Thai SEC Cautions Investors About Risks of DeFi Transactions Thai SEC Cautions Investors against Risks of DeFi Transactions

The Securities and Exchange Commission of Thailand (Thai SEC) has asked cryptocurrency investors in the country to pay attention to DeFi transactions, calling them risky.

The watchdog said local regulators have no control over the emerging industry.

Popular but not proof of everything

In a statement on Wednesday, the financial and capital markets watchdog said DeFi services have become popular, especially deposit taking and lending services. But these services are risky as the mechanism to control operations that enforce terms in smart contracts may be absent in DeFi platforms.

“Investors are therefore advised to study any DeFi program before joining … as deposit taking and lending services are not regulated by the financial and capital market regulators in Thailand,” reported the media quoted by the statement. Thai SCE.

Further enumerating the risks, the supervisor noted that excessive leverage and inaccurate operational information on terms, conditions and features could leave investors exposed to exploitation. DeFi platforms attract investors in transactions that show high returns, but there are hidden risks, including the possibility of rug-pull, he added.

The Thai SEC warning comes in the wake of July 21, when cryptocurrency exchange Zipmex suspended withdrawals for its local clients. Zipmex’s decision stemmed from liquidity concerns stemming from its $ 53 million exposure to troubled lending platforms Babel Finance and Celsius Network.

Echoes with the collapse of the current DeFi

According to a report by Chainalysis, of the $ 1.7 billion worth of digital assets stolen from the beginning of the year through May, 97% belonged to DeFi.

A May 13 report by DappRadar said DeFi’s total frozen value fell to $ 83.4 billion nominal, down 48% year to date, with a major portion of the decline (over 40%). ) in the past seven days.

During the market crash from May to July, there was a massive exodus of investors from DeFi to stablecoin and then to fiat, leading to the dumping of DeFi tokens. According to industry reports, DeFi’s market capitalization plummeted 75% in the second quarter from a nominal $ 142 billion to $ 36 billion in three months.

Thai regulators planning an overhaul

The SEC statement also said the regulator is planning a review of regulatory guidelines on digital assets and made it clear that it does not support DeFi transactions – deposit taking and lending – in either centralized or decentralized finance.

It is also discussing the matter with other stakeholders to determine regulatory guidelines to protect investors.

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