Ripple Discusses Regulatory Approaches
In a recent blog on Ripple Insights, Sagar Sarbhai, the company’s Head of Government and Regulatory Relations for APAC and the Middle East, talked about the regulatory approaches driving innovation in Thailand and Abu Dhabi.
The blog starts off with the company talking about the situation in Thailand:
“Like Japan, Thailand’s Central Bank, the Bank of Thailand (BOT), was reacting to market demand for digital assets when it moved decisively in 2018 to protect its consumers and institutions, by banning banks from offering services to digital asset exchanges. Then, just a few months later, the Thai government switched course and announced progressive regulations designed to encourage investment and innovation.”
Discussing it further, Sarbhai said:
“With ambitions to be the fintech hub for the ASEAN region (Association of Southeastern Asian Nations), Thailand’s government had recognized the importance of finding balance — creating a framework for digital asset regulation that addresses risk while also supporting innovation. It chose not to regulate the technology, just how it’s being used.”
Talking about Abu Dhabi, he said:
“Abu Dhabi Global Markets (ADGM) also recently launched a thoughtful digital asset market framework, but for different reasons than Thailand. Rather than in response to market demand, ADGM’s policy makers took a top-down approach, to make the region a digital asset hub for the Middle East.”
Even though both of them chose different ways to regulate the industry, both saw positive outcomes. He then looked at both the cases closely.
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Starting off with Thailand’s case up-close, Sarbhai said:
“For more than a decade, Thailand has encouraged investment and education in technology. This creation of a tech-literate society resulted in a lot of interest in the burgeoning digital asset market from both consumers and exchanges.
The government started to worry that people were investing in volatile markets, while the country’s banks could be exposed by fraudulent or flaky Initial Coin Offerings (ICOs). This is why the BoT implemented its ban initially.”
At the same time, the country was formulating official policies to benefit the digital asset market. In the month of May, these regulations were “announced in a royal decree.”
Talking about the decree further, he said:
“According to the Thai government’s decree, virtual currencies are classified as digital assets, while the country now has a framework for licensing exchanges. The regulations also include protections for consumers as well as for financial organizations like banks, who are now required to form subsidiaries for dealing with ICOs as a buffer against losses.
Thailand is already seeing an increase in retail and institutional participation in the digital asset market, including foreign investors. Further, the government’s pragmatic and collaborative approach has gradually helped to evolve policies that protect consumers and financial institutions, while positioning Thailand as ASEAN’s premier digital asset hub.”
Moving on to Abu Dhabi, which didn’t have much demand for digital assets in the market. ADGM intends to become Middle East’s fintech hub. A key element of its plan is its proactive approach toward digital asset regulation.
Explaining ADGM’s stance, Sarbhai said:
“Without the need to react to market risks, ADGM policymakers have taken a thoughtful approach and spent a lot of time learning from the experiences and mistakes of other regulators. The result is the most comprehensive digital asset regulation framework in practice today.”
Adding to it:
“All digital asset activities are subject to high standards but dealt with on a case-by-case basis, depending on the nature of the product and service. When it comes to risk, ADGM goes way beyond simply addressing anti-money-laundering and counter-terrorist financing by tackling technology governance, anonymous currencies and custody management. The regulation also provides guidance to banks and other institutional on leveraging digital assets.”