Thailand's Securities and Exchange Commission (SEC) is set to draft new regulations regarding decentralized finance (DeFi) projects.

According to reports from Bangkok post, DeFi platforms may require a license to operate in Thailand soon.

Per the SEC statement, the new regulation would target DeFi protocols that issue tokens. The statement reads,

“The issuance of digital tokens must be authorized and overseen by the Securities and Exchange Commission, and the issuer is required to disclose information and offer the coins through the token portals licensed under the Digital Asset Decree.”

The SEC clampdown on the country’s DeFi sector follows the listing of the token of local DeFi protocol Tuktuk (TUK) Finance on cryptocurrency exchange Bitkub Chain.

Following its debut, TUK soared in value to the tune of “several hundred dollars” before crashing to $1 a few minutes after.

Speaking on the new wave of regulations, the CEO of Ava Advisor, Niran Pravithana, said that it was important that the announcement was made due to the several fraudulent tokens issued recently.

Pravithana added that criminals behind the fraudulent tokens use messenger applications like Telegram and manipulate the token prices.

Dome Charoenyost, the founder of Tokenine, also supported the new policy, saying that the law gives the SEC the authority to regulate coin issuance and supervise licensed intermediaries.

Thailand laid out more regulations in the cryptocurrency industry this year, which could be attributed to the booming crypto adoption in the country.

In April, data compiled by the Thai SEC and released by Bloomberg indicated a combined volume across licensed Thai crypto exchanges increased from 574.5 million in November 2020 to $3.96 billion in February this year.

The number of registered Thailand crypto accounts on exchanges in Thailand also spiked from 160,000 in 2020 to nearly 700,000 at the start of May 2021.

Upon seeing the increasing usage of crypto exchanges, Thailand's financial regulators introduced new rules regarding account creation at crypto-asset exchanges.

Last month, Thailand's Anti-Money Laundering Office introduced strict know-your-customer (KYC) protocols. The regulator wants crypto exchanges to verify the identities of new customers in-person using a “dip-chip” machine.

The dip-chip machines require customers to be physically present for the verification process. This is because the machines operate by scanning the Thai citizen ID cards. Despite the government's move on the DeFi space, financial institutions have remained receptive to the sector.

The Siam Commercial Bank announced a $50 million investment fund in February, and Thailand's Fourth-Largest Bank Kbank disclosed its usage of DeFi services in exploring a new project.

In the same vein, the Brooker Group, a financial consultancy firm, revealed plans to invest nearly $50 million in decentralized finance (DeFi) and decentralized application (dapp) projects last month.

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