Thailand SEC updates regulatory framework for digital asset trading operators

During the first quarter of 2022, the Securities and Exchange Commission (SEC) of Thailand announced a series of notifications aimed at strengthening the regulatory regime for digital assets while safeguarding the interests of investors. The updated rules and terms apply to SEC-licensed digital asset trading operators.

The main features of the new notifications, which entered into force in March and April 2022, are summarized below.

Custody of Client Assets (Effective March 1, 2022)

As custodians of their customers’ assets, digital asset business operators must:

  • Separate client assets in their custody so operators can clearly identify which assets belong to which investors. If customers’ digital assets are to be deposited with a third party, operators should notify customers accordingly.
  • Refrain from seeking benefits from client assets in a manner other than that for which the assets are held. This includes refraining from using client assets to provide benefits to others or to clients themselves, and depositing client digital assets with a custodian that intends to lend digital assets (but does not include giving the client’s assets to a licensed digital asset fund manager for investment in digital assets).
  • Reconcile client assets and retain supporting documentation for a period of at least five years.

Privacy Coin Services (Effective April 1, 2022)

Commercial operators of digital assets are prohibited from providing confidential coin services that may conceal (or allow the concealment of) specific transactional information, such as transferor, transferee and transfer amount data.

Commercial operators of digital assets who provided confidential coin services to their customers before the effective date of these new regulations can continue to provide these services, but they must ensure that their customers at least disclose the information. transactions required or undertake not to engage in concealment of information.

Digital assets as means of payment (effective April 1, 2022)

Commercial operators of digital assets are prohibited from using digital assets as a means of payment and must not provide any service or undertake any activity that encourages or promotes the use of digital assets to pay for goods or services. This includes:

  • Represent to any customer (through advertising, etc.) that the business operator will accept payment for goods or services using digital assets;
  • Establish a system or tool that facilitates the use of digital assets to pay for goods or services;
  • providing electronic wallets for the purpose of using digital assets as means of payment;
  • Provision of a THB-denominated fund transfer service from a client’s account to third-party accounts;
  • Providing a digital asset transfer service from a customer’s account to third party accounts in order to pay for goods or services; and
  • Provide any other service that supports the use of digital assets to pay for goods or services.

Business operators must take action (e.g., warnings, account suspension or termination, etc.) against customers who violate the terms and conditions of the service.

Provide customers with activity reports (as of March 30, 2022)

The SEC now requires operators of digital assets to provide their clients with a report, within one business day of a transaction, containing specific information about the trading, exchange and investment activity of customer digital assets. Operators must retain disclosed information for at least 18 months.

Although the requirement took effect on March 30, there is a first implementation stage until April 30, 2022, during which operators only need to provide reports to their customers within a reasonable time upon request. The reporting requirement will be fully implemented from May 1, 2022.

Michael J. Birnbaum