Bangkok, 30 April 2020 - SEC has revised the regulations regarding sale of digital tokens backed by real estate as a means to have a mechanism to protect rights of investors properly and adequately and to improve flexibility in a case that a smart contract does not cover enforcement of investors’ rights. This regulation will effect from 1 May 2020.
Presently,
several companies are interested to
raise fund through digital token offer to finance their investment in office
buildings or condominiums which will later be rented for income shared to
holders of digital tokens or real estate-backed initial coin offering (ICO).
Meanwhile, the regulations have not yet extended to such fund raising method
and a smart contract has not yet covered an enforcement of investors’ rights in
some issues which are activities occurring outside blockchain* and are not based on the smart contract. Such activities
include rent fee collection and payment of income earned from rental fees in the
fiat currency**.
SEC
has revised the following regulations to issue the real estate-backed ICO with
a proper mechanism to protect investors’ rights.
1. Appoint a trustee to protect digital
token holders’ interests. Trustee will possess real estate or hold shares of
special-purpose entity (SPV), which is a real estate owner, at no less than 75%
of SPV’s eligible shares for voting.
2. Real estate must be a project with finished
construction and is ready to generate income. Investment is made at more than
80% of the project.
3. Investment must not be in small units
such as individual houses or condominium units.
4. Asset appraisal must be made by an
asset appraiser determined by SEC.
In
addition, SEC has improved the flexibility for a smart contract that has not
covered the enforcement of investors’ rights as determined in the filing and
prospectus. Other mechanisms equivalent can be used in replacement. For
example, obligations or document with legal enforcement can be arranged.
Replacement mechanisms must be clearly disclosed in the filing and drafted
prospectus. The regulations will go into effect from 1 May 2020 onward.
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Remark :
*Blockchain is a decentralized
database system with a mechanism to have transactions without intermediaries.
** Fiat currency means a currency that
is declared legal tender and ability for debt repayment like the baht.