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Thailand’s Government Clears the Path for Scripless and Tokenized Securities

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BANGKOK – The National Legislative Assembly in Thailand has approved the issuance of scripless and tokenized securities through blockchain technology.

An amendment to the Securities and Exchange Act received the endorsement of the National Legislative Assembly on Feb 8, paving the way for scripless securities issuance and tokenised securities via blockchain technology.

Once the amended act is effective, the capital market could see securities such as stocks and bonds being issued and traded via blockchain in the future.

The Securities and Exchange Commission (SEC) will further issue relevant rules, and the tokenisation platform could soon seek a securities depository licence under the act.

The implementation of the tokenisation platform is expected to become effective this year, said SEC deputy secretary-general Tipsuda Thavaramara.

The SEC has amended the act to serve the tokenisation platform in the future and will build up the digital asset ecosystem, Mrs Tipsuda said.

The regulator also aims to unlock some traditional operating systems to increase market efficiency, she said.

The SEC will allow businesses operating depository of securities and digital tokens to apply for depository licences.

The act previously allowed Thailand Securities Depository Co Ltd, a subsidiary of the Stock Exchange of Thailand, to be the sole company for scripless securities depository to serve the SET’s securities trading operation.

The SEC has also amended the act on scripless issuance of securities and digital tokens for the primary market.

For instance, sales of subscriptions for initial public offerings, initial coin offerings and security token offerings (STOs) in the primary market will be based on scripless issuance.

The secondary market has already adopted scripless securities issuance.

Pariya Techamuanvivit, director of corporate communication department at the SEC, said it’s possible to launch an STO, a type of blockchain-driven financial security that gives investors some rights to the company, under Thai securities law.

The SEC can provide legal clarity on whether securities can be issued in the form of digital tokens.

Whether an STO is regulated under the Securities and Exchange Act or the digital asset royal decree, this will depend on features of rights and obligations associated with that token, Mr Pariya said.

According to the royal decree, if features of a financial instrument fall under the definition of securities under the act, such as stocks, bonds or mutual fund units, such instrument would be regulated under the act even if it is in the form of a digital token.

For example, a token that grants its holders similar rights to stocks, such as a right to share profits, receive dividends and vote, will still be deemed securities under the act.

Likewise, a token whose issuer is obliged to pay token holders interest and repay principal would be deemed a debt instrument under the act, regardless of its tokenised form and whether such token is issued on blockchain.

For the licensed digital asset exchanges, brokers, dealers or recognised ICO portal, they must apply for a relevant licence if they want to provide STO-related services, Mr Pariya said.

By Steve Kaaru