Bitcoin was not ruled illegal. The Bank of Thailand has no legal power. A few senior members of the bank saying something is illegal does not make it illegal. The Foreign Exchange Administration and Policy Department are merely departments of the bank, not branches of the legislative government.

In other words the title "Bitcoin ruled illegal in Thailand" should be changed to "Bank of Thailand wishes Bitcoin to be illegal", or "Trading suspended due to Bank of Thailand advisement" which is the original title.

The key factor to the success of any currency is liquidity. You are only willing to put money in if you can take money out. If the government of Thailand says it is illegal to transfer money in or out - that will effect liquidity in Thailand. How will this be enforced? First, banks and reputable institutions doing business in Thailand will not be allowed to trade with companies involved in bitcoin exchange. Of course, this will not completely stop currency conversions, but it will act to decrease liquidity which will act to discourage people from putting money into bitcoins – further decreasing liquidity.

This is definitely bad news for bitcoins.

[Edit] Will a down-voter kindly explain to me how this is good news for bitcoins? Maybe liquidity is not important for a currency?

Thailand's "Foreign Exchange Administration and Policy Department" has advised that, quoting from the OP: "the following Bitcoin activities are illegal in Thailand: buying Bitcoins; selling Bitcoins; buying any goods or services in exchange for Bitcoins; selling any goods or services for Bitcoins; sending Bitcoins to anyone located outside of Thailand; receiving Bitcoins from anyone located outside of Thailand."

We can get a sense of how successful and lasting this edict will be with a simple mental experiment: replace "Bitcoin" with "US Dollar." The edict thus becomes: "the following US Dollar activities are illegal in Thailand: buying US Dollars; selling US Dollars; buying any goods or services in exchange for US Dollars; selling any goods or services for US Dollars; sending US Dollars to anyone located outside of Thailand; receiving US Dollars from anyone located outside of Thailand." How successful could that edict be, and how long could it last, realistically?

Foreign exchange controls are normally difficult to implement and enforce. Control of Bitcoin -- a decentralized, optionally anonymous, virtual commodity -- should be even more difficult.

I suspect a lot of Bitcoin trading volume in Thailand will simply go underground.

    - Buying Bitcoins
    - Selling Bitcoins
    - Buying any goods or services in exchange for Bitcoins
    - Selling any goods or services for Bitcoins
    - Sending Bitcoins to anyone located outside of Thailand
    - Receiving Bitcoins from anyone located outside of Thailand

Maybe they got tired of all those bitcoin users abusing the Thai baht symbol.

It will be interesting to see how actively they enforce this new ruling. Given that paedo-tourists are effectively given a free pass in Thailand I find it odd that Bitcoin would work it's way to the top of the agenda.

I have a different explanation. Like many corrupt Asian governments (and I have lived in Asia for 10y+) they usually abide to this principle: if you discover some new way to make money, we either have to make money too out of it and without doing anything, or you have to stop. So in this case my theory is that they looked at it and like most computer illiterate governments they thought to stop it until they understand how the game works and start making money out of it themselves. I mean personally. Expect pretty soon to see some new Bitcoin service to appear in Thailand, with some weird license from the government, and founded (probably indirectly) by some corrupted member of the government or someone from their relatives.

Bitcoin is more than a virtual currency or miners running rigs. It's the first self-sufficient, decentralized, monetary system that renders 3rd party entities like banks obsolete.

At the very least it's an intriguing concept in relation to sociology, economy, and new forms of governance. It's a paradigm shift, and as such, it will meet a lot of misunderstanding and opposition. Particularly from those whose power is at stake - banks and governments.

As once, the idea of equality and democracy shook the kingdoms during the Enlightenment, the idea of Bitcoin, if you look closely, is not far from it.

Yeah, well, prostitution is technically illegal in Thailand too.

Riddle me this.

How does banning bits in any way shape or form, prevent their transmission and storage?

Correct me if I'm wrong, but I believe it applies to any nation that the government always retains the monopoly of "issuing" a currency.

EDIT: ...which probably means that sooner or later, bitcoin will probably be outlawed everywhere.

No problem. Start an Okpay exchanger in Thailand and ppl can use it to buy coins.

Thailand is already so corrupt laws are basically meaningless there. If you get caught somehow trading coins then just bribe the cop $100 and walk away.

Bitcoin is a tool. It is useful for some things, and it is not useful for others.

Any country who prohibits, like any country who prohibits any tool, it is putting their residents at a disadvantage. By definition. In those situations where the nail is a Bitcoin, Thai people will have no hammer, but a wrench with which to bang the nail in.

The beauty of Bitcoin is it only needs to thrive in one of the 200+ countries in the world for it to achieve Proof of Concept status. And once it does that, other countries will follow, and eventually any countries who prohibit it will need to allow it to stay competitive.

And so it begins. Thailand is a drop in the ocean, once the US and other countries get on-board then the success of Bitcoin is only going to be further propelled. I presume most Bitcoin transactions will go underground and given their anonymous and decentralised nature, good luck enforcing laws like this or even being able to draw conclusive proof of Bitcoin usage to a particular entity (unless you find other proof like receipts, emails or having the Bitcoin client on your computer).

How will this work in practice?

I am not 100% sure, but this could have a lot to do with the Asian currency crisis of the 1990's.

Thailand might be more sensitive to currency issues than other countries.

They were told to float their currency on the international market and it backfired horribly in the 1990's.

I can see why they would want to be worried about currency manipulations again.

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This will not last. Why? Because by making Bitcoin illegal, Thailand will detach itself from a market worth $1bn+.

And I agree with the other comments on here which say that this will drive trade (in Thailand at least) underground.

Disclaimer: I'm bullish on bitcoin.

I wonder why isn't there even one cool country government in the whole world. We only see lame ones.

Switz might be an exception, or Iceland perhaps, but both too constrained by neighbours and political bonds.

Maybe another government called in a favor for Thailand to be the first to ban the currency? (Wild speculation.) If so, I wouldn't imagine that other nations will be long behind.

aha, so mining bitcoins in Thailand was not mentioned!

How about litecoin?