The most critical stages in the life-cycle of a new company are often the various levels of capital infusion that allow the company to expand its base, hire employees, fund projects, and otherwise grow as a business. Particularly in the tech space, companies are already familiar with traditional methods of attracting funding, from seed money to angel investors, venture capital, and IPOs. A new addition to these familiar [transactions] is the ICO: the Initial Coin Offering. This model offers exciting new ways of connecting new and growing companies with members of the public interested in funding their development and participating in their growth.
The increased attention to ICOs as funding method comes on the heels of the success of several well-known digital assets such as Ether, Ripple, and Bitcoin. However, ICOs are not merely exciting to members of the public hoping to participate in the issuance of next big digital currency, but also present opportunities to young companies. Traditional capital raises come with limits, including the cost of public registration, caps on the number of equity investors, and the conservative approach of traditional financial institutions. ICOs offer these companies the opportunity to straddle those barriers, to access the public directly and fund their growth through their customers’ enthusiasm and support.
The field of ICOs is still developing rapidly, and deals are becoming increasingly sophisticated in this new area. An important distinction has emerged in the split between “security” and “utility” tokens among recent issuances. A security token has features similar to the equity interest represented by other classes of security; holders might enjoy the right to vote for board members, participate in company governance, or receive part of the proceeds of the company’s earnings. A utility token, on the other hand, allows its holder to make use of a company’s products or services, such as allowing utility token holders to access a company’s website or platform to engage in online transactions, use company software, or otherwise access the company’s technology.
This rapid evolution has brought the ICO market into multiple intersections with new and existing laws and regulations. Prominently, the wide availability of digital assets to the public has securities law implications for issuers of security tokens, and many regulators including the U.S. SEC consider at least some ICOs as public offerings of securities requiring registration. Utility ICOs come with different complexities since their issuers must structure their offerings carefully in order to avoid legal exposure while at the same time ensuring their tokens’ value and usefulness to their customers in the marketplace.
As with any complex transaction, experience and expertise are essential. Silk Legal is proud to have represented our many satisfied ICO clients and is available to offer our counsel on many stages of a successful ICO, including:
You must obtain a license to legally run a crypto exchange, or be a broker or dealer in Thailand. Silk Legal streamlines the convoluted licensing process to save you as much time and money as possible.
The requirements for each type of license differ in the details (mostly the fees) but broadly follow the same template of prerequisites.
The first obstacle for all three licenses is significant; you must already be a registered Thai company. This process alone is complex enough to the uninitiated but we have significant experience and can assist you with obtaining a Foreign Business License (51% Thai ownership minimum).
Secondly, there is a minimum registered capital for each license type:
|License||Minimum Registered Capital|
|Crypto Exchange License||฿50,000,000 for centralized exchange
฿10,000,000 for decentralized exchange
฿2,500,000 to exchange cryptocurrencies
฿2,500,000 to exchange digital tokens
|Crypto Broker License||฿1,000,000 to operate
฿5,000,000 to store client digital assets
฿25,000,000 to manage client assets
|Crypto Dealer License||฿5,000,000 to operate|
Thirdly, there are expectations of duty for all three crypto license types:
Finally, the application process duration is approximately three months at the Securities and Exchange Commission level and then approximately two months at the Ministry of Finance level. These processes can only be performed consecutively.
The regulatory authorities in Thailand which currently govern crypto are the Securities and Exchange Commission (SEC), Bank of Thailand (BOT) and the Ministry of Finance represented by the Minister of Finance.
The governance of crypto is nascent and while piecemeal guidance was given by the BOT in the form of circulars such as in February 2018, when the Bank of Thailand issued a circular, banning financial institutions from being involved in various cryptocurrency transactions (for example advising customers on cryptocurrency investment and trade).
The SEC has the duty and authority to regulate crypto and their operators. When two Royal Decrees were issued on May 13th 2018, they laid down the regulatory framework for crypto, they specified that the Minister of Finance was given the authority to administer the Royal Decrees and the SEC was given the power to designate additional categories of crypto business to be regulated. Hence both the SEC and Minister of Finance were given a statutory footing to govern crypto.
The SEC has responsibility for four areas:
1. To regulate the issuance and offering of cryptocurrencies and digital asset businesses.
2. Set the fees and requirements for the registration and approval of cryptocurrencies and their operators.
3. To establish guidelines for dealing with potential problems.
4. Everything else – this area is a catch all for everything else that was not covered in areas 1,2 and 3.
Future developments affecting the governance of crypto
The SEC is currently working on laws which require all digital asset transactions to be registered with the authorities in accordance with the Royal Decree on Digital Asset Business.
In 2011, the Electronic Transactions Development Agency was tasked to rewrite the Electronic Transactions Act to include the use of smart contracts through blockchain technology. However, the Act has not been amended yet. The date of enactment of the new Act and how blockchain will be regulated under the Act remain unknown.
When creating regulations that govern disruptive technological innovations, law makers tend to act with caution as they take their time to understand the overall implications of such technologies in their jurisdiction. While there is currently no consensus around the world with regard to how they should be governed, Thai law makers have developed laws specific to cryptocurrencies and blockchain technology in the country in order to facilitate ventures in these sectors.
These laws include those put forward by the Securities and Exchange Commission regarding taxes on gains made from cryptocurrencies as well as general regulations on crypto exchanges, brokers, and dealers under the Royal Decree on Digital Asset Businesses.
Having said this, Silk Legal is Thailand’s leading firm in all matters related to cryptocurrencies and blockchain. We have handled several matters in this practice, particularly with regard to regulatory compliance, and helped clients navigate through the requirements in order to successfully establish a crypto and/or blockchain venture in the country. Among other matters, we have assisted in registering Thai digital asset businesses, advised on foreign legislation, and provided counsel on transactions that adhere to Thai laws.
In 2016, the Bank of Thailand (BOT) released the FinTech Regulatory Sandbox Guidelines (FRSG) which outlined the conditions required to operate a fintech business in the Kingdom. The BOT claimed that the objective of these guidelines is to accelerate Thailand’s progress in the financial technology sector by encouraging innovation.
These regulations can be viewed more as encouragement rather than a list of restrictions, offering assistance to both local and foreign businesses regardless of whether they are startups or established firms. Nonetheless, regulations surrounding Thai businesses still apply to fintech ventures.
Companies seeking to establish a fintech venture that complies with relevant laws while maximizing the benefits afforded to them by the Thai government must meet certain requirements – an endeavor Silk Legal can assist with. By making sure all required documents are submitted, capital requirements are met, and due diligence audits are conducted among others. Silk Legal is also proficient in regulatory matters concerning mergers and acquisitions, licensing, and intellectual property.
Organizations are becoming increasingly dependent on websites, apps, and other digital media to operate business and, most importantly, to communicate with customers and other stakeholders. Therefore, organizations that collect, retain, process, and disclose personal data must review their policies and ensure that they comply with Thailand’s Personal Data Protection Act (PDPA). If organizations fail to do so, they can be subject to severe fines and penalties under the law.
Our firm understanding of Thailand’s regulations surrounding personal data protection allows us to assist you on multiple fronts. This includes advising you on your rights and obligations as a data collector and reviewing your data policies to ensure that they adhere to the provisions of the PDPA.
We also have the capacity to is advise data controllers regarding the legal issues related to data collection and processing, data transfer, data security, as well as protocols in the event of a data breach. This also extends to matters related to digital marketing and online privacy.