From the beginning, discussions, and arguments around cryptocurrencies and digital assets have always been linked to regulation. Crypto has shaken up opportunities and possibilities for financial institutions, consumers, and investors and is now forcing regulators worldwide to come up with new licenses and frameworks.
The recent rise in digital assets adoption (especially by financial institutions and corporations) has forced regulators to speed up their efforts. We are seeing a rapid evolution sustaining the increasing adoption, especially in South East Asia.
New regulations implementation takes time and a lot of effort to share knowledge and understand new technologies, opportunities, risks, and consequences. For example, it took years to have The Financial Action Task Force (FAFT) set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system (https://www.fatf-gafi.org/). The FAFT only issued recommendations on a risk-based approach for virtual asset service providers in 2019.
As a first step into establishing frameworks, several regulators decided to start regulating Initial Coin Offering (ICO) due to the several frauds and scams organized by unscrupulous cryptocurrency promoters. The growth of the cryptocurrency ecosystem and the complexity of services provided by digital asset businesses alerted the regulators to clarify the conditions for the provisions of such services.
The focus of the regulator has always been:
- To protect investors and consumers.
- To avoid any criminal from abusing the financial system.
- To create mutual trust.
After clarifying ICOs (in Thailand, Singapore, and many other jurisdictions), the regulators focused on regulating more activities and businesses such as exchanges, brokers, advisory company and custodian; however, the strategies and methodologies for obtaining such results were quite different depending on the jurisdiction.
The regulatory framework is evolving rapidly regarding digital assets, especially with custodians, with few jurisdictions set to develop their conditions in 2022.
Defined in the 2018 Royal Decree on Digital Asset Businesses, the Thai SEC included rules and regulations and a provision of custodial service conditions by a foreign custodian. Initially, the SEC planned to issue the custodian license around July 2021 but has been postponed to 2022.
Manages to integrate the status of custodian for digital assets within its existing laws.
Creates a new license and regulatory framework to provide custodial services and authorizes foreign custodians to deliver the services.
Creates a new set of rules (2019 Payment Services Act) including condition provision of custodial service. They plan to issue a license for crypto assets custody in 2022
The current objectives of the regulator are to provide clarification and guidelines for the provision of custodial services as soon as possible to support the rapid increase of financial institutions looking at using those services. Southeast Asia is favorable for cryptocurrencies; we expect a clear regulatory framework for digital assets custody by 2022.
Atato is now a fully licensed digital asset custodian under the Hong Kong Trust Licence framework and can service financial institutions and crypto businesses in several southeast Asian jurisdictions.
If you want to know more about atato custody and try our security solution for free, you can register here to get your free trial: https://pages.atato.com/atato-custody-launch
Clement Berger CLO at Atato