC) issued a statement on July 3, 2023, outlining the new rules. The ban explicitly targets “depository services that promise returns to lenders and depositors,” effectively barring exchanges from offering both staking and lending options.

To enhance transparency and risk awareness, the Thai SEC has introduced a mandatory disclaimer, requiring exchanges to prominently display the message: “Cryptos are high risk. Please thoroughly assess the risks involved, as you may risk losing your entire investment.”

Moreover, exchange operators must ensure that users acknowledge these risks before proceeding with their crypto transactions. Additionally, investor suitability assessments will be conducted to determine the appropriate investment levels for users in the crypto market.

While crypto payments were previously banned by the regulator, consumers were still permitted to invest in cryptocurrencies as assets. However, with the new rules set to take effect on July 31, 2023, staking and lending services will no longer be available to retail customers in Thailand.

The decision by the Thai SEC is in line with the Monetary Authority of Singapore’s announcement, which also prohibits exchange operators from offering staking and lending services to retail clients. The Singaporean central bank believes that these services are generally unsuitable for retail investors. Nevertheless, exchanges will still be allowed to provide such services to institutional and accredited investors.

In a bid to prevent potential risks, the MAS is now requiring exchanges to move all customer assets into a trust by the year’s end. This move aims to prevent the commingling and trading of customer funds, mitigating the possibility of a situation similar to the FTX catastrophe.

FTX faced a significant collapse last November due to a bank run on its native FTT token, which exposed discrepancies in its financial records. It was later revealed that FTX had sent customer funds to its sister company, Alameda Research, to cover losses from unfavorable trades. This incident has prompted global regulators to scrutinize exchange activities more closely.

In another regulatory development in Asian markets, the South Korean National Assembly passed the Virtual Asset User Protection Act on June 30, 2023. This comprehensive legislation combines 19 crypto-related bills aimed at regulating the industry, cracking down on illicit financial activities and ensuring investor protection in the wake of several crypto-related scandals in the country.

Crypto industry such as Riot Blockchain Inc. (NASDAQ: RIOT) are likely to track how industry regulations are taking shape around the world so that they can have a better basis when making their strategic plans.

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