Thailand’s ICO markets and the Forestias project

Getting Things Done: The Thailand ICO

Getting Things Done: The Thailand ICO

Thailand’s second ICO: The Forestias

Cryptocurrency project: According to press releases, Magnolia Development Corporation signed a formal engagement letter with Monaker Group, Inc., the indirect stakeholder in the Thai ICO portal Longroot Holding (Thailand)  Co., Ltd. to represent Magnolia as its financial advisor for a proposed ICO offering targeted between US$ 500 – 700 million for the Forestias, Thailand’s largest property development project.

Ownership structure: Longroot Holding (Thailand)  Co., Ltd. is controlled by Longroot Limited in the Cayman Islands because it controls 90% of the Thai company’s voting shares. The shares in Longroot Cayman have been subscribed on January 5, 2021, by Longroot, Inc., a Delaware corporation, that is wholly owned by the Monaker Group, Inc. Therefore, the U.S. Monaker Group will act as advisors as well as the controlling ICO Portal. 

Property: The Forestias is a real estate development promoted as “The Land of Everlasting Happiness” to develop a smart green city in Bangkok. It is made up of residential zones, retail and office spaces, a 6-star hotel, health facilities, cultural and community centers as well as educational and learning institutions. It is located in Bangna close to Suvarnabhumi Airport. The property development is valued at approximately THB 125 billion (roughly US$ 4.12 billion).

Update: Further developments of the exciting ICO project will be monitored on this page.  

Thailand’s Initial Coin Offering framework

Start-up financing: A start-up business can be financed through equity contributions, by obtaining a loan, or by selling its (future) products on the public markets. The third method has been developed and made available by the design of digital tokens and the utilization of blockchain technologies. Apart from utility tokens, Thailand gets its regulations straight for regulated ICOs that offer investment tokens, as this term is understood by Thailand’s SEC.

Scams of the past: International scam structures ruined the reputation of free and unregulated ICO offers. After US$ 30 billion had been invested and mainly lost in 2016 – 2019, there is no more stupid money available for crazy projects. The reputation loss of this finance scheme killed effectively the global ICO market. As a consequence, Thailand introduced in 2018 a regulatory framework for initial coin offerings. 

Purpose: The regulatory framework has the purpose to create a controlled and protected legal and business environment for the development of an ICO market. It requires initial due diligence on the feasibility of the start-up as a service for prospective ICO investors and token buyers. Its aim is to protect the market and stakehodlers against exit scams and fraudulent ICO projects. Thailand’s ICO will be solid and trustworthy, and it needs just a pilot project to get things started.

Regulations as a marketing tool: Thailand’s fintech legislation creates the perfect marketing tool to attract international investors in crypto-businesses. The fact that each ICO project has to be audited by an independent, government-licensed ICO portal company and, in addition, obtain the license by Thailand’s Security Exchange Commission, and, even more, after the licensing process has to fulfill strict compliance requirements, is an invitation for ICO stakehodlers from all over the world to bring their ICO project to Thailand and to benefit from the trust and confidence in the regulatory framework in the land of the smile.

Seven steps to getting the ICO done in Thailand

This post describes the seven essential elements to get the ICO successfully licensed and in which areas PUGNATORIUS Ltd. can assist and support.

#1. Business, business idea, and problem-solving: An ICO is typically accomplished by a start-up company or for new (start-up) products. Products are goods or services including the granting of access to a network.

For an ICO, these products are in a certain status of development and typically not ready for the market yet. Finished and available products are subject to tokenization projects which under certain conditions can be structured as ICO. Any indirect participation in the start-up’s dividends, interest payments, royalties, or similar benefits results in a security that can’t be done under Thailand’s digital asset framework.

The project has to be sustainable. It has to fulfill the legal and economic requirements to establish a long-term business in its market. Seven relevant key data are (i) the corporate entity and its legal and tax arrangement, (ii) the shareholders and its experiences and background, (iii) the internal corporate constitution and structure, (iv) the directors and executives, (v) the feasibility of the business venture, (vi) reasonable roadmaps and long-term procedures, and (vii) a certain form of proof of concept for the venture. The business model has to give evidence for successful products. High profitability is not required, because the token investors would/should not participate in this.

#2. Blockchain technology: Compared with a centralized database, blockchain technology is more expensive, much slower, and has limited privacy. The blockchain-based business has to utilize particular blockchain advantages that over-compensate these economic disadvantages. Practical examples are that the business utilizes the blockchain as a record-keeping tool for the long-term storage of information, data, and files, as proof and verification tool, immune from data falsification with complete traceability. or as proof of work for certain tasks. Blockchain advantages mainly require that the public has the option to verify each transaction directly on the blockchain, apart from the web or phone application. Peer-to-peer platforms like Uber and AirBnB maintain web-based centralized databases and see no advantage in the blockchain technology.

#3. Feasible token economy model: Neither a casino jeton nor a fun coupon – the intrinsic characteristics and associated rights of the token are essential. It has to be clear, which and how many products are subject to the token, and how this value is assured, by a smart contract, an empty promise, or something in between. The token which is sold in the ICO needs such utility as its intrinsic value. The smart contract has to be verifiably designed to reach this aim. These strong intrinsic characteristics and associated rights have to be truly and clearly described.

#4. Whitepaper: The offering prospectus should contain all required or necessary information. The potential token buyer will look into these four core aspects: These are the description of the (i) implementation status of the start-up business. (ii) prospected sustainability of such business, (iii) intended use of the ICO proceeds and how this is assured, and (iv) particular use purpose and the counter value of the token.

#5. Legislation and regulations: The ICO has to meet the applicable regulations for any pre-sales, roadshows, and similar arrangements, for the country in which the ICO company is located, and in any jurisdiction where the token is offered. To accomplish an ICO under foreign law, although the key personnel, key buyer base, or the start-up is located in Thailand, should be carefully reviewed under feasibility and legality aspects.

#6. ICO procedure: The procedures of the Thai ICO have to follow Thailand’s complex regulatory framework. Key aspects are the Thai company as ICO promoter and the requirements regarding its internal constitution, shareholders, and officers. The approval by a private ICO portal company is followed by the licensing by the SEC. Limitations under laws, regulations, and licenses apply. 

#7. ICO limitations: When conducting ICO transactions, only four plus one coins are excepted as a medium of exchange. These are Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Stellar (XLM), and Baht (THB). The SEC rectifies this list with the criteria of sufficient market liquidity, a well-designed decentralized system, and the ability to use a trading pair with other cryptocurrencies. The legal requirements do not end with the ICO itself. Additional requirements cover the start-up, the use of the proceeds, and the ICO itself. The long-term success of the ICO must not be identical to the long-term success of the start-up and its products.

ICO advisory and professional services in Thailand’s Fin-Tech sector

PUGNATORIUS Ltd. is the Bangkok-based specialist provider of legal services and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. Sophisticated solutions in a complex legal environment. Serious legal and tax advice in the land of smile.

The law firm advises and supports challenging ICO projects in a multi-regulatory and multi-legislation environment. The firm’s lawyers are involved for some years in virtually each and every aspect of the crypto industry in Thailand and abroad. Based on this wealth of experiences, an international clientele is guided through the corporate, foreign investment, taxation, fintech, and digital asset regulatory framework. This includes the negotiations with the ICO portal company, Thailand’s SEC and other regulatory authorities.

Details can be found at “Legal advice, tax structuring, transaction support services and business matchmaking on Fintech, cryptocurrency and digital asset ventures“.

Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice, nor an attorney-client relationship, nor equips with the insights, tools or skills to do this without the law firm.

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