A source says the Revenue Department will propose the cabinet impose a 10% withholding tax on dividends from investment in digital currencies.

A possible 10% capital gains tax on investment gains in cryptocurrencies will seek cabinet approval today, says a source at the Finance Ministry.

The Revenue Department will propose the cabinet amend the Revenue Code to pave the way for the tax-collecting agency to impose the 10% capital gains tax from investment gains in digital currencies, the source said.

The tax is part of a royal decree to comprehensively regulate cryptocurrencies and initial coin offerings (ICOs).

The dividend tax on equity investment will be applied to digital tokens, the source said.

Deputy Prime Minister Somkid Jatusripitak said last week the government would try its best to issue the new law to regulate ICOs and cryptocurrencies this month.

Virtual coins will be classified as digital assets, not currency, so the royal decree will empower the Securities and Exchange Commission (SEC) to regulate all aspects of virtual coins.

There are three types of ICOs: asset-backed, securities-backed and utility tokens. Utility tokens let investors purchase a company's products or services; asset tokens enable investors to acquire rights in assets such as bullion or properties; and securities tokens allow investors to obtain rights in revenue- or profit-sharing without engaging in day-to-day operations.

Rapee Sucharitakul, secretary-general of the SEC, said recently the regulations must set standards for information disclosure and transaction reporting, while system security, transaction objectives and utilisation of proceeds arising from ICOs would also come under the regulatory framework.

The regulatory framework will cover cryptocurrencies in several areas, including investor protections and how cryptocurrencies have sometimes been used as a medium for money-laundering, tax avoidance and Ponzi schemes, he said.

Adisak Sukumvitaya, chief executive at Jay Mart Plc, said he has not been informed about this withholding tax on cryptocurrency investment. It is up to the government to define what cryptocurrencies are and whether they are classified as securities or utilities, said Mr Adisak.

"Personally, I think the regulator should announce a clear picture for the cryptocurrency regulatory [framework] at one time rather than gradually [unveil] the framework in bits and pieces," he said.

Arnat Leemakdej, professor at Thammasat Business School, said this tax could be deemed as a capital gains tax because ICOs have no dividend as profit made from cryptocurrency trading is not dividend profit.

"Those who trade cryptocurrencies could be taxed and such taxation has already started in the US," said Prof Arnat.

Traders could seek to engage in cryptocurrency trading overseas, but they could be subject to money laundering liability once they repatriate such gains into Thailand, he said. Profits earned from cryptocurrency trading is likely to be parked abroad by wealthy investors, said Prof Arnat.

This tax could be considered "shooting two birds with one stone" by seeking a way to generate revenue for the state and obstruct the trend of cryptocurrency speculation, he said.

In related news, a royal decree on cryptocurrency supervision will be forwarded for cabinet consideration today, with three main asset categories in the regulatory framework, namely cryptocurrencies, digital tokens, and assets in the electronic format, said the source.

The SEC and Bank of Thailand will supervise these digital assets, said the source, without providing further details.

A definition of traders will also be designated for classification, said the source.