4 months ago
Prinn Panitchpakdi points to the stifling effects of regulation. Companies have gained a foothold without legal clarity, and blockchain needs wiggle room. This is part two of a three-part interview.
Blocks99 had the honor of speaking with Prinn Panitchpakdi – Advisor to Thailand Minister of Commerce – about blockchain in Thailand and other topics in October 2019. When Thailand formed a new government following this year’s election, Panitchpakdi of the minority Democrat Party was appointed Head of the Economic Team, an excellent fit considering his background in business and economics. A graduate of the prestigious London School of Economics (LSE) with a BSc in Economics, Panitchpakdi began his career in the corporate finance department of ABN Amro in London. During this period, he was also appointed Vice Chairman of the Asean-UK Business Forum.
Panitchpakdi has held several leadership positions in finance, including Country Head, Thailand, with the Hong Kong-based investment and brokerage firm CLSA. He is also a Managing Director of the Four Seasons Restaurant Group, one of the world’s largest Chinese restaurant chains. He is a sought-after speaker at startup and new economy conferences.
You asked me what’s the difference since I entered the public sector, a very good question because in my role as a CEO in the private sector – the reason I joined – is that in the private sector for the last 21 years, I’ve tried my best to nurture the ecosystem for startups and social enterprise to impact society, not just make money personally. But doing that as a private person, you sometimes face obstacles, not being in the inner circle. But now in the inner circle – I’m the advisor to the Deputy Prime Minister and Minister of Commerce, Deputy Leader of the Democrat Party, which is in parliament, Head of the Economics Team – these jobs allow me to really directly influence and impact society and regulations in a positive fashion. Yesterday, I took a group of startups to meet the Deputy Prime Minister and Commerce Minister, who is directly responsible for some of these regulations we’re discussing – about company registration, startups and, in the future, digital assets and so on – so I’m able to influence and push regulations that will be positive for future generations, for startups and digital assets in the future, hopefully.
But most people in Thailand don’t use or own digital assets. I think it’s like, 600 thousand people out of a country with a population of 70 million. Maybe only 600 thousand people trade, and most of them are speculative traders, not buy-and-hold, but in it for the trading, the short-term gain, rather than understanding the system, understanding blockchain or using it in daily life, corporate use or whatever. So to me, we’re still a long way from achieving an understanding of digital assets. It’s going in the right direction – people are incrementally understanding more. The Bank of Thailand tried to use the blockchain for the interbank settlement system, the PTT Group – the largest corporate in Thailand in energy – tried to use blockchain for an energy-trading platform, you know, Banchak Petroleum BCPG are trying to do things on their trading platform. And there are various companies in the property sector trying to introduce tokenization of real estate, there are securities companies trying to do it, the Stock Exchange of Thailand is looking at how it can tokenize listed stocks for a digital asset platform. The Security Exchange Commission, which regulates the Stock Exchange, has opened up and begun giving licenses for digital asset exchanges.
So we’ve come a long way in the last two or three years, but there are still a lot of misconceptions and misunderstandings about the potential of digital assets besides being just a tradable and profitable trading good.
But amid the excitement of potential gold-rush scenarios, sound regulatory frameworks are required. As a member nation of the international money-laundering watchdog Financial Action Task Force (FATF), which recently issued recommendations that cryptocurrency platforms monitor and report suspicious transactions, Thailand has introduced new legislature. Please explain Thailand’s recent amendments to its anti-money laundering laws to cover cryptocurrency.
To be honest, I’m not an expert on the anti-money laundering laws, so I don’t want to go into great detail. As far as I know, the law has become stricter and tougher. I think data disclosure and tracking of the flow of money have improved. To me, it’s become stricter and tougher because there have been a few scandals in the political sphere, where politicians own assets abroad. So I think there is room for improvement and I think the Anticorruption Commission wants to improve the efficiency of its work. The FATF has really put pressure on the global financial industry – banking, insurance, securities – to really open up with regulations that have become tougher on these money-laundering issues. So for me, Thailand is following the global trend to become a little bit more tough in its anti-money laundering stance – and rightly so.
You actively support innovation, the new economy and the startup scene in Thailand. At the conference Startup Thailand in July, you pointed to data as the single most important source of opportunity for entrepreneurs. Please share your thoughts on this point in greater detail.
