Thailand’s Securities and Exchange Commission (SEC) has updated its regulations regarding public initial coin offerings (ICOs) that exhibit debt-like or infrastructure-backed characteristics. These new regulations are set to transform the landscape for digital fundraising, ensuring enhanced investor protection and risk mitigation.
The introduction of these regulations is a major move toward cultivating a more transparent and secure digital token market in Thailand. It highlights the importance of comprehensive information disclosure and aligning digital-asset fundraising practices with established financial standards. The adjustments require more collaboration between token issuers and ICO portals to comply with the developing regulatory environment.
The key features of the new regulations, which took effect on November 16, 2023, are summarized below.
Debt-Like ICOs
Debt-like digital tokens are digital tokens for which a fixed rate of return is predetermined. The rate does not vary based on the performance of the project or enterprise, but it may be supplemented by extra returns.
To ensure that investors have access to adequate and essential information prior to making informed investment decisions, and to evaluate the risk of default by the issuer, the regulation requires disclosure of the project’s creditworthiness and risk assessment factors, as detailed below.
- Project creditworthiness. Disclosures about project creditworthiness should include information about the credibility assessment of the project, which should be conducted reasonably by an ICO portal or an independent expert.
- Risk assessment factors. Disclosures should include information about the factors considered in the assessment of risks—particularly the financial capability to repay the investment project’s debt.
Infrastructure-Backed ICOs
Infrastructure-backed digital tokens are issued for investment in infrastructure assets or to earn a share of the revenue stream from infrastructure projects.
The regulations for the ICOs of these infrastructure-backed tokens have been revised to align with those for infrastructure trusts. These regulatory updates cover various aspects:
- Definition of infrastructure. The revised rules specify the characteristics of underlying assets that would be deemed infrastructure and can be referenced in these ICOs.
- Due diligence and asset valuation. The rules include stipulations regarding the due diligence processes and valuation assessments necessary for the referenced infrastructure assets.
- Trustee duties and conduct. The regulations outline the duties and conduct for the trustees involved in these ICOs, aiming to ensure adequate governance and oversight.
- Issuer asset management. The regulations also address the ICO issuers’ management of assets, aiming to ensure compliance with specific standards and practices.
