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ICO: A Digital tokens in thailand Tool
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3rd August 2018
Omega World Class
The St. Regis Hotel, Bangkok
CORPORATE FINANCE LAW 2018
ICO: A DIGITAL CORPORATE FINANCIAL TOOL
Kowit Somwaiya
Managing Partner
LawPlus Ltd.
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Kowit Somwaiya
• B.A. (Education – English), Ubon Ratchathani Rajbhat University
• LL.B., Thammasat University
• LL.M., University of Illinois
• Certificate of Instruction for Lawyers, Harvard Law School
• Managing Partner, LawPlus Ltd. and LawPlus Myanmar Ltd.
• Vice President, IPAT (Intellectual Property Association of Thailand)
• Member of the Board of Directors, INTA (International Trademark Association)
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www.lawplusltd.com for newsletters and articles on laws
LawPlus Ltd.
• Established in 2003
• Major practices
− Banking and finance
− Corporate and M&A
− FDI and investment promotion
− IP and IT
− Dispute resolution and litigation
• Rankings:
• Visit
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Presentation Topics
• Digital Assets: Cryptocurrency and Digital Token
• Requirements and Procedures for Launching Initial Coin Offering (“ICO”)
of Digital Tokens (“DT”)
• Report and Filing After ICO Launching
• Digital Asset Business Operators
• Withholding Tax
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Digital Assets
• Regulated by:-
(1) Digital Asset Business Operation Emergency Decree B.E. 2561 (A.D. 2018)
(2) Implementation rules and regulations issued by the Ministry of Finance and
the Securities and Exchange Commission (“SEC”)
• Digital Assets are:-
(1) Cryptocurrencies, e.g. Bitcoin, Ethereum, Litecoin, Ripple
(2) DTs, e.g. JFIN Coin, BIG Token
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Digital Assets
What are Cryptocurrencies and Digital Token?
“Cryptocurrency”
A unit of electronic information created in an electronic system or an electronic
network with objectives to be used as a medium for the exchange of goods,
services or other rights through a medium of exchange between digital assets,
including a unit of other electronic information to be determined by the SEC.
“Digital Token”
A unit of electronic information created in an electronic system or an electronic
network with the objectives of (i) determining the rights of a person who invests in
any project or activity and (ii) determining rights to acquire goods, services or
other rights as determined by the SEC pursuant to an agreement between an
issuer and a holder, including any other right to be determined by the SEC.
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Digital Assets
• Cryptocurrencies are deemed digital tokens if they
− are issued for raising funds from the public and
− create (i) rights to jointly invest in any project or activity or (ii) rights to
acquire goods or services or other rights.
• Digital assets may also include other electronic information to be prescribed by
the SEC in the future.
• Securities under the securities law are not a digital asset.
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• DT ICO issuer must:-
− be a private or a public limited company registered in Thailand
− obtain approval from the SEC for the ICO of DT
− have the registration statement and the draft prospectus (white paper)
approved by the SEC
− have directors, executives or other persons having control over its
business with qualifications and without prohibited characters, e.g.
bankrupt, used to be imprisoned due to offence related to assets
dishonestly, used to be director of a financial institution that the license of
which has been revoked.
Requirements and Procedures for Launching ICO of DT
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• ICO of DT must be:-
− made after the registration statement and the draft prospectus have
become effective
− offered to (i) institutional investors, (ii) ultra high net worth individual
investors, (iii) venture capital funds, (iv) private equity funds, or (v)
individual investors (with investment limit of THB300,000 per ICO)
− made through an ICO portal licensed by the SEC
− completed within 6 months from the SEC approval date, extendable to
not more than 6 additional months
Requirements and Procedures for Launching ICO of DT
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• ICO portal must:-
− be a private or public limited company registered in Thailand
− have paid-up registered capital of not less than THB5 million
− obtain a license from the SEC
− have directors, executives or other persons having control over its
business with qualifications and without prohibited characters
prescribed by the SEC
− have a secure and reliable system for the ICO
− have a system for segregating assets of investors.
