Financial Crime World

Lao People’s Democratic Republic Regulates Cryptocurrency Transactions

In a move to crack down on financial crime, the Government of Lao People’s Democratic Republic has issued a decision regulating digital asset transactions using blockchain technology.

Background

The Ministry of Technology and Communication (MOTC) released Decision No. 888/MOTC dated November 9, 2021, providing regulatory guidance on digital asset transactions in the country. The move comes as cryptocurrency prices soar, with Bitcoin reaching a record high of over $68,521 earlier this month.

Classification of Digital Assets

The decision classifies digital assets into two categories:

  • Cryptocurrency: Electronic data created to be used for specific purposes.
  • Digital Tokens: Electronic data created to be used for specific purposes.

Key Provisions

The decision also identifies the distinction between investment tokens and utility tokens, but has not provided definitive details on how investment tokens will interact with applicable investment promotion or securities regulations.

  • The government has authorized six Lao companies to undertake cryptocurrency trade and mining operations relating to Ethereum, Bitcoin, and Litecoin.
  • Operators must obtain a license from the Ministry of Science and Technology, enter into a power sale and purchase agreement with Electricite du Laos, and secure approval from the Ministry of Energy and Mines.
  • The regulatory framework aims to bring exploited cryptocurrencies under regulated Cryptocurrency Sale and Purchase Centers authorized by the Bank of Lao PDR.

Implementing Secondary Market Participants

The decision provides guidance on implementing proposed secondary market participants in Lao PDR, allowing cryptocurrency sale and purchase transactions to occur in Lao KIP through specific over-the-counter (OTC) service providers. Additionally, it deals with electronic know-your-customer (e-KYC) and identification requirements for customers wishing to transact in digital assets within the Cryptocurrency Sale and Purchase centers.

Rationale

The move is seen as a major step towards regulating the cryptocurrency market in Lao PDR, which has been gaining popularity among retail investors and adopters. The government’s decision aims to ensure that digital asset transactions are conducted in a transparent and secure manner, while also preventing financial crimes such as money laundering and terrorism financing.

Conclusion

The Lao People’s Democratic Republic’s decision to regulate cryptocurrency transactions is a significant step towards creating a robust regulatory framework for the country’s growing cryptocurrency market. The government’s efforts aim to ensure that digital asset transactions are conducted in a transparent and secure manner, while also preventing financial crimes.