Thailand Web3 Market Overview
The new possibility of a Southeast Asia crypto hub
TL;DR
Thailand has one of the most active crypto markets in Southeast Asia, and its rapid adoption of regulations has helped it become the region's crypto hub.
However, the prolonged bear market and the rise in crypto-related crimes and illicit trade have led to a need for increased regulation, resulting in a ban on cryptocurrency-enabled payment, staking, and lending services. This is seen as a way to protect the country's financial ecosystem and investors amidst the risks of crypto.
With the recent election of a pro-crypto prime minister, the Thai crypto market has entered a new phase. For example, policies such as the distribution of utility tokens to the entire population are being considered, which is expected to create a new wave in the Thai crypto market.
Introduction
Thailand is one of the major countries in Southeast Asia with an active cryptocurrency market. Along with Vietnam, Thailand has the highest crypto trading volume of any Southeast Asian country, with nearly 21.9% of Thai citizens owning cryptocurrencies (compared to a global average of 11.9%).
In addition, Thailand's unique regional characteristics make the development of the Thai Web3 industry promising. Thailand is often referred to as a digital nomad's paradise, attracting a large number of digital talents with 1) long-term residence visas and 2) relatively low housing costs. These characteristics have a direct and indirect impact on the development of Thailand's IT industry, and the country's developer growth rate has been one of the highest in Southeast Asia in recent years. In addition, Thailand is the largest economy in Southeast Asia after Indonesia and has a high internet penetration rate of about 85%, which provides a good foundation for the development of the Web3 industry.
Timeline of key events in the Thai crypto market
Thailand's cryptocurrency market is undergoing a dynamic transformation, and here are some key points in the timeline. The Thai government took a conservative stance in the early days of the crypto market. However, it began to fall under the regulatory purview as the crypto market developed rapidly. However, with a prolonged crypto bear market and the continuation of negative events, government bodies are in the process of tightening crypto regulations in an attempt to prevent the occurrence of such events.
Key event timeline
July 2013: Thailand's central bank refuses to register Bitcoin Co. Ltd
May 2018: The Thai government enacted the “2018 Emergency Order on Digital Asset Business”
June 2018: Thailand's Securities Commission approves 7 cryptocurrency exchanges for operation
June 2018: The Bank of Thailand announced the first Thai CBDC project, “Inthanon”
July 2018: Thailand's Securities and Exchange Commission enforces ICO licensing regulations
August 2018: Thailand's central bank allows commercial banks to set up crypto subsidiaries
July 2023: Thailand's Securities Commission bans crypto lending and staking services
Step 1) Early days of the crypto market
Thailand was a relatively early adopter of the cryptocurrency market. The cryptocurrency exchange Bitcoin Co. Ltd was established and in operation since 2013. However, the development of the cryptocurrency market was limited in the early days of the market, as the Bank of Thailand declared cryptocurrencies illegal and shut down the exchange. This may have been because Thailand was at the center of the East Asian financial crisis, and it was protecting the domestic currency was a financial imperative. It was inevitable that the government would take a conservative stance against cryptocurrencies that threatened the value of its currency.
Step 2) The cryptocurrency market enters regulatory purview
May 2018: The Thai government enacted the “2018 Emergency Order on Digital Asset Business”
June 2018: Thailand's Securities Commission approves 7 cryptocurrency exchanges for operation
June 2018: The Bank of Thailand announced the first Thai CBDC project, “Inthanon”
July 2018: Thailand's Securities and Exchange Commission enforces ICO licensing regulations
August 2018: Thailand's central bank allows commercial banks to set up crypto subsidiaries
Initially, the Thai government was worried about the impact of cryptocurrencies on its financial ecosystem. However, the stance changed as the cryptocurrency market began to grow. In May 2018, the Thai government enacted the first cryptocurrency legislation in Asia and became the first country in the world to allow initial coin offerings (ICOs).
In addition to enacting crypto-related legislation, Thailand has made other efforts to promote the crypto market in the country. For example, the Bank of Thailand has allowed commercial banks to establish crypto-related subsidiaries. In effect, it authorized commercial banks to issue cryptocurrencies and broker crypto-related services. Additionally, the Securities and Exchange Commission of Thailand has relaxed regulations to reduce the difficulties encountered in the ICO process, further facilitating the growth of the fast-paced industry.
Step 3) Time for more regulation of crypto assets
Thailand swiftly capitalized on the rapid expansion of the cryptocurrency market, establishing itself as a significant crypto hub in Asia. However, this movement came to a halt due to the prolonged bear market and an increase in crypto-related crimes and illicit trading. Calls for tighter regulation of cryptocurrencies in the country have begun to grow.
Governmental response followed not too long after. Previously, Thailand had been allowing crypto exchanges to open non-face-to-face accounts. However, as of May 2021, an in-person verification process has been introduced. This measure is aimed at preventing cryptocurrency-related crimes by accurately tracking the flow and origin of cryptocurrencies. In April 2022, the country banned the use of cryptocurrencies as a payment method to protect the value of its currency. In July 2023, it banned cryptocurrency lending and staking services to strengthen investor protection.
Finally, the Bank of Thailand also issued new cryptocurrency regulations for commercial banks in October 2022. The goal was to minimize risks by placing restrictions on financial institutions' participation in the cryptocurrency market that could adversely affect the general public. The regulations are as follows. No Thai commercial bank or financial holding company may directly or indirectly invest in crypto assets in excess of 3% of its total capital. Financial holding companies are allowed to engage in crypto businesses, but only with the approval of the Central Bank of Thailand. Commercial banks are prohibited from directly participating in or conducting crypto-related businesses under existing regulations. As such, the Thai government has taken a cautious stance in the wake of a series of negative events related to cryptocurrencies, and its efforts are now focused on strengthening regulations and protecting investors.
