BANGKOK: Thailand, which has banned the use of cryptocurrencies for payments, will restrict the role of commercial banks in the digital-assets business to protect them from unforeseen risks, a central bank official says.

       The Bank of Thailand (BoT) on Wednesday said banks should limit their investment in digital-assets business, including crypto exchanges, to 3% of their capital.

       Any investment made in the industry should be through units to shield the confidence of depositors and the banking system, it said.

       “We will use regulatory measures to ring-fence the banks by allowing only units to invest in digital assets,” BoT assistant governor Roong Mallikamas said yesterday.

       “We want banks to invest in digital assets gradually and focus on quality more than going into it at full-speed on fears of falling behind.”

       Thai regulators are stepping up the oversight of digital assets, following an exponential growth in trading, investment and use of cryptocurrencies after South-East Asia’s second-largest economy became one of the first nations in the region to legalise the tokens as an investment tool.

       The country will ban the use of digital assets as a means of payment from April 1, as they threaten to undermine the status of the baht as the only legal tender, the BoT said Wednesday.

       A cautious approach prescribed for banks expanding into financial technology in the past worked to their advantage, Roong said, adding that the lifting of a limit on their investment in fintech was the result of the regulator being comfortable with the risk management and benefits.

       The central bank will now allow commercial banks to invest more than 3% of their capital in fintech businesses, it said, removing a major hurdle for lenders pushing digital banking to boost profit margins and offer wider services.

       The BoT plans to issue guidelines for digital banks by June, and may allow existing lenders and new applicants to seek licences.

       The 3% cap for digital-assets investment for Thai banks, compares with 0.43% of the capital for major global financial institutions, Roong said, adding that it provided enough capital for lenders to develop the business.

       The popularity of crypto assets, especially among Thai youths searching for better returns amid the country’s economic slowdown, has driven banks such as Siam Commercial Bank Pcl and Kasikornbank Pcl to make investments in digital asset platforms.

       Siam Commercial, which agreed to buy a majority stake in Bitkub Online Co for more than US$500mil (RM2.13bil) in November, has yet to win regulatory approvals for the deal.

       Bitkub Online is a new generation digital asset and cryptocurrency exchange platform that offers advanced cryptocurrency exchange services.

       The value of digital assets held by Thais has soared to 114.5 billion baht (US$3.4bil or RM14.37bil) from 9.6 billion baht (RM1.21bil) a couple of years ago, the official data showed.

       The average daily number of active trading accounts has swelled to 1.98 million from 170,000 before the pandemic.

       While the government recognises the potential of digital assets business, it wants to ensure the growth is gradual and orderly, finance minister Arkhom Termpittayapaisith said yesterday.

       Tighter regulations and tax breaks for investment in digital assets will ensure the sector’s growth and protect investors, he said. — Bloomberg