The Thai Securities and Exchange Commission (SEC) is preparing to impose more stringent regulations on digital assets to mirror the global market, with the aim of increasing investor protection.
This year the digital asset market has suffered through several events that have dented confidence in the industry, its players and regulations. These included the collapse of the Luna cryptocurrency network, the TerraUSD (UST) stablecoin of the Terra blockchain, and Three Arrows Capital, a Singapore-based cryptocurrency hedge fund.
Notably, the bankruptcy of lending platform operator Celsius Network affected Thai investors using Zipmex.
Next came the collapse of FTX, one of the world's largest crypto exchanges and service providers, amid revelations about a lack of effective management and regulations in the industry.
A number of investors face heavy losses following the bankruptcy of crypto exchanges and other digital asset lending platforms.
In addition, cryptocurrency advertising has been found to contain information that could mislead investors and increase their investment risks.
Recently, several digital asset service providers have spent money on advertising by hiring celebrities to lure investors, without disclosing information required by the rules.
All these events reflect the vulnerability of the digital asset industry and the lack of proper oversight, the SEC said.
Regulators should play a greater role in enhancing investor protection mechanisms, according to the SEC's Fintech Department.
For example, regulators in countries such as Singapore, the UK and Japan have announced new guidelines for regulating digital assets, including the use of distributed ledger technology (DLT), a digital system for recording the transaction of assets and their details in multiple places at the same time.
In the US, the digital asset regulator has enforced disclosure guidelines to crack down on illegal acts involving deceptive digital asset ads.
The Monetary Authority of Singapore (MAS) does not support cryptocurrency speculation, but also does not obstruct the development of such technologies.
The country aims to further develop the digital asset ecosystem by taking advantage of DLT to serve its strategy of becoming a fintech hub.
MAS focuses on regulatory risks in five areas: anti-money laundering and anti-terrorism financing; technology management services; hedging against retail investors; stabilisation of stablecoins; and mitigating against potential financial stability risks.
Japan, meanwhile, has a policy of regulating digital assets with a focus on the stability of the financial system.
Following the UST meltdown, the Financial Services Agency (FSA), a Japanese integrated financial regulator responsible for overseeing banking, issued rules that stipulated stablecoin issuers must be banks, trusts or fund transfer service providers. Those operators must comply with rules set by the FSA, including funding guidelines, to minimise risks against financial stability and to provide enough protection for stablecoin holders.
In Thailand, the SEC is in the process of improving digital asset governance.
The regulator set up a working committee consisting of relevant government agencies and private sector representatives to study and suggest ways to improve the laws to adapt to the changing environment and growing risks of digital assets. Among the recommendations is the use of DLT in the business sector.
In addition, the SEC is monitoring new potential risks and has vowed to improve regulation to be more effective in supervising the industry and enhancing investor protection in areas such as protecting investors' assets, governing advertisements and product promotions, preventing conflicts of interest, and strengthening cybersecurity.
These changes are in line with the supervision of foreign and international regulators, said the SEC's Fintech Department.