Today we’re going to take a look at cryptocurrency investing. As you may have noticed, the beginning of 2021 has been marked by the explosion of the Bitcoin price. But did you know that there are over 2400 different cryptocurrencies you can invest in?

Investing in virtual currencies, also known as digital currencies, is like investing in the stock market. Whether it’s for the long term (holding strategy) or the short term (trading strategy), investing in cryptocurrencies in 2021 is becoming more and more popular, with the arrival of promising currencies and a market capitalisation that could well rise. Themis Partner takes a look at the situation to shed light on investing and taxes in Thailand.

What is cryptocurrency?

The cryptocurrency market has a variable capitalisation which is calculated by multiplying the number of coins issued, also called tokens, by their value at the top of this market. We find of course the bitcoin whose capitalisation exceeded 1000 billion dollars in February 2021. It is difficult to talk about a ranking of cryptocurrencies as their values and capitalisations are constantly changing. Among the best known and most popular are Bitcoin (BTC), created in 2009, but also Ethereum (ETH), Tether (USDT), Ripple (XRP), Litecoin (LTC), and Bitcoin Cash (BCH).

What is important to remember is that unlike fiat or state currencies such as the dollar or Thai baht, the cryptocurrency market is decentralised, which means that all its tokens are issued via a network of computers called the blockchain. There is therefore no central authority, nor a third party organization such as a bank. This is called a peer-to-peer network. Thus the vast majority of cryptocurrencies owe their name to their network. We speak of Bitcoin network, Ethereum network etc.

Internationally, cryptocurrency investments have grown in importance in recent years, which has had a significant impact for different jurisdictions and their policy on the matter. Many countries, as well as some regional organizations, have issued laws, regulations and guidelines for this new digital asset system.

Cryptocurrency tax thailand

Cryptocurrency tax system in Thailand

Thailand has long been resistant to the idea of cryptocurrencies, banning them in the country until 2014. Thailand changed its stance in 2018 by introducing legislation governing the digital asset industry under the Emergency Decree on Digital Asset Business. In addition, an Emergency Decree on the Amendment of the Tax Code came to regulate the shares of profits or capital gains from the transfer of cryptocurrencies and withholding tax obligations.

The main purpose of the Decree on Digital Assets is to control and regulate digital assets, including cryptocurrencies, while the main purpose of the Decree amending the Tax Code is to regulate and tax the benefits and interests of digital assets.

The purchase or sale of cryptocurrency must be in cryptocurrencies accepted by the Securities and Exchange Commission (SEC) office. The SEC office periodically publishes a list of approved cryptocurrencies to be used in Thailand.

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What are the taxes on cryptocurrency in Thailand?

The Emergency Decree on Amendments to the Tax Code has incorporated two new types of taxable income including income from investment in cryptocurrencies as well as a withholding tax requirement. The types of transactions affected are the following:

➤ Crypto converted into FIAT (a legal currency backed by the government, such as USD, THB, EUR, etc.)
➤ Crypto used in exchange for goods and services
➤ Crypto exchanged for others, such as Ethereum used to purchase Bitcoin

1. Personal Income Tax (PIT)

Under Thai law, digital assets are considered intangible assets and therefore follow the general principles of personal income taxation. Thus, in Thailand, an individual’s capital gains are taxed under the progressive personal income tax at a tax rate of up to 35%. Therefore, individual taxpayers are required to include any income from the sale of cryptocurrencies when filing their annual personal income tax returns.

On the other hand, whenever the crypto-currency investment activity is carried out in a professional capacity the gains must be taxed under a different category. These explain the need for an overall analysis of the client’s personal and tax situation.

2. Withholding tax (WHT)

Also, all gains made by the cryptocurrency transaction are subject to withholding tax at 15% whether for Thai residents or non-residents. It is important to note that any withholding tax can be claimed as a tax credit against any PIT payment.

Our team of lawyers and accountants provide professional tax planning services in Thailand.

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How to invest in cryptocurrencies?

Before jumping into the purchase of such or such crypto currencies, you must study its price, the evolution of its price, its capitalization and more globally all the elements that will allow you to determine whether or not this crypto asset will be profitable for you. Don’t forget that the value of cryptocurrencies depends on supply and demand which makes this type of investment extremely risky.

It is very important to go back to one of the key points of investing in cryptocurrency: risk appetite. Crypto assets such as Bitcoin, Basic Attention Token or even Nexo all carry the risk of loss. So be prepared to lose your entire stake in the worst case scenario!

It is strongly advised to learn in detail about the functioning of the cryptocurrency financial markets, the related decentralized applications or even each of the crypto assets you wish to acquire. Entering an online community (typically on Reddit) also allows you to interact with other users and learn more about the pros and cons of investing in cryptocurrency.

Investing in cryptocurrency will then be made easier if one goes to forums and get a better insight into the opinions of investors in 2018, 2019 and 2020.

To buy cryptocurrency, several solutions are available to you:

1. Specialized marketplaces: Thai interfaces like Bitkub, Dopple Finance, Zipmex or global platforms like Binance, Coinbase, Bitfinex to connect sellers and buyers of crypto currency, which charges a commission on the transactions made. More suitable for experienced investors.

2. Peer-to-peer: since blockchain technology allows cryptocurrency to be traded without a third party supervisor, it is possible to buy Bitcoins from an individual with ease. Several websites like Paxful or LocalBitcoins allow these transactions.

