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Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms. While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.
Introduction
Attitude of the country towards ICOs/token sales
Initial coin offerings (ICOs) have been recognised by the government and relevant regulators as alternative fundraising. Thailand’s regulations regarding ICOs allow issuers to offer certain types of digital assets – including real estate-backed tokens – to the public as a fundraising scheme.
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
Generally, the Emergency Decree on Digital Asset Businesses B.E. 2561 (2018) (Digital Asset Decree) is the main instrument in Thailand that governs digital assets businesses, including the issuance and offering of digital assets to Thai investors. The SEC, which is the regulator for this has also issued a notification requiring issuers of certain digital tokens to obtain prior approval from the SEC. These “regulated digital tokens” are currently classified as (i) investment digital tokens; (ii) utility digital tokens that are not ready to use; and (iii) real estate-backed digital tokens.
On the other hand, utility digital tokens that are ready to use, non-fungible tokens (NFTs), meme tokens, and other nonregulated digital tokens are not subject to an approval requirement.
Crypto currencies are also not considered to be regulated digital tokens, and issuance of crypto currency is not subject to an approval requirement from the SEC.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins
Subject to the law, issuers must offer their digital token/coin only through an SEC-approved portal to (1) institutional, ultra-high-net worth, private equity, and venture capital investors; and (2) retail investors, who have an investment limit of THB 300,000 (approx. USD 8,774) per person per offering round. This amount only applies to the ICO subscription (i.e. primary market), and not to trading or investment in crypto currencies or digital tokens on the exchange, or with a dealer or a broker (i.e. secondary market). In each round, issuers must not offer digital tokens to retail investors in an amount exceeding four times the issuer’s shareholder equity, and this cannot exceed 70% of the total offering amount per round.
Obligations and requirements to issue token/coins
Issuers who wish to conduct an ICO of a regulated digital token must obtain approval from the SEC, which must also consider the registration statement and the draft prospectus. If approval is granted, the issuer can then offer the regulated digital token to specific groups of investors through an SEC-approved portal.
If regulated digital tokens are offered to a specific group of investors, or they have a total value which is less than the prescribed amount, the approval requirement will be waived (private placement exemptions).
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