ICO and cryptocurrency rules to debut in March

The Securities and Exchange Commission (SEC) is set to introduce new regulations to supervise initial coin offerings (ICOs) and cryptocurrency in March, while reiterating that investment in such financial instruments carries hefty risks, especially for small investors.

The SEC expects to issue the regulatory framework over the next 2-3 weeks to supervise funding raised via ICOs and cryptocurrency, SEC secretary-general Rapee Sucharitakul said yesterday after a joint meeting with representatives from the Finance Ministry, the Bank of Thailand, Stock Exchange of Thailand and the Anti-Money Laundering Office, chaired by Deputy Prime Minister Somkid Jatusripitak.

“The regulations to supervise ICOs and transactions will be handled by the SEC, thus any companies that want to raise funds by offering ICOs to investors or companies that operate ICO trading are required to ask permission from the SEC,” he said.

Firms that trade ICOs are also required to disclose information showing the fundraising has no connection to money laundering and does not intend to deceive investors.

These companies are also required to educate investors, said Mr Rapee.

Although the government has yet to institute a law governing cryptocurrencies, the SEC has been granted full authority by the Finance Ministry to supervise such digital assets.

He also warned that ICOs and cryptocurrencies are not suitable for small investors.

“Those invited to invest in digital assets must study the investment thoroughly, including the assets, business operations, investors’ rights and tokens received from investment,” said Mr Rapee. “Some opportunists may float business projects by raising funds through this new technology, which is their selling point.”

Mr Rapee said the SEC’s study of ICO investment indicates 95% of ICO investments are deemed to be failures, with the remaining 5% reaping considerably high returns.

The SEC said the success of ICOs as an investment are difficult to gauge because startups have no track records and can be disrupted by technological changes, causing extreme rates of failure.

ICOs see a company, usually a tech startup, issue digital tokens, typically in exchange for a cryptocurrency such as bitcoin or ethereum.

Tokens can be used to buy future services from the issuer or can be sold to ostensibly reap a handsome return.

There are many returns that can be derived from ICOs. These could be in the form of a utility such as a coupon used to buy products or services, the right to own a specific asset or the right to receive revenue or profit-sharing without engaging in dayto-day operations.