On June 23, 2022, Thailand’s Securities and Exchange Commission (SEC) opened a public hearing period on regulatory controls for initial coin offering (ICO) portals that serve as financial advisors to digital token issuers. The proposed measures aim to prevent conflicts of interest; allow ICO portals to outsource certain functions; and establish additional notification obligations for ICO portals.

The public hearing is open for general comments until July 23, 2022, and the new legislation is expected to be issued soon after that. During the public hearing period, any interested parties can comment on the SEC’s proposed principles. The key proposed points are outlined below.

Conflicts of Interest

Similar to SEC-approved financial advisors for securities offerings, ICO portals must be clear of conflicts of interest when representing issuers in a coin offering. According to the draft regulation, the following conflicts of interest are prohibited:

• The ICO portal (and certain individuals as specified by the SEC) directly or indirectly holds a prohibited amount of shares in the issuer, its affiliates, or its subsidiaries. If the issuer is not a listed company, any shareholding or portion thereof is prohibited. If the issuer is a listed company on the Stock Exchange of Thailand (SET), the shares held by the ICO platform may not total more than five percent of the total voting rights.
• The issuer (and certain individuals as specified by the SEC) directly or indirectly holds shares in the ICO portal in any amount if the ICO portal is not a listed company, or totaling more than five percent of the voting rights if the ICO portal is listed on the SET.
• Any of the ICO portal’s directors or executives, or the head of the department responsible for screening the ICO project, is also a director in the issuer.
• The ICO portal has a relationship with, or any interest in, the issuer in a way that could impede the independence of the ICO portal with respect to conducting its duties.

Outsourcing ICO Portal Functions

To increase efficiency, ICO portals will be allowed to outsource certain tasks, subject to the following conditions:

• The ICO portal must adopt an outsourcing policy, measures, and procedures (approved by the board of directors), to be reviewed annually or upon any event that might have a material impact on business operations.
• The scope of outsourced tasks must be appropriate, reasonable, and not so substantial that the ICO portal will become an entity with no business operations (an “empty box”). ICO portals may only outsource tasks relating to digital token offerings, such as contacting and providing services to investors, and supporting digital token offerings and subscription management. Core tasks, such as screening ICO projects, may not be outsourced.
• The ICO portal must notify the SEC within 15 days when it outsources a task to a third party, when there is a significant change to the outsourcing, or when the third party subcontracts any task to another party.

Additional Notification Obligations

To facilitate additional supervisory control, ICO portals will have to notify the SEC within 15 days if there are any changes to their qualifications, personnel, and functions, or if the ICO portal is unable to maintain the necessary qualifications or comply with the requirements detailed in the relevant section of SEC Notification No. GorJor. 16/2561 Re: Criteria, Provisions, and Procedure for Approval of an ICO Portal Service Provider. In the notification, the ICO portal must identify the cause and report on any remedial measures planned or already taken.

If an ICO portal wishes to suspend operations, it must also notify the SEC and provide a list of unfinished tasks along with a plan to mitigate any potential impact on customers. When the ICO portal wishes to resume operations, it must again notify the SEC and explain how it has resolved the issues that caused the suspension of operations, along with any significant changes to the portal’s characteristics.

Tilleke & Gibbins will continue to monitor these ICO portal regulations and provide updates as needed. For more information on any aspect of digital asset business, cryptocurrency, digital tokens, or digital asset regulations in Thailand, please contact Kobkit Thienpreecha at [email protected], Onunya Chanpen at [email protected], or Sorawit Partomtanasarn at [email protected].