To promote the cryptocurrency industry, crypto traders on government-approved exchanges will be exempt from 7% value-added tax (VAT). During a cabinet meeting held on March 8th, Thailand’s finance minister announced that investors will get tax relief from April 2022 to December 2023.
Investors will be able to offset their losses against taxes due to profits for cryptocurrency investments. Additionally, VAT will not be charged on transfers of Thai central bank digital currency (CBDC) issued by the Bank of Thailand.
In January, Thailand’s financial authorities announced plans to tighten regulations on the crypto industry – including a 15% tax – to promote the adoption of digital assets. Crypto traders believed the tax was excessive and were concerned it would stifle growth in the nascent sector. Consequently, the Thai government scrapped the plans as a result of the backlash.
The Bank of Thailand (BOT), the Securities and Exchange Commission (SEC), and the Ministry of Finance (MOF) have jointly reviewed the benefits and risks of digital assets. It was decided that digital currencies should be regulated as a means of payment for goods and services to avoid potential impacts on Thailand’s economic future. Several digital asset companies have expanded their business offerings to include services related to the use of digital assets. A few have offered to set up digital asset settlement systems in order to facilitate businesses accepting digital asset payments.
Bank Of Thailand’s Retail CBDC Project
Bank of Thailand’s retail CBDC project is due to enter the pilot stage later this year. BOT’s retail CBDC pilot test will be conducted in two parts. First, a foundation track for evaluating the use of CBDC for cash-like transactions, like payments. This phase is expected to begin in the second quarter of 2022. Secondly, an innovation track that will focus on CBDC use cases with participation from the private sector and technology developers.
Thailand has been among the more active countries in Asia when it comes to CBDCs and digital payments. The Thai central bank has also been working on a wholesale CBDC that financial institutions can use. The country is collaborating with China, Hong Kong, and the United Arab Emirates on the “Multiple CBDC Bridge” project for cross-border payments. This project is an expansion of the earlier Initiative Inthanon-LionRock CBDC between Thailand and Hong Kong.
Despite regulatory hurdles, Thailand has had a huge spike in crypto trading in the last year. Trading accounts have surged from 170,000 earlier last year to about 2 million at the end of 2021.