This article provides the general background for cryptocurrency, digital asset businesses and initial coin offerings (ICO) in Thailand. It describes how these industries are regulated and which steps have to be taken to get the crypto deal done.
I. Thailand's regulatory environment for crypto businesses
Thailand's legal environment bases on the civil law system, originated from Europe with laws and regulations serving as the primary source of law. This is different from the common law systems, with bases merely on a judge-made decisional framework and precedential authority of prior court decisions.
In most jurisdictions, cryptocurrencies, the trade of digital coins and the financing by so-called Initial Coin Offerings do not fall under specific laws and regulations. Digital assets are not deemed to be securities and, therefore, crypto-transactions are not regulated at all.
As one of the first jurisdictions in the world, Thailand introduced in 2018 a full set of laws and regulations for transactions involving cryptocurrencies and crypto assets. This is relevant for Bitcoin, altcoins and all types of digital tokens with any link to the Thai markets and location.
It took Thailand some time to find its stance on cryptocurrencies. While in a first phase, the use of shadow currencies had been prohibited, this had been silently revoked and the use of cryptocurrencies had been liberalized.
Thailand did the smart move to open the markets under clearly defined rules. With the publishing of two Royal Decrees, various regulations by the Thai Securities and Exchange Commission SEC, and, finally, announcements by the Bank of Thailand, the regulatory framework for digital asset businesses in the land of smile is completed. Thailand offers regulated crypto ventures on a reasonable level.
II. How to set-up a digital asset business in Thailand
Under the legal framework, Thailand distinguishes between an exchange, a trading business, and a brokerage business. All three categories are separately regulated and have to follow different rules and requirements.
In a specific category fall ICO portal businesses. An ICO portal business acts as the entrance gate for ICOs Initial Coin Offerings and examine and certify ICOs, based on predefined protocols, policies and requirements. ICO portals have to be licensed by the Securities and Exchange Commission SEC before they can start doing business.
ICO portals have typically the intention to provide apart from their regulatory audit work some ICO advisory services and to practice transaction support services, including financing tasks. Whether such scope of unregulated work can be combined with their regulated business, has to be carefully examined.
The Securities and Exchange Commission is the main regulatory body for all things crypto. The SEC is since 1992 an independent public agency under the Securities and Exchange Act. Its duties are to supervise and develop the Thai capital market to ensure efficiency, fairness, transparency and integrity.
Under Thailand's regulatory framework, crypto business requires to set-up a Thai company. Certain capital requirements apply depending on the business purpose. Apart from the new regulations for ICOs and digital assets, Thailand's foreigner legislation has to be taken into consideration as well.
Apart from a licensing by Thailand's SEC, an approval by the Ministry of Finance is required. The exchange, trading or brokerage business is not allowed before both steps have been successfully accomplished. While the general timeframe is defined as 90 respectively 60 days, a streamlined process can significantly reduce the required time exposure.
III. How to set-up an Initial Coin Offering (ICO) in Thailand
The ICO typically intends to finance a business venture. For this task, generally, no limitations apply regarding the type of venture. Even brick and mortar investments can be financed through this modern digital crowdfunding scheme.
To carry out an ICO under Thailand's laws, a Thai company with a minimum equity amount has to be set-up. This will typically be a corporation with limited liability ("Co., Ltd."). Further requirements under the crypto regulations as well as foreigner legislation have to be observed.
The ICO has to be set-up through a Thai ICO portal company. Such portal company can be freely chosen by the initiator of the ICO. However, there are different criteria, including costs, track-record, reputation and the expected time exposure.
The ICO portal acceptance is the basis for the subsequent licensing through Thailand's SEC. This is a separate procedure by the governmental agency after the process by the private ICO portal company has been successfully accomplished.
A successful licensed ICO falls under certain restrictions as defined by Thai laws, regulations and the specific license certificate. These limitations refer to the allowed coins and tokens, to the allowed investors and the maximum investment amount per investor and per ICO.
IV. Reasons to set-up regulated digital asset businesses and regulated ICOs in Thailand
While working in an unregulated legal environment seems to be convenient for the developer, unregulated crypto-businesses and ICOs lack of reputation. Experience shows that the procedure that has been successful in the past, does not find investors any more.
Thailand's regulatory framework is acceptable to accomplish a successful transaction. The reputation of the regulated environment provides a significant benefit and location advantage. Enough regulations to find investors, but not too high regulatory hurdles for the promoter and developer.
International projects can be transferred to Thailand to accomplish it under the umbrella of Thailand's regulations. Cross-border tax planning optimizes the overall benefits. This is a win-win situation for all participants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.