Thailand’s SEC announces plans to regulate Ready-to-Use Utility Tokens
On May 30, 2022, Thailand’s Securities and Exchange Commission (SEC) announced its intention to start regulating ‘ready-to-use’ utility tokens.
Ready-to-use utility tokens are a type of digital token that were previously exempt from needing to obtain the SEC’s approval in relation to trading. A draft regulation is expected to be issued in the near future.
- Ready-to-use utility tokens will soon be regulated by the SEC.
- These tokens will be subject to the same pre-approval requirements as other tokens.
- Ongoing disclosure obligations will also be applied to these tokens.
- The SEC will amend existing rules in order to ensure they correctly apply to ready-to-use-tokens.
What is a ready-to-use utility token?
A utility token is typically used by companies to generate interest in their goods and to enable their usage in blockchain ecosystems.
Utility tokens are used to perform a certain function. For example, tokens could be used to acquire or redeem a particular service or good.
Utility tokens account for the vast majority of tokens offered during initial coin offerings (ICOs). However, utility tokens do not provide investors with a real share of a company’s monetary ownership.
Why has the SEC decided to regulate these tokens?
Currently, the SEC only supervises the issuance of ready-to-use utility tokens and has not enacted any form of regulation. However, due to the rapid expansion of the digital asset industry and a clear lack of regulatory control, many companies have been taking advantage of ready-to-use utility tokens.
As a result, the SEC has now begun planning how to regulate ready-to-use utility tokens. These particular tokens have also come to the SECs attention due to some issuers exploiting regulatory loopholes in order to manipulate the price and supply of these tokens.
What does the SEC propose?
The SEC’s proposed principles include:
The SEC plans to impose the same pre-approval requirements that apply to not-ready-to-use utility tokens upon ready-to-use utility tokens which will be listed on a digital asset exchange.
Therefore, the issuer must now do the following:
- obtain prior approval from the SEC,
- file a draft prospectus,
- and offer the approved tokens via a SEC-approved ICO portal operator only.
A fast-track (15 days) service for approval is available to qualifying ready-to-use utility tokens. These tokens must:
- Have plain-vanilla characteristics;
- Have an offering price corresponding to the value of the underlying goods/services; for which the supply of goods and services does not vary with the price of the tokens (i.e., fixed coins); and
- Not be intended to be a means of payment.
The SEC has also announced an exemption to the pre-approval requirements. Exempt tokens will be those in which the issuer does not intend to list on a digital asset exchange, and must satisfy the same qualifications required for fast-track approval.
Additional Ongoing Disclosure Obligations
Issuers of ready-to-use utility tokens will be subject to the following disclosure obligations:
- The disclosure of pre- and post-offering information such as; the rights and benefits of token holders, business plans for the project, turnover, the source codes for smart contracts, and financial statements.
- Ongoing disclosure of any significant/material changes to the rights and benefits attached to the token and any information or news that may impact the price of the token.
- For any projects that offer the staking of digital tokens, it is required to disclose information pertaining to the source of the return for the acquired stakes.
Allotment of Issuance and Holding by Affiliated Persons
Issuers of the tokens in question must not hold ready-to-use utility tokens or allocate ready-to-use utility tokens to any affiliated persons in excess of the specified percentage.
Issuers and affiliated persons also must also observe a silent period i.e. not sell or distribute ready-to-use utility tokens to other people for a specified period of time.
Amendment of Market Rules of Exchanges
The SEC will also revise the listing rules, trading rules, and market surveillance supervision of digital asset exchanges for ready-to-use utilities tokens. These changes will be made in order to ensure these rules are suitable for the related risks and to prevent information asymmetry among investors.
The SEC is continuing to focus its efforts on digital assets and provide a clear and effective framework. If you are interested in learning more about how your business may be affected by these plans, why not book a consultation with our experts.
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Frequently asked questions
Can a foreigner own a condo in Thailand?
Foreigners can fully own condos in Thailand (subject to the condo developments foreign ownership quota).
Can a foreigner own a land in Thailand?
For the most part foreigners cannot own land in Thailand (there are certain exceptions which are outside the scope of this article).
Is there any fees when purchasing a condo in Thailand?
Purchasing property in Thailand is subject to the following fees.
The Thailand Land Department charges 2% of the appraised value of the property.
Business Tax is assessed at 3.3% of the appraised value. However, it’s only payable if the property is sold within the first five years of ownership. If not, stamp duty will be imposed instead.
A Stamp Duty of 0.5% of the total registered value of the property will be imposed. When specific business tax is applicable, stamp duty is not required.
Whether Withholding Tax is applicable depends on whether the seller is a company or an individual.
Withholding Tax for a company is fixed at 1% of the appraised value or 1% of the sales price (whichever is higher).
Withholding Tax for an individual is calculated at a progressive rate depending on the appraised value of the property.
What type of property can foreigners own in Thailand?
Thailand has no restrictions relating to nationality when buying/selling a condo, therefore a
foreigners can buy and own a condo unit.
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