Thailand Pushes Permissive Regulations as First Legal ICO Is Launched

After initially seeking to ban Bitcoin in 2013, Thailand has since developed a permissive regulatory apparatus for digital currencies and cryptocurrency fundraising methods. Thai financial services firm Seamico Securities recently announced that it has received approval from the country’s Securities and Investments Commission (SEC) to operate its subsidiary, SE Digital, as a regulated initial coin offering (ICO) portal.

In doing so, SE Digital obtained permission to launch the first legitimate ICO in Thailand, with the company announcing that it hopes to raise between 2 billion and 3 billion Thai baht (between around $66 million and $99 million) through the token sale.

Jesadavat Priebjrivat, the CEO of SE Digital, described the approval of the country’s first ICO portal as turning a “new page on Thailand’s capital market history,” adding that Thailand “will become one of the first nations in [The Association of Southeast Asian Nations] to offer regulated digital token offerings.”

Elevated Returns seeks to facilitate secondary trading

While SE Digital will facilitate the issuance of ICO tokens, the company will not directly host markets for traders to speculate on the crypto assets. Seamico’s strategic investor, Elevated Returns — a financial group that tokenizes traditional assets — plans to launch an exchange facilitating secondary trading of SE Digital’s digital tokens. The company has already announced that its subsidiary, ERX, has applied for Digital Assets Exchange License with a plan to launch operations before the second half of 2020.

Stephane de Baets, the founder and president of Elevated Returns, took to Twitter to express his hopes for a pan-Asian expansion of Seamico’s ICO services in coming years, citing Taiwan, Korea, Japan, the Philippines, Indonesia and Singapore as jurisdictions that Seamico may target after further establishing its operations in Thailand.

Elevated Returns previously issued the Aspencoin security token during August 2018, with Aspencoin’s security token offering (STO) being described then as among the first of its kind.

Elevated Returns acquired 21% of Seamico, worth 467.1 million baht (approximately $15.4 million), during the third quarter of 2018 amid expansions designed to facilitate the launch of $1 billion worth of tokenized real estate on Tezos. During March of this year, Elevated Returns revealed that it hoped to launch $100 million worth of true estate tokens in Thailand by 2020.

SE Digital to offer suite of ICO services

SE Digital is seeking to offer a complete range of digital token offering services, including primary issuance, strategic advisory, facilitating secondary market access, and providing Know Your Customer (KYC) and Anti-Money Laundering (AML) services. SE Digital will target Thai retail investors, institutional investors, venture capital firms and private equity funds.

With digital tokens comprising a new market in Thailand, SE Digital is preparing educational programs in cooperation with partners and regulators. As digital tokens are new to most Thai investors and its market, SE Digital plans a series of educational programs through cooperation with its local partners, regulators and leading organizations. Stephen Ng, chief marketing officer of SE Digital, stated, “As asset tokenization fully takes hold, it will help bolster innovation and competitiveness of Thailand’s capital markets.”

Thailand introduces ICO regulations in 2018

Thailand’s ICO sector has matured significantly since the start of 2018. On Jan. 17, 2018, Bangkok Post reported that J Ventures, a subsidiary of mobile accessories firm Jaymart, was readying to become the first Thai company listed on the Stock Exchange of Thailand.

The company was looking to conduct an ICO to distribute 100 million of its “JFin” cryptocurrency — a utility token set to power J Ventures’ lending platform — with a total supply of 300 million tokens. As of this writing, J Ventures has not conducted the final phase of its token offering.

On Jan. 22, 2018, the Thai SEC completed the final round of public hearings relating to its then-proposed regulatory framework for ICOs. On Feb. 14, 2018, J Ventures launched the presale of its ICO, selling 87% of the 100 million tokens on the first day before later selling out. J Ventures raised approximately 660 million baht ($21.8 million), which priced JFin at approximately $0.22 each.

During the presale, JFin could only be purchased via the Thai Digital Asset Exchange (TDAX) for fiat currency and was exclusively available to identity-verified investors. On Feb. 26, TDAX announced that it had halted the registration and trading of new ICOs as it waited for the SEC to establish a regulatory framework governing digital token sales.

Zmine Holdings conducts ICO in Thailand

While many ICOs were still awaiting further guidance from the Thai SEC, Zmine sought to follow in J Ventures’ footsteps and conduct a token offering despite the lack of regulatory clarity. Zmine also conducted both a presale and private sale during the first quarter of 2018, with the company planning to finance an expansion of its mining operations through an ICO.

At the end of May, Zmine Holdings Limited launched a public token sale, seeking to raise 180 million baht ($5.6 million) by issuing 100 million “ZMN” tokens. During its first day, the ZMN ICO sold 2 million tokens and raised 3.5 million baht (roughly $110,000).

Thai cabinet introduces preliminary crypto regulations

March 2018 saw Thailand’s cabinet approve a draft decree to go into effect as of May 14 that provides oversight for companies operating with cryptocurrencies or ICOs. The decree required that crypto businesses obtain relevant licensing and report to AML authorities, and tasked the Thai SEC with regulating the sector.

The regulations also mandated that ICOs be issued exclusively via a licensed “ICO portal” — a platform that screens and assists prospective ICOs in launching fundraising activities for crypto assets in a regulated and compliant fashion. The legislation stated that ICO portals must comprise licensed Thai-based companies with a minimum registered capital of 5 million baht ($155,000).

The decree also outlined the tax obligations of retail traders, mandating a 7% value added tax payment on top of the 15% withholding tax on capital gains and returns from crypto investments. Thailand’s finance minister, Apisak Tantivorawong, stated at the time:

“The new law to comprehensively regulate cryptocurrencies and digital tokens is necessary to prevent money laundering, tax avoidance and crime. […] The new law is not meant to prohibit cryptocurrencies, initial coin offerings, and other digital asset-related translations, but to protect investors.”

JFin tokens begin trading on local exchanges

In May, JFin began trading on the Thai exchange Coin Asset, with prices quickly plummeting by 57% before temporarily retaking half of its losses. Within one month, JFin was trading at just a third of its ICO price. JFin investors’ losses prompted analysts to caution prospective ICO participants.

Thai SEC introduces ICO regulations

At the start of June 2018, the SEC unveiled its regulatory framework for cryptocurrencies and ICOs. The regulations would see seven crypto assets permitted to be used as trading pairs for ICO tokens — Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC), Litecoin (LTC), XRP and Lumens (XLM). The SEC stated that the seven cryptocurrencies were chosen due to each of the assets garnering significant trade volume and lacking advanced privacy features.

ICOs would need to pay fees of 5 million baht (roughly $165,000) upfront for token distribution and cryptocurrency operation, while the application fees for brokerage firms and crypto asset dealers were set at 2.5 million baht ($82.500) and 2 million baht ($66,000), respectively.

Exchanges are also required to pay fees equal to 0.002% of annual trade volume up to 20 million baht ($625,000), whereas crypto brokers must pay annual fees of 0.001% of trade volume up to 5 million baht ($155,000).

While no limits are placed on institutional and high-net-worth investors’ participation in registered ICOs, retail investors can invest a maximum of 300,000 baht ($9,905) per ICO — with ICOs permitted to raise no more than 70% of their capital from retail investors.

Issuers of unlicensed crypto assets can face fines of up to twice the value of the token sale, with minimum penalties starting at 500 million baht ($15,600), in addition to risking a jail term of up to two years.

Also read: Why Blockchain Startups Fail