The Minister of The Ministry of Technology and Communication of Lao PDR has recently released a draft of its law to regulate crypto mining and trading in Laos.
These are the main takeaways:
There are two categories of crypto type of activity that have been approved:
- The mining of crypto currencies (such as Bitcoin, Ethereum etc…)
- The trading of crypto currencies (CEX or Crypto Exchange)
Crypto mining business in Laos
To qualify for crypto mining in Laos, the company shall be a Lao company with strong financial records. The company shall have the infrastructure to operate crypto mining. All costs related to the electricity supply and upgrade required to operate is the responsibility of the company.
The max power capacity a crypto mining company can use is 10MW. The price of electricity for crypto mining is set at 6,95 Cent USD per kWh or 5,5 Cent USD per kWh for companies that only mine during the rainy season.
Bank of Laos will have the right to audit the cryptocurrencies generated from this crypto mining activity. The currencies shall be traded through an exchange that has been approved by the Bank of Laos. If the exchange is located out of the country, all the revenue from mining shall be brought back to Lao PDR.
The license cost to practice crypto mining in Laos is USD $500,000. There is also a tax for power supply set at USD$1M for 10MW. Companies will benefit from tax exemption for the import of crypto mining equipment.
Crypto Trading business in Laos
For the companies that are interested to run a crypto exchange activity in Laos, they shall be registered as Lao companies and be financially healthy. They shall also provide a guarantee bond to BOL of 5,000,000 USD.
The company shall cooperate with a commercial bank in Lao PDR. The company shall have a cyber security framework in place to prevent robbery. Finally, the company shall put in place a customer KYC to control customer ID.
The currency exchange shall only be between cryptocurrencies and Lao KIP. During the trial phase, only two physical exchange centers will be allowed per licensed company.
The fees to run a crypto exchange business in Laos are set at 1 million USD. The company will also be entitled to a fee of 15% on every crypto transaction.
Rules and regulations related to crypto mining and trading in Lao PDR are still in the draft phase and the above content may change in the next few months. Our main takeaway is that Lao PDR is stepping cautiously in the crypto space and will carefully assess and background checks every company interested in such activity to ensure they are not involved in money laundering or criminal activities.
Welnance, the crypto company backed by Phousy Group had to cease activity a few weeks ago as Bank Of Laos was not pleased with the pace and ambition of the new crypto company. It is also likely that the flash loan attack which caused the loss of a significant amount of money caused this suspension as it was definitely a sign that the launch of the new crypto app was expedited too quickly.
Furthermore, one of our main concerns is the cost structure of operating a crypto activity in Laos which seems quite high. License fees aside, exchanging crypto with 15% taxes can be a major break to the adoption of cryptocurrencies in Laos. One of the major upsides of using cryptocurrencies is that it makes money transfer very cheap. With such a steep tax, it will be difficult for crypto exchanges in Laos to compete with Binance P2P that allows users to exchange LAK with Bitcoin, USDT, or Ethereum at a very low cost.
Finally, it is unclear how people in Laos will be able to exchange Lao Kip for cryptocurrencies and at what rate. Will there be any limit? Any proof of the origin of the funds? It is very difficult to date to exchange Lao KIP to USD through official channels. The “black” market price is very high. What will be the situation with cryptocurrencies?
As with any technology adoption, we sit with more questions than answers at this stage and it is totally normal. This is also the most exciting phase as we can only imagine what the future will be made of. What is certain is that crypto is here to stay and that Laos is doing the right move at the right pace.