FRIDAY, March 29, 2024
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Finance Ministry right to slow down ICO trend

Finance Ministry right to slow down ICO trend

Investors are eager for digital currencies but, until regulations are in place, they could easily fall prey to scammers

The Finance Ministry recently took steps to put the brakes on the Initial Coin Offering (ICO) bandwagon by threatening to hit the emerging ICO market with value-added tax and capital gains tax. The threat follows the February launch of the country’s first digital tokens, Jfin coins, which sold out in 55 hours, raising Bt660 million for Jmart.
Earlier this month another Thai firm, Zmine, followed suit, launching its ICO to raise Bt180 million via the issuing of digital tokens to finance its cryptocurrency-mining business. More ICOs are sure to follow as Thailand joins the global community in capitalising on new opportunities generated by digital and related technologies. 
To rein in the fast-spreading popularity of ICOs and cryptocurrencies, especially among the younger generation of investors, the Finance Ministry has indicated that sales of digital tokens are subject to the 
7-per-cent VAT, while profits from trading digital assets are subject to a 10-per-cent capital gains tax.
Critics have complained that these taxes are not conducive to ICOs and cryptocurrencies and warn that Thai firms might instead go to neighbouring countries to raise funds from ICOs if the government makes it onerous to do so here.
On one hand, ICOs and cryptocurrencies like Bitcoin and Etherium are part of a mega-trend that holds the potential to change the economy and society in an unprecedented way. On the other, they are still in the early stage of development and abuses are widespread. They are especially vulnerable to money-laundering efforts, Ponzi schemes and other scams designed to cheat investors. In Thailand, a good 
proportion of investment plans are scams taking advantage of ill-informed investors, so it is imperative for the government to issue a strong public warning, since there are no rules and regulations in place specifically for ICOs and crytocurrencies.
Under the proposed new laws, the Securities and Exchange Commission (SEC) would be responsible for regulating the ICO market, covering securities and other kinds of digital tokens. One key feature of a related new law covers the electronic-KYC (know your customers) requirement aimed at preventing money launderers and other criminals from taking advantage of the new funding channel. On securities tokens, it is also necessary to introduce regulations to combat manipulation in a way similar to the SEC rules on stocks and other equities.
Despite potential risks behind ICOs and cryptocurrencies, the blockchain technology that underlines them holds huge potential for Thailand and other countries embracing digital and related technologies to upgrade the economy and society.
The upside gains are limitless, so policy-makers and regulators need to ensure that any efforts to restrict ICOs and cryptocurrencies are constantly reviewed and updated. They need to ensure the country doesn’t miss out on crucial opportunities in taking advantage of the blockchain technology, whose applications are diverse and will have impacts far beyond finance and other industries.
In this context, it is reasonable for the Finance Ministry to take 
preventive steps against ICOs and cryptocurrencies, combined with 
the SEC’s readiness to regulate 
them properly.

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