• ICO portal can accept only cryptocurrencies determined by the SEC and only
from sales, exchanges or deposits with licensed operators.
Requirements and Procedures for Launching ICO of DT
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Each ICO portal must:-
• provide an electronic system for the ICO of DT and keep information in relation
to its portal services for the SEC to investigate/make reference
• screen the characters of DT to be offered to the public
• screen the qualifications of issuers, the completion and correctness of the
registration statement, the draft prospectus, the smart contract or other information
disclosed through the ICO portal by ICO issuers
• give recommendation to issuers
• co-ordinate with the SEC and certify that it has completed its duties in relation to
qualifications and compliances of issuers and its recommendation
• run a KYC check before providing services to investors
Requirements and Procedures for Launching ICO of DT
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Major criterior for the SEC approval:-
• The issuer can prove that the ICO portal has investigated the ICO and found that
it fully complies with the SEC regulations and can be offered through the ICO
portal.
• No reasonable doubt that ICO information is false, incomplete or incorrect
and no reasonable doubt about enforceability of the smart contract.
• The source code of the smart contract has been disclosed.
• No reasonable doubt on qualifications of directors, executives or authorized
persons of ICO issuer.
• No relationship with unlawful business.
• The latest financial statements (if any) of ICO issuer has been prepared in
compliance with the applicable regulations of the Capital Market Supervisory
Board and audited by auditor approved by the SEC.
Requirements and Procedures for Launching ICO of DT
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Draft Prospectus/Whitepaper:-
− must be filed with the SEC in the Thai language.
− must not be different from the registration statement in material aspects.
− should include information necessary for investment decision, e.g. fact
sheet of DTs, risks, information on the issuer, objective of raising funds,
business plan.
− must include warning statement prescribed by the SEC to warn
investors on risks of investment in DTs, disclosure and approval of the
registration statement not being the SEC’s recommendation or guarantee on
price or return of investment or success of the project.
Requirements and Procedures for Launching ICO of DT
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The registration statement and the draft prospectus/whitepaper are effective
− when the SEC approval is granted
− the official fee is paid
− the 5-day period from the date on which the SEC receives the latest revised
registration statement has lapsed
− the required information has been included in the registration statement and
the draft prospectus/whitepaper in full.
Requirements and Procedures for Launching ICO of DT
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• DT Issuer must submit with the SEC:-
− report on the result of the DT sales within 15 days from the sale closing
date.
− report on the business operations and the current financial status
− report on other significant events that may affect investment decisions
within 3 days from the date on which the issuer knows or should have known
of such event, e.g. entering into insolvency proceeding, serious damages to
the issuer, cease of business operation, change of business objectives,
failure to comply with the payment schedule, changes in the price or value of
DT.
• ICO portal must submit with the SEC a summary report on investment
transactions made through it.
Report and Filing after ICO Launching
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• Types:-
1) Digital asset exchange
2) Digital asset brokerage
3) Digital asset dealer
4) Other persons operating activities related to digital assets to be prescribed
by the SEC.
• Must obtain a license from the MOF under recommendation of the SEC.
• Minimum capital funds maintenance not less than
− THB25 million for digital asset exchange
− THB12.5 million for digital asset broker
− THB2.5 million for digital asset trading / dealer.
Digital Asset Business Operators
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• Must run a KYC check before providing services to investors.
• Must prepare and keep a list of assets of each customer and keep such
assets separate from its own assets.
• Must conduct penetration test and an IT audit at least once a year.
• Cannot agree with investors to exclude or limit their liabilities for damages
caused from their failure to comply with SEC regulations.
• Digital asset exchange can sell, purchase or exchange digital assets against
only Thai Baht or cryptocurrencies determined by the SEC.
• Digital asset exchange cannot invest in digital assets for itself.
• Digital asset dealer cannot hold assets of its customers.
Digital Asset Business Operators
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• Regulated by the Revenue Code Amendment (No. 19) Emergency Decree B.E.
2561 (A.D. 2018)
• Dividends or other benefits derived from holding or transferring digital assets
amount higher than investment amount are subject to withholding tax at the rate of
15%.
Withholding Tax
