Thai DeFi project plummets by 99%! SEC says it will step into DeFi regulatory space in the future

Just this year alone, Thai regulatory authorities have released regulatory messages several times, and the latest document indicates that their next regulatory target will be the DeFi sector, particularly DeFi protocols with issued tokens.

Warning about Unlicensed Trading Platforms

As reported by the Bangkok Post on 1/5, the Securities and Exchange Commission (SEC) of Thailand has warned investors to be cautious about cryptocurrency investments. Apart from the potential high risks associated with massive volatility, investors are reminded to only trade on regulated platforms. SEC Secretary-General Ruenvadee Suwanmongkol stated:

Cryptocurrencies are like gold, traded globally, and investors must be mindful of regulations as exchanges are global, and we can only oversee market participants who are authorized, which poses certain risks.

Conditions Imposed on Cryptocurrency Investors

As reported by the Bangkok Post on 2/15, the SEC Secretary-General believes that a large number of investors are entering the cryptocurrency investment field, leading to a significant increase in new registrations on local exchanges. Therefore, it is deemed necessary to establish conditions for qualified investors, such as age, income levels, trading experience, and relevant financial knowledge.

Public Outcry Prompts SEC Clarification

Interestingly, the Thai SEC's move has sparked discontent among numerous cryptocurrency investors, with users expressing anger over the regulations, claiming that it deliberately excludes those with middle to low incomes (annual income must reach 1 million Thai baht, approximately 880,000 New Taiwan dollars).

Subsequently, the SEC clarified that the draft was just to gauge public opinion and could still be revised based on stakeholders' feedback. The Secretary-General stated:

I proposed overly stringent conditions to prompt public feedback on the matter, but I did not intend to use this as a standard for execution.

Enhanced Regulation of Stablecoins

Previously reported, on 3/18, the Bank of Thailand warned the public against using THT stablecoin, stating that the asset is not bound by laws and protections, exposing users to risks of online theft and money laundering.

THT is a stablecoin protocol where Terra issues various stablecoins anchored by the native token LUNA, such as the US dollar UST, the Korean won KRT, the International Monetary Fund's Special Drawing Rights SDT, and the Thai baht THT.

The following day, the Bank of Thailand announced plans to enact stablecoin regulations this year, supporting compliant stablecoins backed by tangible assets and algorithmic stablecoins.

Latest: DeFi Sector

As reported by the Bangkok Post on 6/1, the SEC announced that in the future, activities related to DeFi projects involving digital currency issuance may require approval from regulatory authorities.

This statement followed the token crash of Tuktuk Finance, a project launched on the smart contract platform operated by the local exchange Bitkub. The token TUK surged to hundreds of dollars and plummeted to $1 within minutes.

The SEC stated:

Issuing digital currencies in the future will require authorization and oversight from the SEC, and issuers must disclose token information in accordance with relevant regulations.

In practice, Thailand is moving towards an integrated regulatory approach, and due to the significant growth in cryptocurrency users, stricter KYC procedures are expected to be introduced in July this year to enhance account security.