3. Transaction facilitators: peer-to-peer facilitators like NowPayments, Blockonomics or Coingate  provide guidance and advice to users while offering crypto currency sales on a platform.

They allow you to access the market of several cryptocurrencies and buy them online in a few clicks but remember to ask about the transaction fees which can be very high in some cases. As for the cryptocurrency itself, think about defining your investment strategy first. Most investors practice either holding or trading.

1. The holding strategy

When it comes to investing in crypto assets, there are two strategies favoured by specialists. The first is to buy Bitcoins or any other cryptocurrency and store them in a virtual safe (it is not advisable to let your crypto assets sleep on an account created on a platform, they will always be safer on a hardware wallet). This is called a hold.

It will be up to you to decide when you will sell all, or part, of your assets in order to make a profit. The goal will be to set targets in advance, for example not to sell a crypto asset below a certain amount.

2. The trading strategy

If you are familiar with how the stock market works, there will be no secrets for you here. Regular buying and selling of crypto assets is reserved for investors who know the system and the financial markets inside out. The goal? Over a short period of time, to buy assets when its value is at the bottom of a curve (which undergoes a decline) and sell it when its value climbs.

To keep abreast of the evolution of the value of the crypto assets present on the market, investors traders have several tools at their disposal:

1. Real-time charts and data available on many websites like CoinMarketCap,

2. The news: many events can disrupt the evolution of the value of a cryptocurrency (epidemic, war, etc.).

3. The nature of the cryptocurrency: whether it is rare or common, innovative or secure, the crypto asset you wish to acquire must stand out from its competition to be profitable in the long run.

How does a cryptocurrency gain value?

In order to gain value, a cryptocurrency must meet various criteria. It must be able to penetrate the real economy: its users must be able to use this currency as their daily life.

On the other hand, this allows a degree of trust to be established, which is also important to the value of the cryptocurrency. Indeed, if a large number of users invest a cryptocurrency, its evolution is certain.

What can you buy with Bitcoins?

Some online platforms such as PayPal accept cryptocurrency as a payment method to pay for your purchases. You can also use your Bitcoins to bet on another cryptocurrency.

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Which cryptocurrency to invest in in 2021?

Between Bitcoin, Ethereum or nano, there are several thousands of virtual currencies. Find below the main existing cryptocurrencies and their market capitalisation in 2021:

Cryptocurrency invest 2021

The most popular cryptocurrencies

First and foremost, investing in cryptocurrencies is a relatively dangerous activity for your finances: there is no certainty about the gains made by any particular investment, and many buyers lose their stake. That’s why the main advice in investing like this is not to bet your entire capital on a single crypto asset.

Do you want to invest in Bitcoin or another virtual currency? Favour the most popular cryptocurrencies, which are therefore the most capitalised. At the top of the list, and no real surprise: Bitcoin.

Historically the first virtual currency created in 2008 in response to the global economic crisis, Bitcoin (BTC) remains the safest investment. With a market cap of over $145 billion at the start of 2020, Bitcoin is undoubtedly the leading currency in the financial markets.

Hot on its heels is Ethereum (ETH), the pioneer of Decentralised Finance (DeFi), which actually has more users on its blockchain than the king Bitcoin! With the rollout of the next-generation Ethereum scheduled for 2021, the crypto asset is looking to move into another dimension, and why not come and titillate its leader.

Who to complete the podium? Nano (NANO), with its many possible transactions per second, is increasingly attractive, but the hack it suffered in 2018 has severely undermined its value. Or the tezos (XTZ), which relies precisely on the security and rigour of its programme to offer investors attractive returns. Or Basic Attention Token (BAT), which surpassed 10 million active users at the end of 2019.

Of course, you’ll need to do your own research for each of these digital currencies and study the cryptocurrency price before buying Bitcoin or any other crypto asset.

What's new in the world of cryptocurrency?

Why 2021 is the perfect year to invest in cryptocurrency? The vast majority of cryptocurrencies have had their value indexed to that of Bitcoin in 2020. And, since this virtual currency has a limited supply (only 21 million Bitcoins), its value depends on the difference between its supply and demand.

It is important to understand that the increase in value of Bitcoin is mechanical: it is expected that the creation of Bitcoins (known as mining) is halved every four years, which is the time needed to mine 210,000 blocks. At its inception, miners received 50 BTC per mined block.

In 2012, the 50 BTC per block was halved to 25. In 2016, a new reduction: 12.5 BTC are delivered per mined block. As you can see, 2020 marks the third reduction, to 6.25 BTC per block. The value of Bitcoin will inevitably rise, as it did in 2013 and 2017 after the first two changes: fewer BTC mined means a rise in demand, and therefore in value.

Buying Bitcoins in 2021 could thus allow you to build a portfolio of crypto assets that will increase in value as the number of mined BTCs decreases.

Another reason to invest in cryptocurrency in 2021 is the arrival of the giant Facebook in the race. By the end of 2021, Diem (ex-Libra), the virtual currency of the Facebook group (Metaverse), should arrive to offer a means of payment already accepted by Uber, Whatsapp, Spotify, eBay… Thanks to the Calibra application, which will serve as a virtual wallet to store one’s Diems, the user can transfer money to another peer via different applications (PayPal and Lydia in particular).