Thailand’s Financial Regulator Announces a Regulatory Framework for ICOs

Siamak Masnavi

According to the Bangkok Post, Thailand's financial regulator, the Securities and Exchange Commission (SEC), has released a regulatory framework for issuing and selling tokens through initial coin offerings (ICOs) that will be effective from 16 July 2018.

When the Thai SEC held a focus group on cryptocurrency regulations on 21 May 2018, the hearing focused on fundraising through ICOs. The focus group decided that ICOs should only be allowed to raise funds through the national currency, the Thai Baht (THB), Bitcoin, Ether, and perhaps a few cryptocurrencies deemed to have "enough liquidity" and not associated with money laundering. ICO projects would also need to ensure that they are complying with KYC and AML rules. The ICO Portal of Thailand would not list any international ICOs. And finally, the Thai SEC would not get involved with ICOs for stablecoins, and regulations for these would instead be dealt with by the central bank, the Bank of Thailand (since there was no price volatility to worry about with stablecoins).

Here is a quick summary of the new guidelines:

  • An ICO's portal must be pre-approved by the Thai SEC.
  • ICO issuers must be Thai companies with a registered capital of at least 5 million bahts (around $150,000). The companies must have clear business plans and clear rights for digital token holders.
  • While there is no limit on how many tokens can be sold to an institutional investor, a venture capital firm, a private equity firm, or an ultra-high-net-worth (UHNWI) individuals, it is not allowed to sell more than 300,000 baht (around $9,000) worth of tokens for a single ICO to a single ordinary retail investor.
  • ICO issuers may only accept payments in Thai Baht or one of these seven cryptocurrencies: Bitcoin, Ether, XRP, Bitcoin Cash, Ethereum Classic, Stellar Lumens and Litecoin. 
  • An ICO's management structure and staff must be appropriate for business operations. 
  • An ICO is required to disclose its source code, investment prospectus, and financial statements.

Rapee Sucharitakul, the Secretary-General of the Thai SEC, made the following comment:

“The SEC is pleased to immediately discuss details with those who would like to be approved as ICO portals in order for them to be prepared for the regulatory framework. After the SEC approves an ICO portal, the token will be assessed for approval.”

 

Featured Image Credit: Photo by "Michael Rehfeldt" via Flickr; licensed under "CC BY 2.0"

U.S. SEC Punishes Russian ICO Rating Agency

The U.S. Securities and Exchange Commission (SEC) announced on Tuesday (August 20) that it had charged Russian ICO rating agency "ICO Rating" for "failing to disclose it was paid to tout digital assets."

The SEC's press release says that ICO Rating had "agreed to pay $268,998 to settle charges that it failed to disclose payments received from issuers for publicizing their digital asset securities offerings.  "

According to the SEC's cease-and-desist order, between December 2017 and July 2018, ICO Rating created research reports and assigned ratings for various crypto tokens that were "securities", and this content was published on its website (icorating.com) and on its social media channels. 

The SEC alleges that although ICO Rating described itself as “a rating agency that issues independent analytical research,” it did not provide disclosure about the fact that it was paid by certain issuers whose ICOs it had rated.

Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, stated:

The securities laws require promoters, including both people and entities, to disclose compensation they receive for touting investments so that potential investors are aware they are viewing a paid promotional item. This requirement applies regardless of whether the securities being touted are issued using traditional certificates or on the blockchain.

The SEC's order says that "finds that ICO Rating violated the anti-touting provisions of Section 17(b) of the Securities Act of 1933."

Although ICO Rating did not admit or deny the SEC's charges, it agreed "to cease and desist from committing or causing any future violations of these provisions, to pay disgorgement and prejudgment interest of $106,998, and a civil penalty of $162,000."

Although the ICO Rating website seems unavailable at press time (13:45 UTC on August 21), a cached copy of its website seems to suggest that it has been updated to include the following statements:

"ICORating receives monetary compensation from the rated entities for completing the ratings reports available on iсorating.com and/or for listing their projects on icorating.com. However, rated entities do not have the opportunity to approve ratings reports before the reports are pubIished by ICORating, nor do rated entities have the opportunity to edit or remove ratings reports after they are published by ICORating. ICORating does not endorse or recommend any of the projects that are rated or listed on icorating.com. This site cannot substitute for professional advice and independent factual verification. ICORating does not provide investment, financial, or legal advice."

Featured Image Credit: Photo via Pixabay.com