A4: Kasetsart University | FinTech and Contracts (2018)

© 2018 Baker & McKenzie Ltd.
FinTech Trends
2
Payments
Deposits &
Financing
Capital
Market
Investments
Capital
Raising
∙ e-Payment / Mobile Payment
∙ P2P Value Transfer Networks
∙ Cryptocurrencies
∙ P2P Lending
∙ Automated Lending
∙ Alternative Credit Adjudication
∙ Online invoice finance
∙ AI
∙ Automated Trading Platforms
∙ Blockchain and Smart Contracts
∙ Micro-Investing
∙ Social Trading Platforms
∙ Robo Advisor
∙ Equity crowdfunding
∙ Virtual Exchanges
∙ ICO

FinTech Ecosystem
3
Core
Fintech
Ecosystem
Financial Institutions FinTech Startups Venture Capital
Incubators/
Accelerators
Government Regulators
Research Institutes
Core
Fintech
Ecosystem
Universities
Core
Ecosystem
Facilitators
Facilitators
Source: Accenture FinTech Research 2018

FinTech Legal Framework
4

Financial licensing/regulatory landscape
5
a. Financial
Institution
Businesses Act
• Commercial bank
• Finance company
• Credit foncier
company
• Representative
office
• Section 5 (other
businesses relating
to public funding,
credit, financial
businesses
designated under
royal decree)
b. Securities
and Exchange
Act
• Securities broker
• Securities dealer
• Securities
underwriter
• Investment advisor
• Fund management
(mutual funds,
private funds,
provident funds)
• Venture capital
company
• Securities inter-
dealer broker
• Securities
borrowing and
lending
• Trustee
c. Derivatives
Act
• Derivatives agent
• Derivatives dealer
• Derivatives advisor
• Derivatives fund
management
d. Exchange
Control Act
• Authorized juristic
person
• Authorized person
• International money
transfer agent
• Treasury center
• Authorized
company

6
e. Payment
System Act
• E-money service
• credit card network service
• EDC network service
• transaction switching
service for payment (one
and multi systems),
• clearing service,
• settlement service,
• substitute payment / bill
payment / payment service
provider service,
• electronic payment service
through any device or
network
f. Life
Insurance Act /
Non-Life
Insurance Act
• Life / Non-Life insurance
companies
• Life / Non-Life insurance agent
• Life / Non-Life insurance
broker
g. Notification
of the
Revolution
Council No. 58
• Credit card
• Personal loan under
supervision
• Nano-finance
• e-Money card

7
h. Other financial
related businesses
• Special financial institutions
• Asset management companies
• Credit bureau
i. Emergency
Decree on Digital
Asset Businesses
• Issuers of digital tokens
• ICO Portals
• Digital Asset Exchange
• Digital Asset Broker
• Digital Asset Dealer

Electronic Transactions Act
8
Concepts: The ETA recognizes electronic data, methods of
dispatch and receipt of electronic data, use of electronic
signatures, and the evidential admissibility of electronic data.
Enforceability: The binding effect and legal enforcement of
any message cannot be denied merely on the ground that
the message is in the form of electronic data.
Formality or required evidence - if the message has been
made in or as electronic data that is accessible and can be
recovered for use without change of meaning, the message
will be deemed to have been made in writing.

Electronic Transactions Act
9
Electronic signature - Deemed signed if,
the method used can identify the owner of the signature and show that he has
certified the message in the electronic data as being his own; and
such method is trustworthy and suitable for the objective in making or transmitting
the electronic data with due regard to the prevailing circumstances or an agreement
by the parties.
Trustworthy electronic signatures (digital signatures)
the signature creation data is linked to the signature’s owner;
the signature creation data was, at the time of creating, under the control of the
signature’s owner;
any alteration to the electronic signature, made after the time of creating, is
detectable; and
where the purpose of the legal requirement for a signature is to provide assurance
as to the completeness and integrity of the message, any alteration made to that
message after the time of signing is detectable.

