The Securities and Exchange Commission (SEC) and the Ministry of Finance (MOF) issued a new set of regulations regarding digital asset businesses (collectively, the "Notifications"). Key takeaways of the Notifications are (i) the designation of new types of digital asset businesses to be regulated under the Emergency Decree on Digital Asset Businesses B.E. 2561 (2018) (the "Digital Asset Decree"); and (ii) the specification of additional and revised requirements for digital asset business operators.
The Notifications designate the digital asset funds manager and the digital asset advisor as additional regulated digital asset businesses, in addition to the existing exchange, broker, and dealer businesses. The regulations also prescribe the regulatory framework for each business as follows:
The digital asset fund manager means a person who manages, or holds itself to the public as available to manage assets for other persons in order to seek benefit from digital assets in the normal course of business. The SEC is empowered to further specify digital asset fund manager with certain characteristics that will be exempted.
The types of digital assets in which the manager can invest for the benefit of the customers are:
- the digital assets legally issued and offered in Thailand; and
- the digital assets permitted or approved to be legally traded or exchanged in accordance with the law in other jurisdictions.
The digital asset advisor means a person who provides advice to the public, whether directly or indirectly, regarding the value of the digital asset or the appropriateness of the investment into such digital asset, or regarding the purchase, sale, or exchange of any digital asset, in the normal course of business for a fee or other remuneration, excluding the provision of advice as part of or in connection with the operation of a digital asset exchange, digital asset broker, digital asset dealer, or digital asset manager, or the provision of advice to the public in the manner as specified in the notification of the SEC.
Digital asset business operators that provide investment analysis must comply with several requirements including additional measures and operational systems as set out in the regulations.
For those planning to provide a digital asset fund management or digital asset advisory service, they must apply for the respective licenses from the SEC and comply with the applicable regulatory requirements. Applicants must prepare and submit the application together with supporting documents as requested by the SEC, who will consider the application and forward its recommendation to the MOF within 90 days from the date that documents are deemed complete. The MOF must complete its consideration within 60 days from the date of receipt of the SEC's recommendation (maximum 150 days in total).
The Notifications prescribe several additional and revised requirements with which the digital asset business operators must comply. The noteworthy ones include:
Digital asset business operators are required to keep no less than 90% of the total value of their customers' assets in the cold wallet.
In the case where the total value of the customers' assets is less than THB 15 million,the digital asset business operator can keep customers' assets by itself (self-custody).The transfer of the customers' assets can only be executed by a multi-signature of at least 2 non-family related authorized persons.
Third party custodian
If the operator holds the customers' assets in an amount of at least THB 15 million for a duration of 5 consecutive days, the operator must arrange to have a qualified third-party digital asset custodian to hold the customers' assets for them within 45 days from the date of holding of such amount of assets. In such case, the business operators may still keep no more than 10% of the customers' total assets in its own cold wallet.
In selecting a qualified custodian, the business operators must be able to demonstrate documentary evidence indicating that such qualified custodian has sufficient and satisfactory qualifications as prescribed by the SEC (e.g. being a regulated entity, having experiences and expertise in the digital asset custodian business). Currently, the SEC is considering introducing custodian licensing scheme in Thailand at a later stage. Qualified custodians may be offshore entities as well.
The Notifications further specify amended or additional requirements for digital asset business operators on the following matters:
- Operating other businesses and change of important operational systems
- Compliance unit
- Introducing Broker Agent (IBA)
- Cloud computing
- Advertisement and promotion
- Net Capital (NC) rules
- Outsourcing arrangement
Both the existing digital asset business operators and the new market entrants should ensure that these requirements are taken into account and duly complied with during their business operation in Thailand.