Advocates of cryptocurrency trading say rigid laws and regulations will cause ICOs with good prospects to flee abroad.

Crypto enthusiasts and issuers of initial coin offerings have asked the Finance Ministry to delay or waive the capital gains tax to be imposed on ICOs and cryptocurrency trading, aiming to assist the fund-raising process for startups domestically.

The hope is that the Revenue Department will consider a tax policy that helps support the digital asset ecosystem and ensure greater competitiveness compared with regional markets, said Thuntee Sukchotrat, chief executive of JIBEX, a cryptocurrency exchange owned by JIB Computer Group Co Ltd.

Tax could be an obstacle for startups and the fund-raising process, given that startups planning to raise funds in Thailand could opt to look at other places because of stringent regulations here, Mr Thuntee said.

He said JIBEX still plans to launch its cryptocurrency wallet service this month and cryptocurrency trading in June, with the exchange adhering to forthcoming ICO regulations.

Operators of cryptocurrency e-wallet service have to apply for a licence from the Securities and Exchange Commission (SEC) if the e-wallet doesn't use baht for cryptocurrency trading, Mr Thuntee said.

Other e-wallet companies operating services in baht are required to have a minimum registered capital of 200 million baht and must apply for a licence from the Bank of Thailand, he said.

"I think that financial and investment literacy will be the most important factor for investor protection," he said, "while startups and technology companies [should be able to] raise funds from the Thai market, otherwise we will lose good ICO transactions to other markets."

Investors who make digital-asset-related trades will be liable for a 7% value-added tax (VAT), on top of the 15% withholding tax on capital gains and returns from such investments, once the new law is enforced.

The series of levies is designed to discourage people from speculating in digital assets. But retail investors will be exempt from paying the VAT if they trade digital assets through exchanges.

In March, the cabinet approved in principle the drafts of two royal decrees, one to regulate digital-asset-related transactions and another to amend the Revenue Code to let the tax-collecting agency impose levies on digital assets.

Jirayut Srupsrisopa, a blockchain expert and co-founder of coins.co.th, said ICOs could help startups raise funds.

The regulations should be flexible or be amended to fit with the changing situation and environment, Mr Jirayut said.

Rigid laws and regulations will cause ICOs with good prospects to flee abroad, he said, and investors will opt to trade on global cryptocurrency exchanges whereby they can convert the baht to other digital tokens or currencies that have no tax obligation.

Only a handful of small-scale ICOs and retail investors will be investing in the domestic market if such stringent regulations are imposed, he said.

"Tax collection should align with specific assets because digital tokens differ in terms of asset value," said Bhume Bhumiratana, a technology consultant of the SEC and the Thai Fintech Association. "It is hoped that the Finance Ministry and the Revenue Department will consider issuing another law to delay the implementation of digital asset tax."

Regarding the imminent ICO regulations, the SEC regulatory framework will cover the ICO issuing process, ICO portals, cryptocurrency exchanges, brokerage firms, dealers and cryptocurrency e-wallet, Mr Bhume said. Most of these operators will have to apply for new licences from the SEC.

A draft version of a royal decree regulating transactions related to digital assets will grant issuers of ICOs 90 days to inform the SEC of their plans before the law takes effect.

"At present, we still cannot give details of the regulations until the new law is approved and announced in the Royal Gazette, Mr Bhume said. "We will have to see what will be retained and omitted from the original draft."

In terms of principle, the SEC will likely supervise all types of ICO offerings and require issuers to disclose business models and future operations, he said.