SEC eyes regulations for trading of utility tokens

SEC eyes regulations for trading of utility tokens

Regulator wants to govern digital market

Representations of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple and Litecoin are displayed on a PC motherboard in this illustration.  REUTERS
Representations of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple and Litecoin are displayed on a PC motherboard in this illustration.  REUTERS

The Securities and Exchange Commission (SEC) is looking to govern the issuance, listing and trading of ready-to-use utility tokens on local digital asset exchanges, with an emphasis on information transparency, to enhance protection for investors.

Any issuer who seeks to list its utility token on digital exchanges for fundraising purposes will be required to submit an application with full disclosure of the coin's trading conditions for approval from the SEC.

With the new regulations in place, the SEC will gain the authority to take legal action against any issuer who commits fraud.

Jomkwan Kongsakul, SEC assistant secretary-general, said the digital asset market has evolved rapidly since the Royal Decree on Digital Asset Businesses took effect in 2018.

Businesses in many industries such as tourism, entertainment and sports have converted loyalty points, coupons, gift vouchers, or event tickets into ready-to-use utility tokens and wanted to list them on the local digital exchanges.

Jomkwan Kongsakul, assistant secretary-general of the SEC

However, if the tokens are listed and traded on the digital exchanges, they are considered to be an investment instrument that must be under the regulation of the SEC as holders of utility coins will be exposed to the same risks that securities traders face.

The SEC envisions the same regulatory mechanisms for the issuance, listing and trading of utility tokens in both primary and secondary markets to increase legal protection for traders and ensure investors are equipped with sufficient information before making investment decisions.

Any issuer which wishes to list its utility tokens on digital exchanges must obtain permission from the SEC and comply with certain rules and conditions.

The tokens must be issued and offered through a licensed initial coin offering (ICO) portal and listed on a digital asset exchange with a transparent white paper.

The offering can be made in two ways. The first is a fast-track route that supports simple, uncomplicated fundraising, and the second is a normal track with complex fundraising, which must be carried out in accordance with the general fundraising process.

The listed tokens will also be strictly prohibited from being used as a means of payment for goods and services as it would violate the Bank of Thailand's financial stability policy.

To date, the only digital coin raised through the ICO process is Siri Hub Investment Digital Tokens, the country's first real estate-backed investment token.

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