Thai SEC’s Drastic Move to Safeguard Investor Interests
Thailand’s Securities and Exchange Commission (SEC) has laid down new rules for digital asset service providers. The primary objective of this initiative is to offer stronger protection to investors against the potential risks associated with cryptocurrency trading.
A Clear Warning to Crypto Traders
As part of the new regulations, all digital asset service platforms are required to display a clear and unambiguous warning message:
“Cryptocurrencies are high risk. Please study and understand the risks of cryptocurrencies thoroughly, because you may lose the entire investment amount.”
In addition to providing a disclaimer, service providers are obligated to obtain explicit consent from their customers, acknowledging their understanding of the associated risks before they are allowed to use the service.
Tightening Restrictions on the Use of Customer Funds
The latest guidelines also explicitly prohibit service providers from using customer’s funds for lending or investment. With the recent ban on crypto lending services, crypto platforms are now disallowed from offering any form of return on deposited crypto by customers. This move is expected to bolster investor protection from the risks of such lending services.
The Timeline of Regulatory Decisions
The initial discussions for these investor protection regulations began on September 1, 2022. This was when the SEC approved the need for security warnings by cryptocurrency business operators to disclose the risks of trading cryptocurrencies. The rules that now forbid digital asset business operators from providing services or supporting deposit-taking and lending services were proposed during meetings on December 1, 2022, and May 11, 2023.
Regulatory Response to the Crypto Lending Crisis
These new rules came as a response to the severe crypto lending crisis during the bear market in 2022. Several crypto lending firms, which had collected billions in customer deposits with promises of hefty returns, went bankrupt during the bear market. Major firms like Celsius and BlockFi also filed for bankruptcy, leaving investors’ money stuck in bankruptcy proceedings. The new regulations, effective from July 31, 2023, are hoped to prevent such scenarios in the future.
