Text by: RYAN YOON AND YOON LEE
Compiled by: TechFlow
The tokenization of real world assets has become one of the most popular topics in the crypto space. In this area, Thailand’s Destiny Token experiment deserves our attention. This is a relatively successful tokenization financing case in Thailand. From this case, we can explore the experience and lessons of the RWA market.
Summary
Potential of the RWA Market: Tokenization of real-world assets has huge potential to unlock the value of assets that have not yet been financialized
Thailand RWA market: Thailand has tested the feasibility of tokenized financing through the "Destiny Token" project, but the RWA market is still in its infancy
The future of the RWA market: The market is expected to provide institutional investors with a stable alternative investment opportunity and bring a range of benefits and utility to retail investors beyond investment returns, but there are still some obstacles to overcome.
Early interest in the RWA market
Many experts believe that one of the key narratives of the future of the crypto market is the tokenization of real world assets (RWA). The RWA market is closely related to financial innovation, which is the fundamental purpose of blockchain technology. Especially in the process of converting non-financialized assets into valuable financial instruments. Tokenization of various assets including paintings and real estate is underway. There have also been significant advances in technology, with the Solana Foundation recently announcing the expansion of the Solana Program Library (SPL) to serve the RWA market.
Nevertheless, the RWA market is still in its early stages, and so far, the tokenization of traditional assets such as US Treasuries has dominated the market. Although various tokenized products have been developed since the market became active, it is difficult to have a clear understanding of the actual sales of these products and their limitations. In this regard, the case of Thailand, which successfully conducted a token-based financing in 2022 and completed early redemption in 2023, provides important perspectives for our outlook on the RWA market.
Thailand’s open ICO environment
Emergency Decree Regarding Digital Asset Businesses
Below are two excerpts from the emergency decree for digital asset businesses:
Digital token portal service provider: refers to a service provider that provides an electronic system for the issuance of newly issued digital tokens. The service provider is responsible for verifying the characteristics of the digital tokens to be issued, the qualifications of the issuer, and the completeness and accuracy of the registration statement and prospectus for the issuance of digital tokens or any other information disclosed through the service provider.
Chapter 3, Section 17: When offering newly issued digital tokens to the public, the digital token issuer that intends to offer digital tokens must be a legal person of the limited liability company or public limited company category and shall obtain approval from the Office of the Securities and Exchange Commission and submit to the Office of the Securities and Exchange Commission a registration statement and a draft prospectus for the offering of digital tokens, which shall contain the details specified in the Securities and Exchange Commission’s notification.
The Thai government took a leading position in the market by becoming the first country in Asia to enact a cryptocurrency bill and allow ICOs in May 2018. In November 2023, the government further classified ICOs to create a transparent and secure market. The new regulations mainly target debt-based ICOs and infrastructure-supported ICOs, and detail the review and disclosure requirements based on the nature of the product.
At the industry level, commercial banks are allowed to set up subsidiaries to conduct cryptocurrency brokerage business. Financial institutions are prohibited from investing more than 3% of their capital in the cryptocurrency market in 2022. This is interpreted as allowing commercial banks to help revitalize the market while stabilizing emerging markets by setting limits.
Thailand's first token financing "Destiny Token"
About DESTINY Investment Token
The detailed information of the project is as follows:
Thailand's Destiny Token project has attracted widespread attention as the first case of using tokens for financing. The project aims to raise funds for the film "Love Destiny" produced by GDH 559 Co., Ltd., a subsidiary of GGM Grammy, Thailand's largest integrated entertainment company. The fundraising activity was carried out by Kubix, a subsidiary of Kasikornbank, in the first half of 2022.
The project raised a total of 265.23 million baht (about 7.96 million U.S. dollars). Early redemption in 2023 gave investors a base return of 2.99% over an investment period of up to two years, plus an additional return of 2.01% based on the project's successful performance. In addition to the investment terms, investors were included in the film's end credits for their contribution to the film's success and received additional benefits such as invitations to special events and film premieres.
The deposit rate in Thailand is about 0.51%, so investors are able to get relatively high returns. This shows that the project seems to have been successful in terms of financing. However, a year has passed since the early redemption of the Thai Destiny Token project, and no other tokenized financing cases have appeared. This is because the RWA market is still in its early stages.
The market is still in its early stages
Challenges for retail investors
The first inconvenience is the KYC identity verification process. Currently, Kubix requires three pieces of private information when registering:
ID information, including the number on the back of the card
Bank account information
NDID (National Digital ID) Registration and Verification
All information needs to be filled out or verified during the registration process, which is not unique to Thailand. The registration process is complicated because participants must fill out a form with specific information and take a photo for verification.
In addition, for investments exceeding THB 300,000 (USD 84,000), one must register as a special large investor, which means one of the following criteria must be met. Similar restrictive criteria exist in other countries:
Annual income over 6 million THB (169,000 USD)
Securities investments of at least THB 30 million (USD 845,000), including deposits valued at more than THB 15 million (USD 422,000)
Net worth more than 60 million baht ($1.7 million), excluding the value of the home
Evaluation Process
According to our conversations with Kubix, the main reasons for the delay of new projects are the difficulty in convincing asset holders to participate and the long evaluation process.
Even though there are already secure and successful projects like Destiny Token, convincing new asset holders to participate in tokenized projects in the early markets seems to take a lot of time and effort.
In addition, ICO legislation was amended in November 2023. This resulted in a refinement of product classification and additional review document requirements. These changes made the project review process more complex and time-consuming. Although Kubix plans to launch new products in the future, it is expected that these factors will delay the launch of the project.
What we need to know about the RWA market
RWA is suitable for institutional investors who value stability
First, the yield of RWA products is not attractive to cryptocurrency investors. With major cryptocurrency exchanges such as Binance and OKX offering up to 10% annual interest rates on staking, the maximum annual interest rate of 5% for projects such as "Destiny Token" is relatively low. For retail investors who are not familiar with cryptocurrencies, these rates may feel somewhat insufficient, while restrictive sales terms and complex evaluation processes may be another obstacle.
For institutional investors, the situation may be different. While retail investors may think that Binance and OKX are safe, unexpected events like FTX show that depositing money on centralized exchanges is fraught with risks. Projects like Destiny Token can be a good alternative for institutions, as deposits in exchanges do not provide funding efficiency.
Additionally, targeting a small number of institutional investors can reduce customer support costs, which can be quite significant given the complex registration process. This can improve project operational efficiency and reduce administrative costs.
Providing more diverse token benefits to retail investors
When targeting individual investors, it is worth noting that Destiny Token provides various benefits to its holders. For example, "HAPPYDAY TOKEN" allows investors to participate in certain events with a movie guest, where they can have lunch, take commemorative photos, and watch a movie. These practical benefits provide attractive added value for movie lovers and create a unique experience beyond simple investment. Therefore, these practical benefits can also become an attractive option for retail investors.
in conclusion
The RWA market, and in particular Thailand’s Destiny Token project, has become an important example of the possibilities and limitations of tokenizing real-world assets. The RWA market is still in its early stages and faces many challenges. Innovative projects like Destiny Token are testing the possibilities and potential of this new market and providing important perspectives for all stakeholders.
The RWA market is expected to develop into a stable alternative investment opportunity for institutional investors, providing a range of benefits and utility beyond investment returns to retail investors. Of course, there are obstacles such as limited product offerings, complex qualification procedures, and lengthy regulatory review times, which will continue to require coordination between regulators and new services that prioritize investor protection. Hopefully, the challenges and successes of Thailand's RWA market regulation and project Destiny Token will provide valuable lessons for subsequent projects.
