Interview : Rapee Sucharitakul
How do you view new fundraising methods, such as initial coin offerings (ICOs) and crypto-assets, in comparison to traditional ones?
RAPEE SUCHARITAKUL: ICOs will either become the next big thing or exist only as a temporary trend. Nevertheless, we have drafted regulations to control ICOs and the trading of crypto-currencies. Regarding these new fundraising methods, there is a clear distinction between traditional and modern viewpoints. From the more traditional perspective, ICOs have few fundamentals, are crippled with fraud and scams, and offer an irrational evaluation of the coin.
The modern world perspective is the complete opposite. According to this view, ICOs provide an opportunity to effectively raise funds without dealing with a middleman. ICOs also open up a new source of investment the world has never seen before.
It’s very difficult for industry regulators to establish a consensus on this situation. What we need to do is balance the two perspectives and make sure that future offerings follow minimum standards that can be disclosed to the public.
As for ICOs taking over initial public offerings (IPOs), I don’t think this will be the case since ICOs are more concentrated in niche markets, whereas IPOs are more mainstream. ICOs fall into an asset class that needs specialisation from investors and intermediaries; it is not for everyone. Conversely, ICOs suit start-ups targeting specific groups of investors that understand this new type of fundraising. Meanwhile, IPOs come with regulations, credit histories, accounts and investors. These features currently appeal to a larger proportion of investors.
While these two markets will coincide, one will not overtake the other. The ICO market is evolving, and provided that no incidents are recorded, it will grow to be as mature and sophisticated as the IPO market. The bigger question is whether the Stock Exchange of Thailand’s business model will really capture this new market. Nobody knows how far it will go, but we need to understand the new technologies and make an educated guess regarding how the industry will evolve. There will be a lot of trial and error for regulators and authorities, but as long as we are aware of the risks, we can readjust along the way.
What kind of regulatory changes are needed to accommodate new financial products?
RAPEE: While the ICO market is borderless, the IPO market is still localised. Therefore, if we create a set of regulations that is too restrictive, both investors and fundraisers dealing with ICOs will look to take their activities outside of Thailand, as they are able to establish the market elsewhere.
Harmonising ICO regulations worldwide is realistically very difficult to achieve; each country has its own jurisdiction, processes and market ecosystem. There won’t be proper harmonisation but we will still seek to understand what is happening elsewhere and learn from those experiences. In the past, the less developed markets could always learn from the more developed ones, but today we no longer have that luxury, as we are all facing the same challenges. This investment vehicle is new to everyone, and nobody knows how it will evolve in the future.
No matter where regulations are being established, they must prioritise the fundamentals of capital markets, which includes access to information, market transparency, and clear standards for platforms and intermediaries, particularly in the case of “know your customer”. They should also consider how the IPO market is dealing with issues like trade reporting and cybersecurity. However, how jurisdictions deal with each set of principles varies from country to country. Again, no one knows where the ICO market is going or how it will develop, so by having at least some regulations in place, we will have the tools to turn back to the core aspects of the capital market.
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