A dedicated regulatory sandbox will help crypto firms in Thailand to experiment with the development of new digital asset services.

Thailand’s Securities and Exchange Commission (SEC) launched the Digital Asset Regulatory Sandbox on Aug. 9. The regulator welcomes interested parties to participate in the experimental project with their crypto-related services.

A regulatory sandbox is a framework set up by a financial sector regulator to allow private firms to conduct small-scale, live testing of financial and tech innovations in a controlled environment under the regulator’s supervision.

Thailand’s new sandbox project aims to test cryptocurrency service implementations, as the country’s financial authorities have been shifting to a more crypto-friendly regulatory approach lately.

To participate, an organization must meet certain criteria. The eligible digital asset-related service providers include digital asset exchanges, brokers, dealers, fund managers, advisers and custodial wallet providers.

The regulator will consider business aspects like capital adequacy, work systems, management structure and other conditions to ensure that prospective sandbox participants are well-suited to provide services within the given framework.

The sandbox participants must incorporate their innovations into the development of digital asset services in the Thai capital market or must participate in a sandbox of the money market regulatory agency, noted the SEC.

The sandbox period for a particular project is expected to last one year from the approval date. However, the participants may request an extension for their service testing period upon expiration of the sandbox.

Despite a crypto-friendly stance, the SEC of Thailand protects Thai crypto investors with stringent crypto custody rules obliging virtual asset service providers to improve their risk management policies.

The country is also exploring the central bank’s digital currency (CBDC). The first experiments with the centralized token happened within the Central Bank of Thailand’s retail pilot project.

Later on, the country announced a plan to conduct a 500 billion baht ($13.7 billion) digital token payout to 50 million lower-income citizens, aimed at encouraging them to spend in their local communities. The registration process has already started. At the same time, the uncertain legal status of such digital wallet payments, not being legal tender, and existing restrictions on digital cash usage, attracted criticism from local senators and economists.