Got protection? SEC strengthens oversight mechanisms for real estate backed ICOs

Thailand’s approach to digital assets, including virtual currencies, has been gradual, however recently, there have been a few updates looking to support the rise of new concepts while protecting investors, namely by putting the supervision of ICOs under the Securities Act. As part of this move, Thailand’s Securities and Exchange Commission (“SEC”) introduced revised regulations surrounding the supervision of real estate backed initial coin offerings (“ICOs”) to ensure that they correspond with real estate investment trust regulations (“REIT”). The revisions took effect earlier this month and are expected to support private sector business models and provide greater protections for investors participating in real estate backed ICOs, including underlying real estate ownership or income derived from real estate.

This came as a result of the fact that real estate backed ICOs, which aim to raise funds for real estate development in the same way as REITs, are not supervised in the same manner as REITs despite both essentially being securitization of real estate assets. Of particular concern to regulators was the lack of mechanisms designed to protect investors participating in real estate backed ICOs, especially those surrounding the monitoring and management of assets. Through these revisions, the SEC hopes to protect investors’ rights fairly according to the characteristics, forms, and risks of their investment.

According to the amendments, leasehold contracts will be allowed to be underlying assets, as well as shares in special purpose vehicles. The SEC also requires applicants to allocate a minimum of 80% of the value of real estate projects which should not amount to any less than THB 500 million, which contrasts to the current requirements. This is to ensure that such real estate projects are viable and investor interests are protected.

The revisions also stipulate that token issuers are to take on additional duties in managing assets and to implement systems for the protection of investors’ rights. This includes hiring staff that will be directly responsible for addressing matters related to investors and enacting preventative measures for possible conflicts of interest. Similarly, trustees will be given similar responsibilities and will be required to be independent in performing their duties.

For more information about real estate backed ICOs and Thailand’s regulations surrounding them, feel free to contact us at [email protected].