Thailand’s Securities and Exchange Commission (“SEC”) Board on 11 June 2021 approved new rules prohibiting the trading on national exchange platforms of utility tokens and certain types of ‘novelty’ cryptocurrencies such as DogeCoin, SafeMoon or MonaCoin. The Securities and Exchange Commission’s Notification No. Kor Thor. 18/2564 Re: Rules, Conditions and Procedures for Undertaking Digital Asset Businesses (No. 11) (“Notification”) was approved by an SEC board meeting chaired by Secretary-General Ruenvadee Suwanmongkol and became legally effective from 11 June 2021 (with no retrospective effect) after it was published in the official Gazette.

The Notification prohibits the trading in or provision of services related to utility tokens or cryptocurrencies by crypto exchanges and other platforms. These exchanges and platforms now have 30 days to enter into full compliance with the new Notification. The tokens or cryptocurrencies banned by the SEC may have any of the following characteristics:

1. Meme token: having no clear objective or substance or underlying value, and whose price is running on social media trends;
2. Fan token: tokenized by the fame of influencers;  
3. Non-fungible token (“NFT”): a digital creation to declare ownership or grant of right in an object or specific right. It is unique and not interchangeable with digital tokens of the same category and type at the equal amount;
4. Digital tokens which are utilized in a blockchain transaction and issued by digital asset exchanges or related persons.           

The SEC goes on to direct that a “digital asset exchange has to set the requirement that the digital token issuer who is the exchange itself or related person comply with the white paper and relevant rules in substance. Failure to do so could result in the delisting of such digital token from the exchange.”

Through this Notification, the SEC is clearly taking aim at certain forms of cryptocurrency or tokens often based on memes, celebrities or social media trends. This usually relates to ‘memecoins’ or tokens lacking the in-built scarcity, broad ecosystem or transaction verification integrity emblematic of other now well established cryptocurrencies most notably Bitcoin (“BTC”) or Ethereum (“ETH”).

Clearly unimpressed by the vagueness and uncertainty associated with certain tokens and cryptocurrencies, the SEC has therefore sought to apply more stringent regulation to a domain in which it has staked its reputation and credibility to a considerable degree by its unprecedented and region-leading embrace of blockchain technology and tokenization.

However, the key and as-of-yet unaddressed concern among industry experts is whether this Notification will lead to a different treatment being applied to new token issuers. The Notification bans any new tokens or cryptocurrencies which feature the characteristics listed above but does not clearly indicate whether existing tokens already issued or listed by the exchanges will become subject to stricter regulation.

As mentioned in our earlier alert on Thailand’s first Initial Coin Offering (“ICO”), the SEC, by way of recent amendments this year to the Securities and Exchange Act, now has effective national oversight over asset-backed tokenization, cryptocurrency and the national exchanges and platforms through which they are traded. With this Notification, the SEC makes clear that it intends to regulate (and possibly prohibit) the public trading of tokens and forms of crypto that might serve to trivialize the overall current market and undermine efforts by the SEC to legitimize and support the development of this relatively new and rapidly developing economic sphere. This is all the more important as the country slowly re-emerges from the recent pandemic and looks for new ways to restore its economic vitality, lead the field in embracing promising new technologies and secure sustainable avenues to ensure its future growth and prosperity.

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

Contact

Vinay Ahuja

Partner, Head of Regional Banking, Finance & Technology Practice & Head of Indonesia Practice

vinay.ahuja@dfdl.com