Along with Singapore, Thailand on Monday unveiled new regulations that will ban crypto exchanges from offering staking and lending services, as watchdogs across the globe step up scrutiny of digital asset trading.
Thailand’s Securities and Exchange Commission (SEC) has issued fresh rules that will restrict digital asset business operators from offering lending and staking services in exchange for incentives, per an official announcement.
Such businesses will also be prohibited from offering returns to customers in exchange for deposit and advertising or persuading the public to use its services. The new measures will be effective from August 30, 2023.
The Thai SEC further announced measures for crypto exchanges to explicitly display risk warning disclosures to enhance investor protection and keep customers adequately informed about associated risks. Digital asset companies have also been instructed to disclose the results of the investor suitability questionnaire and basic asset allocation to their clients while obtaining their consent for engaging in such services. These new guidelines will come into effect on July 31, 2023.
“It is forbidden to advertise or persuade the general public or do any other act that supports deposit taking and lending services,” the Thai SEC said in a statement.
The move coincides with a similar announcement made by the Monetary Authority of Singapore (MAS) the same day. MAS outlined new rules that would restrict digital payment token service providers from “facilitating lending or staking by their retail customers’ tokens” as it deems these trading activities to be unsuitable for retail investors. The service will still be available for institutional and accredited investors, the regulator said without providing further details on the timeline for implementing the new regulations.
This is, however, not the first time that these two countries have sought to regulate the crypto industry. Thai regulators first approved an effective ban on crypto staking and lending services in September 2022, while MAS published public consultation papers that aimed to mitigate the risks of crypto trading the following month.
Staking for digital assets has been in the spotlight since Ethereum adopted a system known as proof-of-stake to validate new crypto transactions last September.
However, in February, US crypto trading platform Kraken agreed to shutter its crypto-staking operations in its home country and pay $30 million to settle the Securities and Exchange Commission’s charges on selling unregistered securities.
“The crackdown on staking and lending services would probably put local players at a disadvantage to their global peers. There are risks with these services [of course], but I would prefer that if regulated players want to offer these services, they must be audited and provide proof of how the fund is used…,” said Sanjay Popli, co-founder of Cryptomind, a Bangkok-based company that offers digital asset financial services and investment product development.
Staking in the digital asset world refers to a process in which users’ digital tokens are held up in a platform in a certain time period to validate transactions and secure the blockchain network, and users would benefit from earning more tokens as a result. Meanwhile, lending is the practice of cryptocurrency companies lending digital assets to one another in exchange for interest or other forms of compensation.