Government officials in Thailand have said that the country will restrict the use of cryptocurrency as a form of payment for goods and services.
They claim that the increased use of digital assets endangers the country's financial system, and economy.
According to Bloomberg, business operators, including cryptocurrency exchanges, are prohibited from providing such payment services and from acting in a way that encourages the use of digital assets to pay for goods or services, the Securities and Exchange Commission said in a statement on Wednesday.
However, the new regulations would not affect trading or investments in digital assets, the agency said.
While the restrictions on the use of digital currencies for transactions will go into effect on April 1, companies in Southeast Asia's second-largest economy will have until the end of April to comply with the new rules, according to the regulator.
It stated that the restrictions on cryptocurrencies such as Bitcoin for commercial transactions are consistent with regulations in Europe, the United Kingdom, South Korea, and Malaysia.
Thailand's crackdown on digital assets comes as individuals, particularly young investors, increase their cryptocurrency trading in search of higher returns amid the country's economic slowdown.
Due to high volatility, uncertainty, and risk, commercial banks have been advised against direct involvement in the trading of digital assets.
According to the regulator, the development of any pricing unit other than the Thai baht will raise the cost of economic activity and reduce the efficiency of monetary policy transmission.
In the event of a liquidity crisis, the Bank of Thailand stated that it would be unable to assist various financial institutions in currencies other than the baht.
Thai regulators recognize the benefits of technologies such as blockchain, and the country was one of the first in the world to enact legislation to support digital asset trading, according to the SEC.
In the fourth quarter, the Bank of Thailand plans to launch a pilot project for its planned retail digital currency.
BOT Governor Sethaput Suthiwartnarueput has praised the central bank's digital currency for being more effective in achieving financial inclusion in Thailand without jeopardizing financial system stability.
He stated in December that the monetary authority's experiment with a wholesale CBDC had already helped lower cross-border transaction costs and increase efficiency.
The new rules require digital-asset service providers to stop advertising, soliciting, or establishing a system to facilitate payment of goods and services through digital wallets.
It stated that business operators must warn clients against using digital assets for payments and may cancel their accounts if they are found to violate the rules.
According to the government, the value of digital assets held by Thais has risen to 114.5 billion baht ($3.4 billion) from 9.6 billion baht a few years ago.
The average daily turnover has increased from 240 million baht to 4.8 billion baht, and the number of active trading accounts has increased from 170,000 before the pandemic to 1.98 million.