Summary of the draft data protection bill (May 2018)
10
The Thai Cabinet approved "in principle" the Personal Data Protection Bill (the "PDPB")
in January 2015. If the NLA endorses the PDPB, it will be passed into law. This would be
the first consolidated data protection law in Thailand.
Under the PDPB, personal data cannot be collected, used, or disclosed unless consent
is obtained from the data owner, and the transfer of personal data to other countries
must comply with a sub-regulation to be issued by the Data Privacy Committee.
Moreover, the data controller is also required to regularly perform a data protection
impact assessment.
Consent
• must be made in writing or through electronic systems, unless that method is not possible
by nature.
• the personal data controller must notify the personal data owner of the objective for the
collection, use, or disclosure of personal data.
• The Personal Data Protection Committee may require personal data controllers to request
consent from personal data owners in accordance with the form and statement to be
prescribed by the Committee.

Structure of the Payment System Act B.E. 2560 (the “PSA”)
11
BAHTNET, ICAS
regulated by BOT
Chapter 1: Systemically Important
Payment Systems
(e.g. Payment systems of BOT (sec. 5-11)
Chapter 4: Supervision, Examination and Rectification of Conditions or Operations ( sec.24 – sec.34)
หมวด 5 การอทธรณ์ ( ม.35)
Chapter 2: Regulated Payment Systems
(sec.12- 15)
Chapter 3: Regulated Payment Services
(sec.16-23)
Licensing
• Designated by MOF
• Licensed by MOF
• Licensed by MOF
Registration
• Registered with BOT
Chapter 5: Appeal (sec.35)
Chapter 6: Penalty
- Administrative Penalties (sec. 36- sec.42)
- Criminal Penalties (sec.43 – sec. 55)
Transitional Provisions (sec.56)
Persons operating the business under this Act prior to or at the time this Act became effective may continue such
business for a period of 120 days from the date of the MOF notification designating the regulated payment systems
or regulated payment services.

PSA: Regulated payment activities
12
Regulated payment systems

PSA: Regulated payment activities
13
Regulated payment services

14
Royal Decree regarding supervision of e-
Payment Service Businesses Conducted by
SFIs effective
Cabinet
approved
National e-
Payment
Master Plan
with several
projects
launched since
BOT regulatory developments
2016 2018
Jul Oct 2017 Apr Jul Oct 2018
issued
public
hearing on
P2P
lending
Set up specific FinTech
department
launched
FinTech
Regulator
y sandbox
Guiding Principles for Trusted
Mobile Payment
FIs exited BOT sandbox
and are allowed to provide
QR code payment service
via mobile apps
BOT circular
providing
guidelines
allowing FIs
to operate
digital asset
businesses
Issued KYC requirements for account
openings for accepting public deposits
and funds, allows FIs to accept
deposits/funds via electronic means
Guidelines on QR codes for payment
and money remittance
Final Draft FinTech Act will
be submitted via NLC
procedure
Payment
System Act and
sub-regulations
e-payment regulatory
developments
Completed
Ongoing
Notification
No. SorNorSor
3/2561 re :
Guideline on
Banking
Channels for
Commercial
Bank
Jul
Apr Oct

15
Reduction of paid-up registered
capital
Sub-regulations issued
under the Emergency
Decree on Digital Assets
released.
Notifications regarding ICO,
ICO Portals, and Digital
Asset Businesses
(Exchange/Broker/Dealer)
2017 Jan Mar May Jul Sep Nov 2018
Set up specific FinTech department
Reg for equity crowdfunding allows
qualificate companies to crowdfund by
offering shares through an SEC approved
electronic platform
Launch of several regulatory sandboxes for
use of FinTech to support securities clearing
houses, depositories and registrars
Notification No. gor Thor. 22/2560
regarding regulatory sandbox for ETPs
Notification No. Gor Thor 22/2560
regarding regulatory sandbox for KYC
technology effective
SEC regulatory developments
Completed
Ongoing
2018
Public Hearing of
supervision principle
on applying FinTech
products to analyze
and provide
investment
suggestion

