The Securities and Exchange Commission (SEC) is considering a plan to restrict digital asset exchanges from seeking benefits for clients from deposit and lending services, or encouraging others to do so, in order to protect investors and the public against fraud.
In a statement issued yesterday, the SEC said its board agreed to ban digital asset businesses from taking deposits and lending to others for the benefit of their clients.
The resolution prevents investors from thinking that such services performed by digital asset exchanges are under the supervision of the regulator, said the SEC.
This misunderstanding could lead to damage among the public because deposit and lending services both in Thailand and abroad have yet to fall under the SEC's supervision.
Foreign companies that offer these services are now facing liquidity problems, forcing them to suspend services and preventing investors from withdrawing money from the exchanges.
Under the proposed regulation, digital asset operators are prohibited from taking deposits in the form of digital assets and lending or investing those assets, or offering returns to depositors.
Digital asset businesses are not allowed to offer returns to depositors of digital assets without using the asset for investment or seeking other benefits. In this regard, returns might come from profits of the company or its subsidiaries. Revenue gained from sales promotion in accordance with the SEC's rules is allowed.
Lastly, digital asset operators are prohibited from advertising or encouraging others to offer deposit and lending services. For example, the companies must not be a channel for their clients to use deposit and lending services abroad via their platform or application.
The draft regulation is in the public hearing process until Oct 17, after which the regulation takes force.
The planned regulation comes as the SEC is tightening rules governing digital asset businesses.
In mid-August, the regulator warned investors to exercise caution when making decentralised finance (DeFi) transactions. DeFi services based on blockchain are becoming popular, particularly deposit and lending services.
Sanjay Popli, co-founder and chief executive of Cryptomind Group, said he is not surprised by the SEC's latest move, but indicated that digital asset operators already know and comply with the rule.
Foreign trading platforms offer deposit and lending services. For example, Binance, the world's largest crypto exchange operator, operates a DeFi investment platform called "Binance Earn" that offers short-term and long-term returns with yields of 1.8% and 3.6%, respectively.
Although Binance is not under the supervision of the Thai regulator, the company is seeking to penetrate the crypto market in Thailand by joining hands with Gulf Energy Development.
"Some exchanges even want to become a 'crypto bank', but the SEC has so far signalled that it is not providing support for the crypto industry in Thailand," he said.
