The cabinet approved the Financial Hub bill on Feb 4, marking a significant step in Thailand’s bid to become a regional player in finance.
The bill, comprising 96 sections, establishes a One Stop Authority (OSA) committee with broad regulatory powers, including licensing and tax incentives, to attract investment in fintech and blockchain. While the government touts the bill as being a catalyst for foreign direct investment, critics warn of overly complex regulations, loss of financial institution autonomy, and increased compliance costs.
Former finance minister Thirachai Phuvanatnaranubala has voiced strong opposition, arguing the bill could destabilise the financial system.
Mr Thirachai contends the country’s financial system is still too slow and unable to compete with existing financial centres such as Singapore and Hong Kong, which are governed by English law and have more advanced dispute resolution mechanisms for complex financial transactions.
He also wondered whether the bill’s true intent is to enable the government to issue a cryptocurrency, potentially gaining control over the country’s financial system and bypassing the central bank’s authority.
Mr Thirachai warned that centralising financial oversight under a new office could erode confidence in monetary policy and the baht.
INITIATIVE WINS PRAISE
Thitima Chucherd, head of economic and financial market research at SCB EIC, a research centre under Siam Commercial Bank, said as all relevant regulatory agencies are involved in implementing the government’s financial hub initiative, the project is expected to comply with existing regulations while addressing potential risks, particularly those related to financial system stability and money laundering.
With existing regulations enforced by the Bank of Thailand and the Anti-Money Laundering Office (Amlo), supervision is expected to be stringent. Regulators and other stakeholders involved in drafting the Financial Hub bill are expected to thoroughly evaluate both the opportunities and risks of the project before implementing the law, she said.
“The project committees, which include representatives from various relevant organisations, will help close regulatory loopholes, a key public concern,” Ms Thitima said.
However, SCB EIC raised concerns about potential regulatory inequality in law enforcement between existing financial institutions and new entrants under the proposed bill. While current players are regulated under existing frameworks, newcomers would fall under the new Act, potentially creating regulatory disparities.
“For example, existing commercial banks are regulated by the central bank and are not allowed to engage directly indigital asset businesses. The new Act includes provisions for digital asset operations,” she said.
“The government and regulatory agencies involved in drafting the new law should ensure fair and consistent enforcement for both existing players and new entrants.”
Ms Thitima said the initiative is expected to benefit Thailand’s economy in the long run, especially the development of new financial infrastructure to attract financial players and contribute to the country’s economic growth.
SCB EIC believes Thailand has strong potential to become a financial hub, given its well-established financial system standards, robust digital banking services and strong liquidity, she said. This project should also benefit Thais by enhancing access to global asset investment, said Ms Thitima.
OPPORTUNITY KNOCKS
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said the new Act should not undermine the authority of the central bank, but rather promote collaboration between regulatory bodies.
It is vital to engage in in-depth discussions with the Finance Ministry and the Office of the Council of State to ensure the law supports the stability of the financial system, he said.
Addressing concerns about the risk of money laundering, Mr Sanan said the chamber stressed the importance of adhering to international anti-money laundering (AML) standards, including verifying the sources of funds, monitoring financial transactions, and enforcing transparent compliance measures. The central bank and Amlo should play key roles in this respect, he said.
Regarding the regulation of digital currencies, Mr Sanan said it is an emerging area attracting global attention, though the US is the only country currently considering digital currency as a reserve asset.
For Thailand to develop its own digital currency, clear and credible regulatory frameworks would need to be established, requiring extensive studies and consultations with relevant agencies, he said.
POLITICAL MOTIVATIONS
Kavee Chukitkasem, head of portfolio advisory at Pi Securities, said former premier Thaksin Shinawatra’s proposal for the country to adopt cryptocurrency is primarily driven by political motives aimed at garnering public attention and media coverage.
He said if Thailand truly intends to adopt cryptocurrency, the Currency Act must first be amended, and a new law must be enacted to support its use.
Such an amendment would require parliamentary approval, necessitating a majority vote from senators — an outcome that is far from guaranteed. Mr Kavee warned such a move could have negative repercussions for the stock market.
“There is significant uncertainty regarding the country’s policy direction, which is a crucial factor for investors. The government already proposed a digital wallet project, but it has yet to materialise,” he said.
A similar fate may await the Phuket Sandbox initiative for a cryptocurrency ecosystem, which is still in progress, said Mr Kavee.
“Thailand lacks a clear policy framework, making investors hesitant. Many legal amendments are required before moving forward. If implemented hastily, the project would be illegal. What Thaksin suggested is unlikely to materialise anytime soon,” he said.
Mr Kavee noted the proposal for an entertainment complex with a legal casino also remains uncertain.
“Investor confidence has yet to recover due to the government’s ambiguous policies, causing investment delays. Uncertainty over policy direction continues to deter investors,” he said.
Even Thais may lack confidence about consumer spending, further decelerating the economy, said Mr Kavee.
Prakit Siriwattanaket, managing director of Merchant Partners Asset Management, said if the government is determined to push this Financial Hub bill forward, it will likely find ways to pass the necessary legislation.
“The former finance minister already expressed concerns over the risks and dangers associated with such a law. I believe it will not be easy to pass,” Mr Prakit said. “If the policy generates significant backlash, public protests could force the government to reconsider.”
Although the cabinet approved the draft law in principle, the details must still be reviewed by the Council of State before proceeding to parliament, where a broad discussion on its potential impact is expected.
“If this issue proves highly contentious, the government will likely step back. With only two years left before the next election, insisting on this policy could trigger widespread protests,” he said.
TOO AMBITIOUS?
Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry, said the push to develop a financial hub may be overly ambitious and could face challenges arising from cryptocurrency-related businesses.
He said the cabinet’s approval of the bill is a step towards a national-scale project that may be unsuitable for Thailand at this point in time.
“While the country must keep abreast of cryptocurrency trends, it should begin with a small pilot project rather than launching a large initiative immediately,” said Mr Tanit. “We should not rush into a nationwide project. A gradual and cautious approach would be better.”
He was echoing concerns raised by Mr Thirachai, who warned on Facebook the bill could not only facilitate cryptocurrency businesses, but also allow the government to generate its own digital currency — potentially disrupting the financial system overseen by the central bank.
“With a cryptocurrency, the government may think it no longer needs to rely heavily on the central bank. But is digital currency truly reliable? And how will it affect the baht?” said Mr Tanit.
He expressed concern that if cryptocurrency became a core part of the financial hub, the government might eventually struggle to regulate its use.
Mr Tanit said Thailand’s economy and workforce are not yet prepared for a rapid expansion of cryptocurrency, noting that even Singapore has refrained from actively promoting its adoption.
“Cryptocurrency is undeniably a global trend, and we don’t know how it will evolve over the next 10-20 years. But that doesn’t mean we should rush into adopting it,” he said. “If a company offered to pay your salary in crypto now, would you accept it?”