16
2016 2018
Sep Nov 2017 Mar May Jul Sep Nov 2018 Mar May
Amendments to Computer Crime Act B.E.
2550 1/2/2017
Thai Cabinet approved draft bill to allow
private limited companies with one
shareholder1/5/2017
Set up of FinTech Committee
2/4/2017
Revenue Dept. grants tax
exemptions for VCs
2/21/2017
Draft National
cybersecurity Bill
under consideration
by the Council of
State
Latest amendments to Electronic
Transaction Act under consideration
SMART visa opens
National
digital ID
expected
to go live
Relaxation of BOT investment regulation
and consolidated supervision for
commercial banks
9/21/2016
MoC amendments to Civil
and Commercial Code to
allow more flexibility for
private companies
8/14/2017
SETs Live Platform
launched to provide
startups access to
capital from VCs,
CVCs and other
investors
Commercial banks can now
operate an e -Marketplace
platform
draft Personal
Data Protection
Bill is revised
Issued public hearing on
draft amendment on
the Credit Information
Business Act, revised to
include FinTech (P2P)
businesses as a FI
General regulatory and legal
development
VC regulatory
developments
Completed
Ongoing
Emergency Decree on
Digital Asset Business
B.E. 2561 (2017)
released
Jul Sep

© 2018 Baker & McKenzie Ltd. 17
Supporting FinTech
• FinTech department
• Regulatory sandboxes (BOT,
SEC, OIC, F13)
• Easing existing rules to
promote FinTech (e-KYC, e-
Marketplace, SMART visa)
• Registered capital reduction
for securities businesses
• Company structure and
operations (pending)
• Data accessibility (pending)
• FinTech Promotion Act
(pending)
• National Digital ID (pending)
Regulating FinTech
• Payment System Act (effective as
of April 16, 2018)
• Trusted mobile payment
• QR Code payment
• Equity Crowdfunding
• Insurance activities via electronic
channels
• Banking agents and banking
channels
• Emergency Decrees to regulate
digital asset-related transactions
(pending)
• ICO (pending)
• P2P lending (pending)
• Amendment to Credit Bureau Act
(pending)
• Draft Personal Data Protection Bill
(pending)
Supporting startup
ecosystem
• Tax incentives for registered
VC / PE trust
• Tax incentives for startups
• Relaxation of BOT’s
regulations on investing in
FinTech
• LIVE platform
• Draft Startup Act (pending)
FinTech Legal/Regulatory Landscape

Blockchain
and Laws

© 2018 Baker McKenzie
Current legal landscape
19
 Law is always playing catch-up
 Limited blockchain legal and regulatory developments
globally
 Regulators generally taking a ‘wait and see approach’
 Regulatory Sandboxes
 For now, apply existing law to each case
 Monitor legal developments
“The FCA continues to
monitor the
development of this
technology but is yet to
take a stance until its
application is clearer”
“Government needs to
consider regulatory
framework [for DLT].
Regulation will need to
evolve in parallel with
development of new
implementations and
applications”
“Unclear regulatory environment and
legal risks identified as key challenges
to DLT adoption”

© 2018 Baker McKenzie
 No one-size-fits-all approach
 Depends on use case and nature of technology (and, in particular,
whether public/private)
 Needs multi-disciplinary legal team
Blockchain and legal issues
20
“It depends”
 data privacy
 governing law and
jurisdiction
 who would regulate?
Issues which could be relevant include:
 regulatory compliance
 contract law
 consumer protection
 competition law
 corporate law
 securities law
 intellectual property
 dispute resolution

Clauses for automation
Blockchain
SMART CONTRACT CODE
Legal
Agreement
Operational Clauses
• Have conditional logic
• Suited to automation and
self-execution
• i.e. upon occurrence of
specific time/event, an
action occurs
• e.g. A clause that requires
an amount to be payable on
a payment date equal to the
number of options exercised
multiplied by a strike price
differential
Non-Operational Clauses
• Do not require conditional
logic
• e.g. A clause specifying what
law should govern in the
event of any dispute
• e.g. A representation that a
party’s obligations under the
legal agreement constitute
legal, valid and binding
obligations

