ICOs no-go amid public vetting
New initial coin offerings (ICOs) will be prohibited from launching during the public hearing process to draft the organic law on regulating digital assets, says the Securities and Exchange Commission (SEC).
Such organic laws are expected to be unveiled in the middle of June, said SEC secretary-general Rapee Sucharitakul.
"After the digital asset decree became effective on Monday, new ICOs cannot be launched until related regulations are released," Mr Rapee said.
But ICO issuers can submit white papers to the SEC for consideration in the interim, he said, adding that the market regulator will gather ideas from participants before drafting the organic law.
Issues to be discussed during the public hearing include ICO fund-raising criteria, white papers and the qualifications of ICO issuers and investors, Mr Rapee said.
Details of the public hearing process will be uploaded to the SEC website by next Monday.
J Ventures chief executive Thanawat Lertwattanarak said he will meet with the SEC this Friday to discuss compliance with the new regulations. J Ventures is a subsidiary of SET-listed Jay Mart Plc and the issuer of JFin coin, of which 100 million tokens have been sold since its launch in mid-February.
The 100-section law defines cryptocurrencies as digital assets and digital tokens.
All market participants, including ICO issuers, digital exchanges, brokers and dealers involved with digital asset transactions, are required to register with the SEC within 90 days of the effective date. They must also receive the Finance Ministry's approval to conduct digital asset business.
Digital asset transactions will be subject to a 15% withholding tax on capital gains if there is a profit.
Sellers of unauthorised digital tokens will be fined no more than twice the value of the digital transaction or at least 500,000 baht. They could also face a jail term of up to two years.
The Finance Ministry and the SEC will now work on organic laws governing all digital asset transactions.
The SEC does not specify the nationality of businesses requesting official approval, but the Finance Ministry could allow domestic ICO issuers to initially raise funds when the organic law is completed.
Mr Rapee said digital assets will be regulated to protect investors and decrease risks from fraud and scams, clarify the regulatory framework and prevent money laundering.
But the law does not cover people investing in digital assets abroad, he said.
People who are allowed to invest in digital assets are likely to be classified as institutional, high-net-worth and ultra-high-net-worth investors, while there could be a cap on the investment amount for retail investors, Mr Rapee said.
He said digital assets are very high-risk, with a failure rate of over 90% for ICOs raised by tech startups in foreign countries.
In a related development, the Finance Ministry will issue ministerial regulations to impose a 15% withholding tax on capital gains and benefits from digital asset transactions for corporate entities, said Saroch Thongpracum, director of the bureau of legal affairs at the Revenue Department.
Firms that make digital-asset-related trades will be liable for a 7% value-added tax (VAT) payment from the transaction value, on top of the 15% withholding tax, Mr Saroch said.
According to the amended Revenue Code, effective since Monday, individuals who gain and receive benefits from putting money into digital assets are subject to a 15% withholding tax.
But the Finance Ministry will waive the 7% VAT for retail investors who trade cryptocurrencies and digital tokens through digital exchanges, Mr Saroch said, adding that the waiver is intended to alleviate the tax invoice burden for individuals.
The VAT waiver will be subject to cabinet approval.
Juristic persons and individuals are also required to include capital gains and benefits from digital asset transactions in computing income tax.
Mr Saroch said the withholding tax against individuals is not aimed at increasing the tax burden, but the levy could shed some light on the income category.
ICO issuers are liable for the 7% VAT when they sell digital coins to investors, he said, and they must recognise the proceeds arising from the ICO offerings as income.
Commenting on those who live in Thailand but trade digital assets abroad, Mr Saroch said it's the duty of taxpayers to declare such income, otherwise they will face both civil and criminal penalties if the Revenue Department discovers the transactions.
The tax measures are aimed at providing appropriate protections to investors and act as a mechanism to help the government prevent any damage that could occur, said Finance Ministry spokeswoman Kulaya Tantitemit.