In an exclusive interview, Crypto Insider’s Usman Javed talks about cryptocurrency and ICO regulations in Thailand with Bhume Bhumiratana, SEC Consultant and academic. Issues ranging from the status of ICO to the criteria which classify a certain asset as a security get tackled to better understand how the government of Thailand views this novel sector.
Could you elaborate on the regulatory landscape of blockchain and crypto in Thailand?
Thailand recently, in May of this year passed a law. Currently the entire process regarding virtual asset has regulation all the way from issuance to public crowd sale to setting up exchange to broker service dealers, basically anything relating to selling cryptocurrency or virtual assets. We believe that the regulation is a good balance between what technology can do and what the regulator needs to do. Anyone involved in sector, should consult lawyers and regulators to figure out what they can and cannot do because there is regulation and there a lot of exceptions.
What about the coins themselves, such as bitcoin, ether or ripple? Are they regulated as securities as payments or as currency?
We have a couple of weak definitions for them: so a few of them may be classified as crypto currencies meaning they are intend to be used for means of payment or means of exchange. We generally don’t regulate the asset itself, but regulate the activities around it. So, it really depends on what you intend do with it. For example, if you are a business and buy and sell a bitcoin, the bitcoin itself is not regulated but you might be.
What about ICOs – are they regulated?
Yes, so if you want to do an ICO to fundraise, basically you do need to register with SEC and get permission from the Commission. There are exceptions of course. For example, if the fund raising is limited to institutional investors or accredited investors. However, if an ICO involves fundraising from the public then you do need to get permission from the SEC.
How burdensome is the registration process?
It is as easy as we can make it. The requirement is fairly simple, though the process itself can be difficult depending on who you are. We are going to require that you basically declare all your risk. This is important for investor protection. There are businesses with enormous debt and there are ones with high profit margins. You have to prove to the SEC you really are who you claim to be, you pass the due-diligence test and you have the competency to deliver on your promises.
Have you come across any unregulated ICO’s being done in Thailand?
Yes, and SEC has to constantly go through them and tell them that what you are doing is illegal. Please come talk to SCC first. There is lots of scam and lots of people who don’t know the law.
And if they don’t, then the SEC shuts them down?
Yes. In Thailand, if you try to fundraise from those type of people, SEC is going to try and stop you, unless you go through the right door. The goal is to protect investors, there are lots of scams as you can tell, all around the world in every country, and the regulators need to be proactive in protecting investors.
What about security token offerings?
Security Token offerings are a little bit harder because when we created digital asset law we decided that we created an exception saying that any security is not covered under this law because we already have a securities law and we don’t want the two laws to conflict.
What is classified as security in Thailand?
Security in Thailand is essentially a list of 9 things. These 9 things are very specific. For example, equity is very specifically described, similarly debt is very specifically defined. If what you want to create falls within under one of those 9 definitions, then you have to go with the securities law. If you behave similar to them but not exactly the same, then you may come under the regulations governing the ICO, we call those investment token. We don’t refer to them as security tokens because the securities law in Thailand is not broad like Singapore’s collective investment scheme, or US Howey test.
In Thailand, a security is a very specific list of things and so a lot of tokens may not fall into them. For example, a lot of tokens, that offer dividends or offer profit share, are not classified as securities but as investment tokens. So really in Thailand the concept of security token offering really has to be discussed in two domains. If the token is one of those 9 things, security law applies – it is an old process, it is very antique, takes a long time, lots of cost. The SEC is going to go through and review it to see if it can also accommodate for startups. But if your token is not falling into one of those 9 buckets then it’s back to ICO law.
The traditional process, is that a prospectus offering?
Yes, with a lot of business registration requirement, you have to be a profitable company for at least a couple of years before you issue any kind of securities. You can’t just come register your company today and issue securities tomorrow. That doesn’t exist in traditional securities space.
Considering this gap, do you think that there is an incentive for companies now, to avoid the 9 categories and go via the route of investment schemes?
It really depends right on what you want to do. Right now, the digital asset law is much more flexible than the securities law so if you are looking at the ease of issuance then of course, but the market there is less mature so you probably have a less number of investors focusing on your asset. The SEC is going to try to fix this gap but it will take some time. The Securities Act is a very important act and changing it is going to have broad consequences. Therefore, it is going to takes a little bit of time.
How has been the ICO market in Thailand so far and where do you see it in the future?
We had a number of ICOs, several dozens, so not like hundreds, but a lot for a country of this size. Given that the global market ICO is almost practically zero, I think the entire industry is undergoing transformation and change. People realize now that global fundraising in the way we used to do with ICO doesn’t make a lot of sense because there are too many scams and there are other issues such as price volatility, etc. While the industry will change, I think ICOs might stay for a while. For example, we may see a trend towards issuance of tokens in exchange for stable coins.
With the development so far, do you think SEC has been successful in regulating the industry?
I am fairly confident that the Securities and Exchange Commission Thailand understands this space as good, if not better, than any other regulator in the world. The SEC is working hard to keep up with the ecosystem and the industry and it has been successful so far. We have practically received no resistance and the players in the industry are supportive of the regulatory steps the SEC has taken so far. The only people who have resisted us are basically scammers. I think what we have done so far is fairly balanced and we hope to continue doing so in the future.