While United States regulators are still trying to figure out how to think about cryptocurrencies, Thailand’s government is already mapping out its own central bank digital currency.
This is just one of numerous examples how Thailand has emerged as one the most interesting cryptocurrency and blockchain countries in Southeast Asia in 2018.
Since the start of the year, the Thai government has become increasingly outspoken and welcoming of cryptocurrency projects and exchanges. In just a few months, Thai regulators have made notable progress, from setting up cryptocurrency company licenses to permitting exchanges and ICOs. More importantly, the country has attracted foreign companies by providing clear and explicit guidelines for foreign blockchain companies to operate. It’s a pattern that we are seeing across Southeast Asia, and one that blockchain and cryptocurrency startup founders should take note as they think about global expansion.
Southeast Asia regulators are keen to understand cryptocurrency and blockchain
To understand how a small country like Thailand can move so quickly in the blockchain space, it’s crucial to understand the strategy of regulators and local companies. Unlike their U.S. peers, most Asian blockchain companies and exchanges work with local regulators right from the beginning, even as they are first building their products and growing their communities. These teams use formal and informal relationships to get buy-in from their respective local governments in order to bolster their credibility. This pattern is particularly true for Southeast Asian countries such as Thailand.
However, it isn’t just startups that are trying to curry ties with government officials – these relationships work in both directions. Take for example Pundi X, which is a technology company building out a blockchain-based point of sale solution in Southeast Asia and globally. Its CEO, Zac Cheah, is Malaysian and local to the Southeast Asia region, and discussed with me how regulators are engaging with the startup community:
I think government is morphing and changing and many governments that we know are not you know exactly the ones that we say that are lagging behind. They, in fact, have like people, young or not so young people, that are very knowledgeable about what is happening right now. So in fact sometimes when we go to core blockchain meetups, we actually see some very core people from the regulatory side […] they know that this will change the landscape a lot so I think they are trying to think through the, if I may, the ‘tokenomics’ of how they want to get involved.”
No longer Thaied up in regulation
These types of regulatory engagements are encouraging signs for the region and particularly for Thailand, where regulators have been working quickly to provide a legal path for blockchain and cryptocurrency technologies.
In June, Thailand’s government legalized seven cryptocurrencies (Bitcoin, Ethereum, Bitcoin cash, Ethereum classic, Litecoin, Ripple, and Stellar). It has also permitted a limited number of cryptocurrency exchanges and broker-dealers to apply for operating licenses. Then in July, the Thailand SEC permitted additional digital token issuers to file for applications. In the same month, the securities regulator categorized ICOs into three types: investment tokens, utility tokens, and cryptocurrency. As should be clear from this timeline, the speed at which these regulators execute decisions has surpassed that of most countries in the West as well as the rest of Asia.
Part of that speed is that in Thailand, regulators have shown an openness to knowledge exchange. For example, recently the Thailand SEC held a dialogue with Vitalik Buterin and the OmiseGo team on the status of exchanges and Initial Coin Offerings (ICOs). For Thailand, having a local, knowledgeable, and well-established team such as Omise is very helpful to building a clear regulatory environment for companies.
One positive though is that we are still in the relatively early stage of adoption in Southeast Asia, and every country in the blockchain adoption phase is at different stages. A healthy competition between Southeast Asian nations is still brewing, which may benefit newcomers. That said, the strategies used to enter one of these markets will almost certainly change and mature compared to when these opportunities were very green.
In the long run, it’s very possible for many cryptocurrency and blockchain companies to develop a codependency with their respective local government. This doesn’t just apply to Thailand and Asia but to the rest of world too. Each region’s regulators will want to further advance their own interest and form allies with local token companies. So for a project that is thinking globally, forming too close of a relationship with a small set of regulators may pull the company in directions that it otherwise would not want to.
Ultimately, for a cryptocurrency company going into any foreign markets, it is important for one’s team to have a multi-country strategy to avoid developing biases and become overly influenced by one local government. However, to succeed locally, the teams on the ground will also have to be very deeply knowledgeable and experienced in understanding the business culture and regulatory environment there.
As Thailand proves, the ground is changing rapidly on which countries are most open for blockchain and cryptocurrency business, and adapting to these changing market dynamics is critical to the success of startups and companies in the space.