Thailand: SEC to raise the standard of digital asset advertisement and reporting requirement for digital asset business operators

Introduction

Digital assets (i.e. cryptocurrencies and digital tokens) continue to grow and involve more investors globally, and today the digitally-connected world permits near-instant exchange of information. At present, various channels have been used by digital asset business operators to advertise their businesses. However, such advertisements have proved to be problematic due to misleading information and insufficient risk warnings. In response to this, on 14 February 2022, the Office of the Securities and Exchange Commission of Thailand (SEC) proposed a hearing from 14 February until 15 March 2022 on draft rules seeking to tighten the advertising activities of digital asset business operators in Thailand.

The draft rules being developed aim to increase protection for investors against inappropriate digital asset advertisements and enhance the supervision of digital asset advertising in line with other countries such as Singapore, Spain, the United Kingdom and Japan.

Who is being regulated?

The proposed rules will apply to all types of digital asset business operators (under the Royal Decree on Digital Asset Businesses B.E. 2561 (2018)), comprising: (i) digital asset exchanges; (ii) digital asset brokers; (iii) digital asset dealers; (iv) digital asset fund managers; and (v) digital asset advisory services.

What are the initial principles being proposed by the SEC?

The draft rules propose that advertising by digital asset business operators can only be conducted in accordance with the criteria prescribed by the SEC. The proposed criteria include:

• Business operators must have internal systems and processes for preparation, approval, and supervision of advertisements to be in accordance with the prescribed criteria.
• Advertisements must not be untrue, exaggerated, distorted, concealed or misleading in material respects.
• Business operators can only provide information about the number of customers whose accounts have been approved and are ready to use the services.
• Advertisements must not use language that is difficult to understand or that has multiple meanings, and must not lead to understanding that investment in digital asset carries low risk or risk free.
• A balanced view of relevant information must be presented. In the event that positive information or information on investment return opportunity is displayed, then negative information or information concerned the investment risks associated with digital assets must also be displayed.
• Advertisements must include risk warnings that are clear, easily-noticeable and in compliance with the format specified by the SEC in terms of wording, font colour and size.
• Advertising activities conducted by group companies, persons involved in the business (i.e. shareholders, directors, executives, or others) and influencers must also be controlled by the business operators.
• Content, format and means of advertisements must be notified to the SEC at least 15 days prior to the advertisements being displayed. If the SEC has no objection during such period, the business operators can then display the advertisements.
• Business operators can only display advertisements relating to cryptocurrencies on their official channels (i.e. official websites, applications, online channels) and not public spaces (for example, public transportation, vehicles, media, billboards, magazines, newspapers, websites, social networks, public events, and roadshows). However, a digital asset business operator may still conduct advertising related to the core services it provides in public spaces and through other channels.
• Introducing broker agents to refer customers to cryptocurrency business operators is not allowed. However, such referrals are permitted for digital token business operators.

New reporting requirements

In addition, on 22 February 2022, the SEC commenced a separate hearing on potential new reporting obligations on service quality information and information technology usage capacity. Under the proposal, certain digital asset business operators (i.e. exchanges, brokers and dealers) must prepare a report, in a prescribed format, which must include the following information: (i) network failure; and (ii) complaints made by customers. This report must be filed with the SEC and displayed on the website of the business operators on a monthly basis.

The hearing is set to end on 23 March 2022.

Takeaway

Although some criteria in the proposal will need further clarification from the SEC, it is clear that, going forward, digital asset business operators in Thailand will need to reconsider their advertising activities to ensure compliance with new reporting obligations.