THE BANK of Thailand (BOT) is pressing the country’s financial institutions to steer clear of involvement in transactions that relate to cryptocurrencies.
The central bank yesterday issued a circular to banks and other financial institutions seeking their cooperation to help it protect the financial system from the risks posed by the digital currencies, which are unregulated and subject to wild swings in value.
The circular was signed by BOT governor Veerathai Santiprabhob.
The BOT’s concerns are focused on the fact the issuers of cryptocurrencies cannot be clearly identified and, as such, it is not known |whether they have sufficient assets to back up the value of the currencies.
The list of the transactions that the central bank wants the financial institutions to shun are investment in cryptocurrencies or other forms of trading in them with the aim of bringing benefits to themselves or their clients.
According to the BOT, they also should not provide cryptocurrency exchange services via their channels, nor create a platform for their clients to do cryptocurrency transactions between them.
Further, financial institutions should not allow their clients to use credit cards to buy such virtual currencies.
Additionally, they should not support or give advice to the clients on the exchange for prospective investments in the cryptocurrencies.
The BOT has also asked that financial institutions be more careful when opening deposit accounts for clients and should not provide loans that might lead to cryptocurrency transactions.
More broadly, financial companies must strictly observe the principle of “know your customer” and conduct the due diligence on them, in compliance with the related rules and prospective regulations likely to be issued in the future, Veerathai added.
According to the central bank, the rapid uptake of technology for financial transactions gave birth to the cryptocurrencies, such as bitcoin or ether.
For some cryptocurrencies, it is difficult for authorities to identify the issuers and there are no assets to back up their value.
The central bank is concerned by the wild swings in value of the digital currencies, driven by speculators.
It worries that those seeking to enter this alternative investment field may suffer big losses.
The BOT cautioned that the cryptocurrencies did not have the status of legal tender in Thailand and no agency has been assigned to regulate them. Therefore, those involved in the cryptocurrency transactions might not get legal protection in a case of fraud or other problems.
The central bank is also concerned that the virtual currencies could be used for unlawful transactions, such as money laundering or support for terrorism.
The BOT’s stance contrasts with the position of the Securities and Exchange Commission, which had earlier had earlier given approval to brokerage Phillip Securities Thailand to offer advice for investors wanting to trade in bitcoin.
Kobsidthi Silpachai, the head of capital markets at Kasikornbank, said Finance Minister Apisak Tantivorawong must make clear how all the regulators should handle the virtual currencies.
The BOT supervises commercial banks and state-owned banks, while the SEC regulates brokerages.