Melker Bengtsson
TL;DR
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Thailand's SEC requires licensed digital asset operators to collect information on all parties in a transaction, effective February 27th next year.
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What's extra strict: operators must verify who controls self-hosted wallets before sending or accepting funds from them.
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Privacy and personal freedom concerns have gone unmentioned in the SEC's communications; Ledger and Coin Center have criticized this type of requirement.
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Wallet-to-wallet transfers remain outside the perimeter, but the rules may push holders toward offshore and/or unlicensed operators.
Thailand’s Securities and Exchange Commission has issued a new rule under the global Travel Rules standard which requires licensed digital asset operators to collect information on all parties in a transaction. What’s extra strict about the Thai rule is that the operators must now verify who controls self-hosted wallets before sending or accepting funds from them. The new rules take effect on February 27th next year.
Operators must verify who controls self-hosted wallets
Every transaction will have to be recorded with originator, beneficiary and, when applicable, intermediary details. These details include names and account identifiers. Additionally, counterparty providers have to be vetted operators, even if they’re not Thai.
The rule was developed by the Thai SEC together with their Anti-Money Laundering Office, the AMLO. It’s an interim rule that will apply while the AMLO develops their own rules under the Anti-Money Laundering Act. Until then, the two agencies will coordinate with each other.
This rule is meant to reduce the risk that crypto is used for activities such as terrorist financing and money laundering.
Privacy and personal freedom concerns go unmentioned
Despite the obvious privacy and personal freedom concerns, these have gone unmentioned in the SEC’s communications. According to hardware wallet maker Ledger, discouraging self-hosting harms personal freedom and hurts the unbanked worst, as self-hosting is a low cost way to access financial services.
In the US, crypto advocacy group Coin Center has formally commented to the Financial Action Task Force (FATF), the intergovernmental body that created the international standards, against this type of requirement. They argue that restricting operators’ interactions with self-hosted wallets could destroy the link between peer-to-peer transactions and the wider financial system.
Additionally, there’s been discussion regarding the rule’s requirement for operators to keep the records for five years. The argument is that this itself poses a privacy risk, as personal details will be held by private companies for a long time.
Stricter than most
While Thailand’s is on the stricter side, the FATF reports that Travel Rules have been implemented in 91 out of 109 surveyed countries. Other jurisdictions usually stop at collecting counterparty data and in the EU, for example, there’s a €1,000 threshold for ownership verification.
Luckily, wallet-to-wallet transfers still remain outside the perimeter of these new rules.
It remains to be seen how much these rules will affect Thai crypto holders in their day-to-day actions, if a smooth user experience can be created or if this will push those holders to offshore and/or unlicensed operators which would diminish consumer safety.
