Interest in initial coin offerings, or "ICOs" continues to spread among international regulators. Following the lead of Canada, Malaysia, Hong Kong, and the UK, the most recent regulatory body to issue a statement on ICOs is the Security and Exchange Commission, Thailand (SEC Thailand).

That statement sought to caution potential digital token purchasers that the rapid growth of ICOs gives the SEC Thailand concern that "in some cases, ICO may be deliberately used as a tool for fraud or scam." It noted that ICOs expose token purchasers to increased risks relating to "price volatility, inadequate liquidity, cybersecurity," and possible fraud. The statement also pointed out that the cross-border nature of ICOs means that token purchasers may have limited legal protection or recourse should they be exposed to fraud.

At the same time, SEC Thailand recognized that ICOs have value in fundraising for startups. While the Commission noted that some digital tokens may resemble securities and that "[i]n cases where an ICO constitutes offering of securities, the issuer will need to comply with applicable regulatory requirements," it admitted that ICOs "may not yet fit neatly with SEC Thailand's current regulatory framework." For that reason, the Commission's statement took an open approach, welcoming "comments and suggestions from the private sector" as it tries to "balance between supporting digital innovation and protecting investors from potential ICO scams."

SEC Thailand's statement serves as a dual warning to token purchasers and developers alike. First, it emphasized that token sales bring with them a number of unique risks for token purchasers, and any potential purchasers should educate themselves before buying tokens and be mindful of their potential lack of recourse, especially in this still-novel realm. Second, while SEC Thailand did not take an explicit stance as to whether ICOs involve securities, it left the door open to this possibility and did note that some digital tokens may bear a resemblance to securities, particularly given that "digital tokens can diverge widely in design and representation."

While ICOs and digital tokens have the potential to offer unique benefits, token developers and potential purchasers should be aware of both regulatory risks and the potential for fraud.

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