The Royal Decree on the Digital Asset Businesses B.E. 2561 (2018) (Royal Decr...

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Thailand Regulates Initial Coin Offerings and Digital Asset Businesses

May 15, 2018
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The Royal Decree on the Digital Asset Businesses B.E. 2561 (2018) (Royal Decree), which came into force on 14 May 2018, regulates the offering of digital tokens to the public and digital asset business operators.  The Securities and Exchange Commission, Thailand (SEC) has also drafted regulations to be issued under the Royal Decree.  The regulations are expected to be issued in June 2018.  The Royal Decree will not apply to investments in digital assets overseas.

Under the Royal Decree, digital assets comprise cryptocurrencies, digital tokens and any other electronic data unit that may be specified by the SEC.  The Royal Decree provides the following definitions of the terms “cryptocurrency” and “digital token”:  

The Royal Decree does not regulate digital assets themselves; rather, the Royal Decree regulates the offering of digital tokens to the public and the operation of digital asset businesses.

Offers of Digital Tokens to the Public

Only private and public companies that are incorporated in Thailand are permitted to offer newly issued digital tokens to the public.  Offerings to retail investors will be subject to certain limitations such as maximum subscriptions of THB 300,000 (about SGD12,400), while other categories of investors will be able to invest without limitation.  Issuers must obtain approval from the SEC before the offerings by filing a registration statement and draft prospectus with the SEC.  However, the SEC may exempt certain types of digital tokens from the approval requirements.

In addition, every offering must be carried out via an ICO Portal recognised by the SEC.  An ICO Portal is a private or public company incorporated in Thailand with a minimum paid-up capital of THB 5 million (about SGD207,000).  Each ICO Portal is tasked with the evaluation of proposed ICOs to determine the characteristics of the digital tokens, qualifications of the issuers, and the accuracy of the registration statements, draft prospectuses and any other information disclosed through the ICO Portal.

Digital token issuers will also be subject to ongoing obligations, which include disclosure of financial information and information about the source code used to create the digital tokens.

Digital Asset Business Operators

Digital asset businesses comprise digital asset exchanges, digital asset brokers, digital asset dealers and any other businesses as designated by the Minister of Finance in Thailand.  Any entity that intends to operate a digital asset business must first obtain approval from the Minister of Finance in Thailand through the SEC.  The entities must meet certain requirements imposed by the SEC.  Examples of the requirements include having sufficient capital and implementing measures to tackle potential cybersecurity issues.

Approved digital asset business operators will also be required to conduct Know-Your-Customer and Customer-Due-Diligence checks and implement measures to prevent money laundering.  Existing operators before the new legislation came into force have a transition period till 14 August 2018 to make an application to the SEC if they wish to continue their operations.  The existing operators can continue their operations whilst their applications are being processed.

Sanctions

The Royal Decree imposes criminal and civil sanctions against offences such as unauthorised offerings of digital tokens and unauthorised operations of digital asset businesses.

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