Institutions asked to avoid digital tokens

Institutions asked to avoid digital tokens

The Bank of Thailand has asked all financial institutions to stay away from making or being involved in cryptocurrency transactions, following recent moves to curb the risks of virtual currencies.

The central bank is seeking the cooperation of financial institutions to avoid investing or trading in digital tokens to benefit themselves or customers, refrain from providing exchange channels for customers trading in cryptocurrencies, and refrain from creating platforms for customers to make crytocurrency transactions, said governor Veerathai Santiprabhob.

Financial institutions should bar customers from using credit cards to trade cryptocurrency and avoid giving advice to clients investing in digital coins, he said.

The central bank requested all financial institutions to be more cautious in providing deposits and lending services to be used in cryptocurrency transactions by strictly complying with Know Your Customer and Customer Due Diligence practices.

Financial institutions should join to thwart the use of cryptocurrency transactions to violate law, he said.

Mr Veerathai repeatedly said cryptocurrencies are not legal tender in Thailand and there is no law stipulating which regulators are responsible for overseeing virtual currencies, so those who are involved in digital coin transactions might not be protected in the event of fraud.

Cryptocurrencies could also be used in illegal activities such as money laundering or supporting terrorism, and investors should wary of the digital tokens' security, he said.

"The Bank of Thailand has become aware of problems that could occur from transactions related to cryptocurrencies, particularly those where issuers cannot be identified or don't have underlying assets, so the central bank is requesting cooperation from all financial institutions to shun transactions related to cryptocurrencies," Mr Veerathai said.

The central bank's latest move comes while a working panel, formed from regulators, is considering measures to regulate digital currencies, and many countries are launching crackdowns on virtual coins.

According to a recent report by Bloomberg, Chinese authorities planned to block domestic access to Chinese and offshore cryptocurrency platforms that allow centralised trading. Last year, Chinese regulators banned initial coin offerings, shut down local cryptocurrency trading exchanges and limited bitcoin mining.

The recent wild swings in bitcoin's trading value has prompted Prime Minister Prayut Chan-o-cha to instruct the Finance Ministry to educate people about the risks of investing in virtual currencies, while the central bank, the Securities and Exchange Commission (SEC), the Finance Ministry and Anti-Money Laundering Office jointly set up a working panel tasked with considering measures to regulate digital currencies.

Finance Minister Apisak Tantivorawong last week said the working panel was expected to form a regulatory framework on cryptocurrencies within one month.

The Bank of Thailand, Finance Ministry and SEC issued several warnings that digital currencies are not regulated and investors in them do so at their own risk.

Bitcoin reached a peak of almost US$20,000 (627,258 baht) in early December after the introduction of futures contracts on regulated exchanges in the US, but slid to below $6,000 early this month.

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