Supervision of Financial Business Groups of Commercial Banks that Operate Business and Transact on Digital Asset
Digital Asset plays a significant role in contributing to the development of innovative financial services which is beneficial to consumers and the economy as a whole. However, Digital Asset exposed to risks in many forms, especially in cases where consumers have an insufficient understanding of Digital Asset, and is also at risk of being used as a tool for money laundering or terrorist financing.
In order to balance between supporting innovations related to Digital Asset of the financial business groups of commercial banks for benefits and managing risks that may arise, it is an important concept for the Bank of Thailand to improve and defines relevant rules for business operation and transaction related to Digital Asset to be more flexible and to allow discreet investment and business relevant to Digital Asset under the rules and investment ratio in Digital Asset Business as required.
Therefore, the Bank of Thailand has issued the Notification of the Bank of Thailand No. SorNorSor. 6/2565 on Regulations on the Supervision of Financial Business Groups of Commercial Banks that Operate Business and Transact on Digital Asset (“Notification”) which comes to force on October 22, 2022, and applies to commercial banks, parent companies, subsidiaries, and affiliated companies of commercial banks in financial business groups according to the financial institutions business law with key principles such as: (1) to allow companies in financial business groups except commercial banks to discreetly operate a Digital Asset business under flexible regulations, and support technologies or development of financial services to increase financial system’s efficiency for the benefit of the people, business and economy; (2) to supervise and manage the risks from transactions in relation to Digital Asset; (3) to protect consumers and for consumers to receive fair services; and (4) to raise the Digital Asset business standard.
This Notification stipulates that commercial banks can transact on Digital Asset but cannot operate a Digital Asset business, and companies in financial business groups can operate businesses and transact in Digital Asset as prescribed in this Notification without contravening the key principles of this Notification and other relevant laws of Thailand and internationally such as prohibiting the use of Digital Asset as a means of payment or encouraging the general public to hold Digital Asset. However, such transactions are subject to the purpose of developing innovations to increase the efficiency and quality of providing financial business.
Furthermore, this Notification also specifies the principles of risk management governance in the following subjects:
- Limiting the amount of credit, investing, creating contingent liabilities, or conducting transactions similar to lending to businesses related to digital assets (Digital Asset Related Business Limit)
- Good Governance Supervision
- Capital maintenance
- Liquid assets maintenance
- Classification and provisioning
- Supervision of large debtors
- Intragroup Contagion Risk
- Official supervision (Supervisory Review Process)
- Know Your Customer: KYC
- Consumer Protection