I think there’s great opportunity for young entrepreneurs or even big corporates, any company that wants to succeed in the new economy. You need the right business model to use data to full potential. Many companies and government agencies have plenty of data, but data are like raw oil. You know, if you keep the oil as a raw material, you’re not going to benefit much. It can’t be fuel to put into your car – you need to refine it to become petrol or you may need to add value to it to become a petrochemical product downstream. You need to collect and clean data, keep them in an efficient fashion that ensures privacy, like blockchain. You need to be able to pull data out to use when you want to, analyze them with data analytics, merge or join with other technologies – whether it’s artificial intelligence or data from a drone for agricultural surveillance that uses big data to improve the productivity of each plot of land.
There are some startups that are already using this whole big data strategy to benefit the agricultural sector. In Thailand we have a company called Ricult that has been at the forefront of using big data to drive increasing productivity of young smart farmers in many areas of Thailand. It’s a great example of how a young entrepreneur is alert to the potential of a data-driven strategy and is using data and new technology combined with drones and data analytics to come up with tools, advisory services and consultancies and really helping the farmers to become more efficient and active in using data for decision-making about what crops to grow, what fertilizer to use or what time of the year to plant and so on.
So I’m hoping data will not only help entrepreneurs but also help government agencies make better and more informed decisions, because sometimes as a senior government official you make decisions based on trust, political issues and various things. So how do you use the data to make more informed decisions that are not just based on emotional or political inclinations or bias toward pork-barrel politics? How to make it more transparent in the process of government procurement? I think government officials know they have to become more accountable to the population. So to me, using data and data-driven decision-making processes would allow them to achieve that goal in the long run.
At the same time, you referred to the law as a cause of inequality and the biggest obstacle to startups in the new economy. What legislative changes do you advocate? How would they affect the environment for blockchain-based startups?
I think the key regulations of the blockchain space come down from the Security Exchange Commission, the Ministry of Finance and the Bank of Thailand. So those three agencies need to work together in a speedier fashion to become more efficient in regulating the sector. For example, we want to have a security token offering law, but no one seems to be forthcoming from the SEC to implement STO regulations and make it legal in Thailand. I’m sure the ICO law could be amended to make it more fluid and easier to use and easier for startups to be able to raise capital in Thailand. There are also regulations to do with crowdfunding, which in the future may merge with blockchain technology, and there are ways that you can link digital assets with a fiat currency. So you could raise funding for startups with fiat currency as well as digital assets.
So I would ask regulators to leave room for more flexibility because innovations and new technologies need room for change in the near future – you don’t want too rigid a structure of a regulatory framework. Otherwise, we’re going to lose opportunities to other countries around the region, like Singapore. It doesn’t have a digital asset law. They’re not supporting cryptocurrency – the Central Bank of Singapore is not pro-cryptocurrency – but they’re not blocking it by introducing too-strict regulations. They’re leaving room for innovation, to run trials and tests. They have some sandboxes for players to start and fail and fail again. So I think it’s important for Thai regulators to have a bit more of a startup mentality, where they dare to fail and dare to try and test it before regulations come in. For example, we have a company called Grab with a taxi or ride-hailing application. Now, Grab should be regulated because many people use it, but Grab is still technically illegal. This is not good because it’s unfair for Grab to be competing with licensed taxi drivers in Thailand. You need to regulate industries that are already proven and widely used. Why don’t you regulate Grab before you regulate digital currency? You know, Bitcoin, Ethereum, whatever. Only around 600 thousand people will trade it, but maybe millions of people use Grab. Or look at Airbnb, for example. You let Airbnb, Agoda, Booking.com take a big chunk of revenue in the tourism industry in Thailand, but you don’t regulate those guys, who are digital companies. The regulations have to be fair for digital companies operating in Thailand.
In the future, I’m sure there will be giants in the blockchain space that will come to our country, but to me fairness is important. And lastly, it’s important that startups are able to compete with traditional big companies because at the moment sometimes the government operates state-owned enterprises and, with the best intentions, competes with the startups and new companies unintentionally because they think they can do everything themselves. Sometimes the private sector gets crowded out by the public sector. The government and state-owned enterprises need to stop competing with the private sector and companies to compete efficiently among themselves. The government needs to stop being both regulator and operator. This hurts startups and blockchain companies. To give you an example in the digital asset area, there are many companies that want to set up exchanges. The Stock Exchange of Thailand should not do the digital asset exchange itself but should help find partners to nurture the talent and to enable young startup companies. There are two very capable companies. One is called Satang Pro, with the SATCoin as well, and the other is Bitkub. Instead of doing everything itself, the Stock Exchange should do more to allow young startups like these to be successful and prosper. Regulations need to be more vibrant for open, free and fair competition.
Read the first part of this three-part interview with Prinn Panitchpakdi here.
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