Legal considerations for blockchain
22
 validity and enforceability of tokens
 record-keeping requirements and evidentiary rules
 smart contracts
 what is smart contracts?
 when is contract executed / effective?
 legal terms subject to interpretation
 legal status of distributed autonomous organization
 data privacy / bank secrecy
 IT security / cyber security
 Situs
 AML/CTF
 industry standards / international standards
Blockchain

Specific legal issues for blockchain / DLT
 depends on specific products/services
• financial markets
 financial laws
 cryptocurrency
 exchange control
 tax
 regulations (e.g. SEC hearing on
 use of blockchain in ECF)
Blockchain / DLT

Cryptocurrencies and ICO

Cryptocurrencies and ICOs
26

27
ICOs

28
ICOs

Digital Assets in Thailand
29

30

31

32

33

34

35

The Changing FinTech Landscape
37
Trade secrets Open source
Competition
Jurisdiction specific
Closed
Unregulated
Collaboration
Cross-border
(borderless?)
Open infrastructure
Regulated markets
(and the rise of SROs)

Finding the Equilibrium Point
38
Financial
Market
Stability /
Integrity
Consumer /
Investor
Protection
Innovation

Keeping up with the pace of technological innovation
39
Migration to unregulated sectors, ML/TF, operational risks related to IT
cybercrime and cybersecurity, outsourcing risks, legal uncertainty
transparency vs. privacy, accountability
A Regulatory Approach to Fintech
Christine Lagarde, Managing Director of IMF
- Will a more decentralized financial system be
more stable, or less?
- Will risks be more dispersed?
- Will the diminished role of traditional
intermediaries mean that emerging risks are more
likely to go undetected?

How should technological innovations be regulated?
Market
Settlement Regulatory
Intervention
Technology
Availability Technology
Adoption
Technology-
neutral Technology-
influencing

FinTech Regulatory Trends
D: Data
• Open Banking – PSD 2
• Data Protection
• PDPB
• GDPR
C: Cybersecurity
• European Parliament's number one
priority
• shadow infrastructure – too connected
• cybersecurity and outsourcing rules
Support
• Sandboxes – global
regulatory sandbox
• Ease of existing rules
• Tax and sponsor Incentives
Holistic
Approach
• EC’s FinTech Action
Plan
• Draft FinTech Act
Cross-Border
• Divergence
• International
Cooperation
Rise of RegTech
• For regulators
• For FinTech players
A: AML/CTF
• e-KYC / e- Authentication
• FATF – cryptocurrencies
• NDID
B: Blockchain
• Blockchain
• no "one size fits all“
• Legal code VS Technical code
• Crypto Assets
• divergent but more strictly
regulated
“Regulation is not poison. Regulators are not always your enemies.”

Legal Documentation in FinTech Businesses
42
Terms and Conditions / Agreement with customers
Privacy policy
Confidentiality Agreement / Non-disclosure Agreement
Agreements with business partner / technology providers / SLA
Disclaimer
Prospectus
Fundraising agreements
Escrow arrangement
etc.

Example important contracts for business
43
 Confidentiality Agreement/ non-disclosure agreement (NDA)
 Definition of Confidential Information
For example: "Confidential Information" means all business or technical
information of Disclosing Party, whether it is received, accessed or viewed by Receiving
Party in writing, visually, electronically or orally. Confidential Information shall include,
without limitation, technical information, marketing and business plans, databases,
specifications, formulations, tooling, techniques, inventions, discoveries, know-how and
trade secrets.
"Confidential Information" also includes all such business or technical information of
any third party that is in the possession of Disclosing Party.
Any information disclosed by the Disclosing Party will be considered Confidential
Information only if such information (a) is conspicuously designated as "Confidential" or
"Proprietary" or would reasonably be regarded as being of a confidential nature, or (b) if
provided orally or visually, is identified as confidential at the time of disclosure, or would
reasonably be regarded as being of a confidential nature.
Contracts

