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"

Crypto-Lawyers Aren't Impressed With the Token Taxonomy Act

Colin Muller

Many attorneys working in the cryptoasset industry are concerned that proposed US crypto regulation, designed to provide clarity to the industry, could be even “less clear” than the cumbersome sercurities laws already in place.

The subect of this criticism is the Token Taxonomy Act (TTA), the recently re-proposed piece of legislation aiming to clarify the legal environment in which the cryptoasset industry will operate in the US. Specifically, the bill would add an amendment to 15 U.S.C. 77b(a), or the Securities Act of 1933, defining a “Digital Token” under US federal law.

The responses came in recent days in the form of tweet storms from Jake Chervinsky and Caitlin Long (among others), both American attornies who work in the industry.

The TTA’s specific objective is to exclude eligable digital assets from the possibility of being classified as securities, a kind of financial product that is highly regulated in the US and many other countries. In the US, the infamous Howey Test - first elaborated during a 1946 legal case - is used as a benchmark for determining whether or not something is a security.

Are Cryptos Securities?

The above question has plagued the nascant cryptoasset industry in the US for quite some time, and caused regulatory uncertainty which has probably had some chilling effect in the past year or so.

The US Securities and Exchange Commission (SEC), the body charged with dealing with securities regulation, has been firing shots in 2018, most notably by charging the creator of the decentralized ERC-20 exchange EtherDelta with illegally operating a securities exchange (namey, the ERC-20 tokens) - forcing him to settle and pay $400,000 in disgorgements and penalties late last year.

Crypto-Lawyers, Not Fans?

While confirming his opinon that the industry (in the US) needs better regulation, Chervinsky definitely does not see the TTA as succesful in this regard. His preliminary criticisms come within two arguments.

The first, simpler argument is that: Although the Howey Test is not easy to navigate, there does exist a vast body of legal precident on it, which took decades to build. He seems to suggest that it can be worked-with in application to cryptoassets.

His second criticism is that the TTA seems woefully hazy in how it defines digital tokens, perhaps presenting an even more uncertain definition than already troublesome securities law.

Caitlin Long agreed with Chervinsky that the definition of a digital token was far too imprecise, but also pointed out that the TTA could heap on additional harm by giving the SEC yet more remit to crack down on crypto projects.

This is the case because the TTA still affords the SEC an authority of exemption to the law change, and to issue 90-day notices for digital token project to shut down their operations.

Long publically mused as to the outcome of such an exemption, saying on Twitter: do you think that's going to play out??? [...] If I'm the SEC, I send notices to pretty much every #utilitytoken project.

Caitlin Long

Not stopping at the exemption, Long points out that the bill includes a “Preemption of State Law” clause, which would give the federal government priority in overruling any US states’ own esoteric definitions of ditital tokens - forcing them to accept the federal government’s definition rather than their own. This, Long said, is “probably unconstitutional.”