Crypto security is slowly but continuously gaining popularity in the business world including that of Thailand. The country, like in many countries in the region however, currently does not have any laws that would clearly regulate activities on security token offerings or STOs. With this, the Thai Security and Exchange Commission has recently released a statement wherein it mentioned two existing laws that may help govern or regulate crypto security in the country in lieu of fit-for-purpose legislation.
Digital Asset Act
The Digital Asset Law was formally enacted on May 14, 2018. It was Thailand’s response to growing interests and activities on digital assets and cryptocurrencies. The said act was aimed to regulate the trading of digital assets. Further, the law was also designed to aid Thailand’s revenue collection by imposing taxes related to sales of digital assets, similar to what is being enacted upon on mainstream assets sales and purchases of publicly listed companies.
Basing on the public statement of the Thai SEC, STO trading may be governed by the Digital Asset Act if the system in raising funds is done “in the same manner as for the ICOs” or initial coin offerings, the latter of which was the main purpose of the law when it was enacted last year.
Security and Exchange Act
On the contrary, if the STO has “similar condition to other fund-raising securities,” the same circular reiterated that it may be governed by the SEC Act as it may go through “similar processes to those with the IPOs.”
Indeed, crypto security may be recent as it is popular and innovative that Thailand is having a hard time keeping at pace for financial activities such as this. In the absence of a matter-of-fact law, Thai government agencies such as its SEC are reminding current and would be STO firms that current laws are in place, are applicable and are meant to be complied with.
STO Activities and the World Market
Thai companies opting to conduct STO activities internationally must take prudent steps when undergoing what can be considered as a pioneering venture as “an STO firm with Thai investors” may be considered to have had actively circumventing government regulations on fund-raising processes and may be penalized under the Digital Asset Act.
In summary, there can be severe implications if companies engage in STO using processes that may be similar to procedures currently being regulated by the Security and Exchange Act and the Digital Asset Act. If found guilty of violating the applicable laws, fines of 1,000,000 Baht may be imposed. More than the monetary penalty, imprisonment of not more than 5 years may also be added.
Rather than taking the adventurous route, companies or investors must strongly consider seeking sound legal advice from a licensed Thai fintech lawyer. This is a prudent step, a simple one but it will protect the company or the individual from a possible lawsuit by government regulators and avoid being penalized with prison terms and or monetary fines.