The rise of cryptocurrency has placed the decentralised system of finance in the spotlight with the recent record high in the price of Bitcoin (“BTC”) reaching more than USD$68,521 earlier this month. Take Southeast Asia for example with the region experiencing resounding impact of this digital phenomenon especially in the uptake of retail market participants and adopters. The Southeast Asian crypto world has amassed itself a somewhat contagious popularity, even so that governments are beginning to show interest and scrutiny in the major factors that drive and regulate this system, including the Government of Lao PDR.
Decision on Digital Asset Transactions
The Ministry of Technology and Communication (“MOTC”) recently issued the Decision on Digital Asset Transactions No. 888/MOTC dated 9 November 2021 (the “Decision”) which provides regulatory guidance in relation to digital asset transactions utilising blockchain technology in Lao PDR.
Under the Decision, “Digital Assets” are classified as either (i) Cryptocurrency; or (ii) Digital tokens, defined as electronic data created as a system of coins to be used for specific purposes by the creators of the coins or for determining the rights of any persons in the receipt of goods or services or co-investment.
The Decision importantly identifies the distinction between “Investment Tokens” and “Utility Tokens”, however has not yet provided definitive details relating to how such Investment Tokens may interact with applicable investment promotion or securities regulations.
Cryptocurrency Exploitation Transactions
Following the recent Lao PDR government announcement authorising six Lao companies to undertake cryptocurrency trade and mining operations relating to Ethereum, Bitcoin and Litecoin, the Decision now deals with the standards and conditions applicable to the exploitation of cryptocurrency transactions. Notably cryptocurrency exploitation transactions are reserved for Lao nationals and the implementation of a cryptocurrency exploitation facility shall utilise not less than 10 megawatts of electrical power, to be supplied by Electricite du Laos.
The Decision aims further regulates cryptocurrency exploitation transactions whereby operators must first obtain a license from the MOST, have entered into a power sale and purchase agreement with Electricite du Laos, including the approval by the Ministry of Energy and Mines. The intention of the regulatory framework under the Decision in relation to “exploited cryptocurrencies” shall be brought into certain Cryptocurrency Sale and Purchase Centers authorised in Lao PDR as regulated by the Bank of Lao PDR.
The Decision provides further guidance with respect to the implementation of proposed secondary market participants in Lao PDR, with the intention of cryptocurrency sale and purchase transactions to occur in Lao KIP within specific OTC service providers. The Decision also deals with certain e-KYC and identification requirements for customers wishing to transact in digital assets within the Cryptocurrency Sale and Purchaser centers.