Thailand’s Securities and Exchange Commission (SEC) on Thursday (July 5) released its regulatory framework for creating and trading digital tokens through initial coin offerings (ICOs). The regulations will come into effect on July 16.
It also announced that the ICO portal process and outlined the rules and fees that will apply to businesses wishing to operate as a digital token exchange, broker or dealer.
ICO portals’ responsibilities
ICO issuers will have to be approved by ICO portals, which themselves must be Thailand-based companies, with a minimum of 5 million baht in registered capital, that have been approved by the SEC.
ICO portals will be required to evaluate the soundness of ICO issuers’ business plans and the distribution structure of digital tokens, as well as auditing issuers’ source code to check that it matches the information they have declared.
ICO portals will also be required to identify the status, identity and risk-taking ability of investors.
The SEC said that it expects about 10 companies to apply for approval as ICO portals and will begin assessing ICO issuers’ digital token sales once the portals have been approved.
Half of the likely candidates for ICO portals are expected to be cryptocurrency exchanges, with the rest identified as brokerage firms and dealers.
ICO portals must also receive approval to conduct digital asset business from the Finance Ministry.
ICO issuers must also be companies established under Thai legal jurisdiction and have clear business plans that fully detail the rights of digital token holders.
Issuers will also be required to disclose their source code, investment prospectus and financial statements.
Fees and investment caps
The upfront fee for digital exchanges is 5mn baht, which is separated into 2.5mn each for token distribution and cryptocurrency operations. Brokerage firms and digital asset dealers will be charged a fee of 2.5mn and 2mn baht respectively.
Investment in a particular ICO will be capped at 300,000 baht (US$9,050) per person for retail investors or no more than 70% of total value of offered tokens.
However, ultra-high net worth investors, venture capital firms and private equity funds will have no limits on the amount they invest.
According to the Bangkok Post, ICO issuers will only be allowed to receive payments for their ICO tokens in baht or one of seven approved cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, Ripple and Stellar.
SEC urges caution for ICO investors
SEC secretary-general Rapee Sucharitakul told the Bangkok Post that “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,”
“Despite the regulatory framework’s standardization of ICOs and enhancement of investors’ protection against fraud, an approved sale of digital tokens does not guarantee the success, price or return from fund-raising projects. Investors can still experience losses or limited choice in token swaps, so investors should study information thoroughly and accept investment risks before making an investment,” warned Mr Rapee.
Taxes and annual fees
In March, Finance Minister Apisak Tantivorawong said the finance ministry will impose a 15% withholding tax on gains from digital tokens and cryptocurrency trade which can be credited against an individual’s full-year income tax bill.
There will also be a 7% value-added tax, but general investors will be exempted, he said.
All market participants, including ICO issuers, digital exchanges, brokers and dealers involved with digital asset transactions are required to apply for licenses with the SEC before Aug 14.
Unauthorised sellers of digital tokens, as well as anyone conducting unauthorized seminars to solicit cryptocurrency investment, will face a fine of no more than twice the value of the digital transaction or at least 500,000 baht. They could also face a jail term of up to two years.
The annual fee for digital exchanges will be charged at 0.002% of their trading volume, with a minimum fee of 500,000 baht and a maximum fee of 20mn baht.
Brokerage firms’ annual fee will be charged at 0.001% of their total trading volume, with a minimum of 250,000 baht and maximum of 5mn.
Centralised exchanges are required to have 50mn baht of registered capital and decentralized exchanges must have 10mn.
Brokers must have 5mn in registered capital unless they are solely involved with sending trading orders, in which case they must have 1mn.