Thailand
Thailand: Blockchain regulation a tough task despite great potential
Utility tokens and blockchain innovations could cut business operation costs and become a new way of doing business for listed companies in the capital market, however the disclosure method for coin issuance remains a challenge for regulators as it can be arbitrarily announced on other platforms that are not authorised.
Such arbitrary announcements can cause share prices of related parties to have unusual movements.
The share price of M Vision Plc (MVP) soared to close at a ceiling on Thursday of 2.56 baht, its highest since 2018, spurred by an unusual surge in trading volume after two online media platforms published news of a digital token project an hour before the market closed.
The media referred to an interview with the company’s chief executive who revealed the company plans to issue MVP Coin — native utility tokens using Bitkub’s blockchain and smart contracts instead of its existing coupons — that can be used as a method of payment for the company’s eight services.
The coin offering is expected to occur through an MVP subsidiary in which MVP holds a 51% share, including 1 billion coins priced 0.30 baht each initially distributed via an “airdrop” or giveaway and later sold through pre-sales. Revenues totalling 330 million baht from the coins are expected to be gradually recognised after they have been used.
MVP is an IT media, content production and event organiser that has been listed on the Market for Alternative Investment since 2018.
The company has total assets worth 284 million baht, according to the first quarterly data it reported. MVP recorded total revenue of 209 million baht in 2020, down from 334 million in 2019 and 451 million in 2018.
After the market closed, MVP shares came under the market surveillance criteria because of its unusual price movement and surge in trading volume. The shares are on a trading alert list while the Stock Exchange of Thailand waits for clarification from the firm.
The cash balance rule has also been applied to the company’s shares, requiring investors to settle their purchases in cash from May 28 to June 17.
The share price dropped to 2.42 baht in the morning session Friday before closing at 2.52 baht. The company said the issuance of MVP Coin is not an initial coin offering (ICO), but tokenisation of traditional utility coupons into digital ones. The company’s subsidiary plans to buy the rights for the coin issuance from MVP and act as an issuer.
However, on Thursday night details of the digital token project were already being shared on social media by some digital asset gurus, with critics expressing mixed feelings while others wrote the move is unfair to licensed ICO portals.
A source in the digital asset industry who requested anonymity said offering some free coins in the initial stages is normal. An airdrop or giveaway of the coins is not fundraising.
MVP Coin is a ready-to-use utility token that is not required to be offered via an ICO portal licensed by the Securities and Exchange Commission (SEC).
The source said other non-fundraising approaches produce similar results.
“Many companies might follow this approach and it could become the new norm because they might see it as their only way to compete,” said the source.
In addition, decentralised finance (DeFi) is also another challenge for regulators as it allows businesses or IT developers to use blockchain technology and smart contracts to directly provide financial services to their customers without banks or other financial intermediaries.
Visit Ongpipattanakul, managing director of Trinity Securities, said DeFi can help distribute saving units to people, but it should be under the supervision of some authority.
Otherwise, DeFi could cause a global financial crisis similar to the subprime mortgage crisis in 2008-2009, although at this point the size of Defi’s market cap is still small, he said.
A crisis could occur if the DeFi market grows larger than the GDP of major economies, or if it involves central banks or affects physical money, said Mr Visit.
The subprime crisis was linked to mortgage-backed securities, a type of financial instrument backed by interest income from the subprime loan or high-yield property loan that was charged to mortgage borrowers who bought housing they couldn’t afford.
To reduce the risk of defaults, financial institutions issued credit default swaps to curb credit defaults.
“Now everyone is seeing there is a bubble in the DeFi market, but the market continues because investors are motivated by very high returns,” said Mr Visit. “Investors think the bubble will not burst soon because everyone is being careful. They think they can get out before the bubble bursts. Keep in mind the 2008 subprime mortgage crisis had been underway since 2004 and took 4-5 years to erupt.”
He said the current DeFi situation is beyond the control of regulators because DeFi owners mostly operate overseas and the technology changes so quickly regulating the industry has become a challenge for the SEC and central banks around the world.
In separate news, on Friday the SEC applied civil sanctions against Jakkaphong Jakrajutatip, JKN’s executive officer, for disseminating messages that may cause misunderstanding. Earlier she had arbitrarily disclosed information regarding JKN’s hemp businesses and stock prices on Facebook. Ms Jakkaphong was fined 2,166,840 baht for the offence.
Source: https://www.bangkokpost.com/business/2124247/blockchain-regulation-a-tough-task-despite-great-potential