Thailand is Ready for Tokenizing Real Estate
The legal framework for the tokenization of real estate and other digital securities is ready for deployment in Thailand.
The Thai framework for securities has seen major developments geared towards ensuring legal certainty and regulatory protection for both issuers and investors.
Spearheaded by the explosive growth of the digital asset ecosystem, Thailand is now ready to join the evolution of asset management and investments that blockchain technology provides through asset-tokenization.
“Not only are ICOs and STOs completely legal in Thailand, they can rely on a clear and effective legal framework which provides certainty to market participants and safety for investors.“
Any digital token offering encompassing securities-like rights or features and targeting retail investors has to obtain prior approval from the SEC.
This is not a trivial process, which will require both time and resources to complete. However, certain issuers may be looking to rely on a number of exceptions from the approval, such as:
- The offering is made to any one of these types of investor: institutional, and ultra-high net worth; or
- The offering is made to a specific investor who has a specific relationship with the issuer, as prescribed in the regulation;
- The offering must be made to not more than 50 people within a 12-month period;
- The offering has a total value not exceeding THB 20 million within a 12-month period;
The Legal Framework for Tokenizing Real Estate
Moreover, the Thai SEC has issued a set of regulations governing digital token offerings for different types of assets including real estate. If a digital token refers to real estate (e.g. tokenized interest in SPV holding real estate assets) or is in another way linked to the cash flow generated by real estate, then such digital token offering has to comply with a set of requirements:
- Real Estate:
The construction of the underlying real estate must be complete and ready for use, without being subject to any property rights or disputes. - Investment Value:
The amount or value of the investment in real estate must not be less than 80 percent of the project’s amount or value, or the aggregate value of the real estate to be invested in must not be less than THB 500 million. - Appraisal:
There must be a full appraisal of title documents for disclosing information to investors. This must be carried out by at least two appraisers, who have been approved by the SEC - Establishment of a Trust:
The issuer must set up a trust with any of the following elements:
1. Trust for the holding of ownership or right of possession over real estate;
2. Trust for investment in leasehold rights in real estate;
3. Trust that holds shares in a special purpose vehicle (SPV) that holds the ownership or right of possession over real estate, whereby the shareholding is at least 75 percent of the total number of issued shares, representing at least 75 percent of the total voting rights of the SPV; the shareholding is for the benefit of token holders requiring trustee’s approval for disposal of the assets; - Real Estate Acquisition:
The contract to acquire the real estate must not contain any agreement or obligation that may prevent the sale of the real estate at a fair price.
Dive Into Real Estate Tokenization
This article owes a huge thanks to Baker McKenzie for inspiration and facts. You can read the full report here.
For general legal concepts and framework you can find more information in the Legal Series:
This article was written by Volodymyr Havrylyuk-Yensen and Emil Holtemann.
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