Thailand cryptocurrency exchange market
Thailand is one of the most active countries in Southeast Asia for retail-oriented cryptocurrency investment. There are currently 10 registered local cryptocurrency exchanges in Thailand, with the main ones being Bitkub, Orbix Trade (formerly Satang Pro), and Zipmex. Bitkub, in particular, accounts for around 75% of the total trading volume, and once even spiked to around 90% during the 2021 Crypto Summer. This shows that Thailand, like other countries, is experiencing a winner-take-all situation in the exchange market. South Korea's largest crypto exchange, Upbit, is also present in the Thai market. A new crypto exchange, Gulf Binance, a joint venture between Thai company Gulf Energy Development and Binance, is expected to launch in early 2024. The competition for market share among local exchanges in Thailand is expected to become more intense in the coming years.
One of the reasons why Thai people are so interested in investing in cryptocurrencies seems to be income inequality. Thailand has a highly unequal income distribution, with the top 20% of earners accounting for 45% of all income. This is one of the highest levels of inequality in Southeast Asia, and one of the worst in the world. In fact, Thailand is ranked as the third most unequal country in the world. As a result, many people are looking to improve their income inequality by investing in cryptocurrencies.
Commercial banks leading Thailand's cryptocurrency market
The main players in Thailand's crypto market are commercial banks. With the enactment of the Cryptocurrency Law in 2018, the Bank of Thailand allowed commercial banks to establish cryptocurrency-related subsidiaries, which led to their aggressive participation in the cryptocurrency market. While commercial banks were still not allowed to engage in direct crypto-related businesses, they could now effectively invest in cryptocurrencies, issue cryptocurrencies, and broker crypto-related services through their subsidiaries.
Among Thailand's major commercial banks, Siam Commercial Bank and Kasikorn Bank, both owned by the Thai royal family, have been particularly innovative. Siam Commercial Bank has been active in adopting blockchain technology. In April 2020, it launched a cross-border remittance service using Ripple, called “SCB Easy”. In July 2021, it obtained a license to operate Ripple Net, Ripple's own payment network.
In November 2021, Siam Commercial Bank announced plans to acquire a stake in Bitkub, Thailand's largest cryptocurrency exchange. However, the plan was canceled due to the prolonged bear market and issues of unfair trading using insider information. However, it has been confirmed that Siam Commercial Bank has been operating a cryptocurrency exchange business through InnovestX, a subsidiary of holding company SCBX, since May 2022.
While Siam Commercial Bank is prohibited from directly engaging in the crypto business due to regulations, it operates various Web3-related businesses through its holding company, SCBX. With its crypto VC, “SCBX 10X”, it raised a $50 million Web3 fund in February 2021. In addition, it operates a cryptocurrency listing support service (ICO Portal) through “TokenX”, a subsidiary of SCB 10X, and recently established a joint venture with Hashed, the largest crypto VC in Korea. Called “Shard Lab”, it is leading the way in blockchain technology research and experimental product development.
Kasikorn Bank is also playing an active role in revitalizing the Thai crypto market. Kasikorn Bank operates an ICO portal, “Kubix”, and runs a crypto VC, “Kasikorn X” (KX), through its fintech subsidiary, Kasikorn Business Technology Group (KBTG). KX is leading innovation in the crypto space with the launch of “BigFin”, a crypto investment analytics platform, and “Coral”, a marketplace for purchasing NFTs with fiat currency.
Like Siam Commercial Bank, Kasikorn Bank has also shown a strong interest in the cryptocurrency exchange business. In October 2023, it acquired a 97% stake in the parent company of “Satang Pro”, a Thai cryptocurrency exchange, and renamed the exchange “Orbix Trade”. Finally, KX is taking the lead in the market by raising a $100 million fund to support Web3 and AI startups.
In addition to the Central Bank of Thailand, major Thai commercial banks such as Siam Commercial Bank, Kasikorn Bank, Krungthai Bank, and Ayudhya Bank have participated in the Thai CBDC project "Inthanon" and are actively adopting and utilizing digital currencies. There is no doubt that commercial banks are major players in the Thai cryptocurrency market.
Conclusion
Thailand has been one of the first countries to embrace the cryptocurrency market, but a recent spate of regulatory moves has put the country on pause. Under this context, the election of pro-crypto Prime Minister Srettha Thavisin opens up new possibilities. Mr. Thavisin has been active in the crypto space in the past, and has pledged to give each citizen about 300 USD worth of cryptocurrency. Since his election, Thailand's ruling party and central bank have been considering issuing utility tokens to citizens, raising new hopes that crypto could be accepted as a form of payment. However, critics argue that these initiatives are merely populist and are more likely to be a one-off than truly facilitating the crypto market.
There are also some negative outlooks surrounding Thailand. The country has one of the lowest growth rates in Southeast Asia and a median age of 41, which is much higher than Vietnam (32). In addition, the Thai government is planning to tax both domestic and foreign cryptocurrency transactions starting in 2025, which is also expected to have a negative impact on the market. Due to these factors, the growth of the Web3 market in Thailand is expected to be slower compared to Indonesia and Vietnam, which have explosive potential. However, as mentioned earlier, a pro-crypto figure has been elected as prime minister, and there are signs of development in the Web3 market centered on commercial banks. It will be interesting to see if Thailand can make a comeback as a crypto hub like it did in the past.
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