In these series of quarterly regulatory updates, Wise Equity Legal Counsel Limited aims to bring to your attention key developments of the relevant rules and regulations in the Thai capital markets and digital asset landscape. Here is our recap for the fourth quarter of 2024:
1. Amendment of regulation related to the details of advertising for Initial Coin Offering Portals (the “ICO Portals”) and Initial Coin Offering Issuers (the “ICO Issuers”)
The Office of the Securities and Exchange Commission (the “SEC Office”) has issued the Notification No. SorThor 34/2567 Re: Criteria for Details of Advertising for Initial Coin Offering Portals and Initial Coin Offering Issuers, effective on 16 December 2024, requiring ICO Portals and ICO Issuers to include risk warnings in their advertisements to ensure that investors understand the risks associated with investing in digital tokens, which can be summarized as follows:
1) The warning must explicitly disclose the risks or limitations associated with digital tokens.
2) The warning must be presented in a manner that is clear and prominently noticeable, employing a color tone that contrasts with the background of the advertisement or by using bold text. The font size should not be smaller than the majority of the text in the advertisement.
3) The risk warning must be displayed in a continuous and clearly noticeable manner throughout the advertisement.
4) The risk warning must be presented in the same language as the primary language of the advertisement and must explicitly state the following message either in Thai or English: “Digital tokens involve risks; investors should carefully review information and make investments according to their own risk profile.”
5) For advertisements that include visuals and audios, ICO Portals or ICO Issuers must provide a read-aloud warning during the advertisement at a normal speed so that listeners can clearly understand.
6) For advertisements disseminated via social media, the risk warning must comply with items 3) and 4) above and must be incorporated into the caption, moving image, or additional subtitles of the advertisement.
2. Amendment of regulations related to the capital requirements for digital asset business operators.
The SEC Office has amended regulations on the capital requirements for digital asset business operators to increase credibility in the digital asset markets and enhance investor protection, effective from 1 November 2024. The key amendments include the following:
1) The paid-up capital requirement for digital asset business operators was increased as follows:
a) THB 100 million for digital asset exchanges that provide custodial services and THB 50 million for those that do not provide custodial services.
b) THB 50 million for digital asset brokers, digital asset dealers, and digital asset custodial wallet providers that provide custodial services.
c) THB 25 million for digital asset fund managers that provide custodial services, without restrictions on the types of investors, as well as for those that do not provide custodial services but serve all types of investors except institutional investors.
d) THB 10 million for digital asset brokers, digital asset dealers, and digital asset fund managers that do not provide custodial services.
2) The net capital (NC) requirement was further amended whereby a fixed NC of THB 5 million is required for digital asset business operators that do not provide custodial services and THB 25 million is required for digital asset business operators that provide custodial services. Moreover, the NC pertaining to the custody of digital assets held in hot wallets was permitted to reflect the ratio of digital assets held by each customer, and the NC pertaining to the custody of digital assets held in cold wallets was also adjusted, as follows:
a) 2% of the total assets of customers held in their own cold wallets or with foreign digital asset custodial wallet providers; and
b) 1.5% of the assets of customers held in cold wallets.
Furthermore, there were additional requirements for NC maintenance to mitigate digital asset trading service risk. Digital asset business operators are required to calculate the average trading value over the past period using the weighted moving average method, divided into 30-day intervals where the weights should be assigned as follows: 50% for the most recent period, 30% for the second most recent period, and 20% for the third most recent period. This calculation should be performed on a monthly rolling basis, using the average trading value over the past 90 days as the new data set, and completed within 3 days of the last day of the previous month.
With respect to the additional requirement for the value of excess digital assets, the excess value will be calculated for net liquidity capital maintenance, using the excess digital asset value of liquidity capital stored in each hot wallet, which will then be deducted by the net liquidity capital calculated from general liabilities, assets required as collateral, and trading service risk.
3) The ratio requirement for the custody of customers’ digital assets was amended to allow a digital asset business operator with total digital assets held for customers of less than THB 1,000 million to hold up to 50% of such digital assets in hot wallets. If a digital asset business operator holds digital assets for customers in excess of a total of THB 1,000 million for 5 consecutive days, it may hold up to 10% of the digital assets in hot wallets.
4) The consequences for non-compliance with the minimum NC required were introduced, e.g. suspension of business operations (in case of NC-1, NC-2 , NC-3, and NC-4 non-compliance), limited permitted investments (in case of NC-2 non-compliance), notification to the SEC Office (in case of NC-2 non-compliance), mandatory request of customers’ intentions (in case of NC-2 non-compliance by digital asset fund managers), and notification to customers (in case of NC-1, NC-2, NC-3, and NC-4 non-compliance).
5) Other rules and report forms were also amended, e.g. maintenance of alternative NC, such as insurance policies and identical digital assets of customers, adjustment of early warning levels by operators, and adjustment of the NC report form and submission process.
Moreover, the regulations on the maintenance of funds of securities companies and derivatives business operators engaging in the digital asset business were also amended to be in line with the amended regulations relating to digital asset business operators as mentioned above, e.g. the amendment of the minimum NC required to reflect the ratio and source of digital assets held and to be in line with the digital asset trading service risk, the adjustment of early warning levels, the amendment on the suspension of the business operations of digital asset business operators, as well as the reporting of NC by digital asset business operators, also effective from 1 November 2024.
3. Amendment of regulations to align with the revised criteria on the use of symbols by the Stock Exchange of Thailand (SET)
Under the previous regulatory framework of the Capital Market Supervisory Board, which came into effect on 1 January 2024, a listed company offering newly-issued shares must not be a listed company that is being subject to the SET’s C (Caution) symbol or SP (Trading Suspension) symbol because of its status as an investment company.
However, the SET later amended its rules relating to the operations of listed companies, which must not be the same as an investment company. Such amended rules, which became effective since 1 July 2024, stipulate that the SET shall post the “CC” (Non-Compliance) symbol for any listed company falling under the definition of an investment company and shall post the “SP” (Trading Suspension) symbol if such non-compliant listed company fails to rectify the matter within one quarter. A listed company that is subject to the “SP” symbol for one year and cannot still rectify the matter shall be subject to delisting.
To align with the revised regulations of the SET, references to symbols have been broadened to encompass any applicable symbol that may indicate a company’s status as an investment company, rather than being limited solely to the ‘C’ and ‘SP’ symbols under the previous rules.
For more in depth information on any of the above, please reach out to Karinevidch Olivero at karinevidch.o@wiseequitylegal.com or Punnapa Vorapanyasakul at punnapa.v@wiseequitylegal.com or Yanika Apisaksirikul at yanika.a@wiseequitylegal.com
