The Thai government’s decision to make Bitcoin activity illegal in the Southeast Asian nation has raised questions about why the decision was made and what that might mean for Bitcoin in other Asian economies.
Thailand-based Bitcoin Co. Ltd. released a statement indicating that the company had met with Thai officials to discuss Bitcoin’s activities and legality in Thailand in late July. At the end of that meeting, officials from the Foreign Exchange Administration and Policy Department told Bitcoin representatives that due to a lack of “applicable laws, capital controls and the fact that Bitcoin straddles multiple financial facets,” a number of the company’s activities were illegal in Thailand.
These included buying and selling Bitcoins, buying and selling services in exchange for Bitcoins, and sending and receiving Bitcoins to and from other countries. Given these restrictions, the company said it had no choice but to suspend operations in Thailand.
Thailand is the first country to outright declare Bitcoin activities illegal, although other governments are scrutinizing the cryptocurrency more closely as well. The United States recently gave the go ahead to the Securities and Exchange Commission to move forward on a lawsuit against a man accused of running a Ponzi scheme using Bitcoin. The man had challenged the case, saying Bitcoin does not fall under any jurisdiction for prosecution. This decision could signal a new precedent in moves to regulate Bitcoin and other digital currencies, which has so far not been the case in the United States.
Although the Thai government is cracking down on Bitcoin, there is speculation that the currency will gain popularity in China. Quartz noted that China is no stranger to virtual currencies, having seen the success of Q Coin. And Bitcoin may give Chinese people a means of skirting currency controls imposed by the government. The publication also notes that the Chinese government has no means of tracking or cracking down on Bitcoin, making it an even more appealing currency for the average person.
Tech in Asia reported that China is the second largest Bitcoin market in the world, behind only the United States, and said that the currency has seen a surge in interest since relatively favorable news reports aired on state media. In fact, a Beijing start-up is focusing on making Bitcoin mining equipment more widely available in China.
Hong Kong-based Asia Nexgen recently launched a Bitcoin trading service, signaling support for the currency in one of the world’s most important financial hubs.
Kristov Atlas, author of a forthcoming book on anonymous Bitcoin use, said a major deterrent for governments worldwide is the current lack of regulation and infrastructure for government oversight. Bitcoin is a pseudo-anonymous currency, which also makes it easier for people to conceal earnings and income and avoid paying taxes on them, another reason governments will be keen to either regulate and hamper the currency, or ban it outright.
“Bitcoin offers the world a scenario in which the government has no control over the money supply,” Atlas said.
Atlas described Bitcoin as a “combination between cash and gold.” Like gold, there is no central agency overseeing the exchange of Bitcoins. There is a limited number of Bitcoins that will ever exist, and because the supply will decrease over time and not be infinitely replenished, it is a deflationary currency, Atlas said. He noted that, like cash, Bitcoin exchanges are more anonymous than using credit cards or other easily trackable means of exchange. This appeals not only for reasons of skirting tax laws, but for privacy when purchasing certain personal items or gifts, or wanting to keep household finances private.
Atlas said Bitcoin is also appealing to people at low-income levels. The currency does not require a bank account and the low financial barrier, including the low transaction fees, make it appealing to those who have little money to begin with. He said that poor people can slowly build wealth using Bitcoin, while continuing to provide for their families.
Bitcoin is, at present, unfettered by regulations on exchanging currencies across borders. Because Bitcoin is a stateless currency, it can be used and exchanged around the globe, in a pseudo-anonymous fashion. Transactions are simple, fast and inexpensive, unencumbered by many of the hang-ups that sour people on services such as PayPal (restrictions in certain countries, high transaction fees, lack of protection in the event of dispute).
Atlas said part of what has driven interest in Bitcoin is that as people begin to use the currency, they learn more about economics and become disillusioned by central banking systems, especially as they see Bitcoin’s value rise while the USD plummets. Many appreciate the genuinely democratic nature of the currency system, and the flexibility. Bitcoins can be exchanged online, through Bitcoin ATM machines, and through completely offline exchanges.