44
 Exclusions from Confidential Information
For example: Receiving Party's obligations under this Agreement do not extend to
information that is:
(a) publicly known at the time of disclosure or subsequently becomes publicly known
through no fault of the Receiving Party;
(b) discovered or created by the Receiving Party before disclosure by Disclosing Party:
(c) learned by the Receiving Party through legitimate means other than from the
Disclosing Party or Disclosing Party's representatives; or
(d) is disclosed by Receiving Party with Disclosing Party's prior written approval.
Contracts

45
(continued)
 Obligations of Receiving Party
Generally states that the Receiving Party must hold and maintain the information in
confidence and limit its use.
 Time Periods
Generally states that the obligations of this agreement shall be continuing until the
Confidential Information disclosed to the Receiving party is no longer confidential or until
Disclosing Party sends Receiving Party written notice releasing Receiving Party from this
agreement.
Contracts

46
 Terms and Conditions/ Privacy Policy
 Terms and Conditions/ Terms of Use/Terms of Service
o A set of rules and guidelines that a user must agree to in order to use a website
or a mobile app. It can also be merely a disclaimer.
o is not required by law.
 Privacy Policy
o A statement that discloses the ways in which a website operator gathers, uses,
discloses, and maintains a user’s data.
o is required if there is collection of personal data from the users.
 The legal effect of an acceptance in entering into an agreement made via electronic
means is recognized under Electronic Transaction Act B.E. 2544(2001).
 Under the Draft Personal Data Protection Bill, the definition of "personal data" is
defined broadly as any data relating to an individual that can identify that individual,
whether directly or indirectly.
Contracts

47
 What to include in a terms and conditions
Key provisions:
 Guideline for using the website/mobile app
 Intellectual property clause - informs users that you are the owner of
contents in the website/mobile app and that the content is protected by
intellectual property laws.
 Termination clause - informs users that abusive accounts will be
terminated and banned from using the service.
 Limit Liability - informs users that the owner can’t be held responsible for
any errors in the content presented, or for the information provided being
accurate, complete, or suitable for any purpose.
Contracts

48
 What to include in a terms and conditions (continued)
 Links To Other Web Sites clause - informs users that you are not
responsible for any third party websites linked to on the website/mobile app.
The users are responsible for reading and agreeing (or disagreeing) with
the Terms and Conditions or Privacy Policies of these third parties.
 Content clause - informs users that they own the rights to the content they
have created and usually mentions that users must give you (the owner of
the website) a license so that you can share this content on your website
and to make it available to other users.
 Limit What Users Can Do clause - inform users that by agreeing to use
your service, they’re also agreeing to not do certain things. You can specify
list of prohibited activities so as to cover most negative uses.
Contracts

49
 What to include in a privacy policy
 Basic requirements
o What information you collect from users.
o What will you do with the collected personal information.
o With whom you share the collected personal information, i.e. with third-
parties.
 Sample provisions
o Introduction.
o Scope of privacy policy.
o Types of personal data to be collected.
o How the data being used. (how, how the information being protected,
where the data being stored and transmitted to etc.)
Contracts

For more information
Kullarat Phongsathaporn
Kullarat is a partner in the Financial Services Practice Group at Baker & McKenzie
Ltd. She is recognized for her expertise in banking and finance, securities,
derivatives and structured finance, FinTech, e-payment, venture capital, exchange
control, and AML/CTF. She leads the FinTech team at Bangkok office, serves on the
Firm’s Asia Pacific FinTech cluster, and acts as one of the global Firm’s Innovation
Ambassadors.
As a FinTech specialist lawyer, Kullarat’s experience in FinTech includes e-payment,
digital banking, online consumer finance, online money remittance, blockchain-based
platform, cryptocurrencies, ICO, e-KYC, P2P lending, crowdfunding, roboadvisor, etc.
Education and professional associations:
• Harvard University (LLM, Fulbright Scholar, 2012)
• Chulalongkorn University (LLB, 1st class honors, Gold Medal, 2008)
• Admitted to the Thai Bar Association in 2009 and admitted to the Law Society of
Thailand in 2010
Contact
02 636 2000 Ext. 3106
Kullarat.Phongsathaporn
@bakermckenzie.com

A4: Kasetsart University | FinTech and Contracts (2018)

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A4: Kasetsart University | FinTech and Contracts (2018)