Throughout 2022 digital asset businesses were under scrutiny from the Securities and Exchange Commission (SEC), imposing several new regulations to mirror the international market, with the objective of improving investor protection.
For example, the regulator announced on Oct 31 digital businesses must seek the approval of the SEC if they plan to have a major shareholder.
An application must be submitted to the SEC within 14 days from the date the operator knows the identity of the major shareholder.
If the major shareholder comes from an event to raise capital, the application for approval must be submitted prior to the date of the capital increase that results in such person becoming a major shareholder.
Earlier, the SEC added digital asset custodian as a business under its supervision. This was in response to the Finance Ministry's announcement in mid-July, describing a digital asset custodian as keeping digital assets in custody, as well as management services of encryption of cryptographic keys, or related services that are required to be confidential for approval of any transfers or transactions related to digital assets, with full or partial authorisation.
"The use of a client's assets, fiat money and digital assets for the benefit of another client or any other persons shall be prohibited, and clients' assets shall be reconciled every business day to ensure accurate and updated records of clients' assets," said the SEC.
The SEC also tightened the rules governing digital asset ads, banning faulty, distorted or exaggerated information, or anything that could lead to misunderstanding among the public.
Digital asset operators that want to advertise must inform the regulator about the budget and other details of their ads, including bloggers and influencers.
The ads must indicate investment risks and have complete information, with balanced views of risks and opportunities so that investors can make informed decisions.
The digital asset market had several meltdowns in 2022 that dented confidence in the industry. 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.
Recently the collapse of FTX, one of the world's largest crypto exchanges, revealed a lack of effective management and regulations in the industry. A number of investors face heavy losses from these incidents.
The Bank of Thailand is expected to wield greater powers under a new regime of digital asset regulation.
So far, the SEC is the main body responsible for keeping an eye on the industry, but recent criticisms over the lack of decisive action in the wake of industry implosions may see the central bank taking centre stage.
The Bank of Thailand is developing a retail central bank digital currency in the hopes it can steer the public away from virtual currencies.
The SEC, meanwhile, 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 laws to adapt to the changing environment and growing risks of digital assets.
Moreover, the SEC is monitoring new potential risks and vowed to improve regulations to be more effective in supervising the industry, specifically protecting investors' assets, governing advertisements and product promotions, preventing conflicts of interest, and strengthening cybersecurity.
