Thailand moves towards the creation of local Bitcoin and Ether ETFs

One more step, not the finish line. After unveiling its three-year strategic plan in January, Thailand's stock market regulator is moving to the next phase. The local SEC opened two public consultations on August 24: one on the precise rules for future Bitcoin and Ether ETFs listed there, the other on foreign custodians of digital assets authorized to intervene in the country. Bangkok is moving methodically, brick by brick, towards its ambition to become a regional crypto hub.

An exposure floor of 80% for future Thai ETFs

The published text sets precise safeguards, far from the vague announcements of January. Indeed, each fund must maintain an average net exposure of at least 80% of its net assets to the underlying cryptocurrency over the accounting year, according to the Thai SEC press release published on August 24.

These ETFs, managed passively, will only be able to trade on the Stock Exchange of Thailand (SET), and only Bitcoin and Ether are eligible for this first phase, due to a lack of other assets deemed sufficiently liquid by the regulator. Management companies will also have to prove that they have the personnel and systems adapted to this type of product before any actual launch.

The text of August 24 extends a first version submitted for comments in April, when the regulator established the main principles of management and custody. The majority of feedback already supported the project at the time, only the question of depositaries had raised enough reservations to push the SEC to review its copy. The regulator had also mentioned, as early as January, the option of dedicated market makers to guarantee sufficient liquidity once these products are actually listed, a project which remains open in parallel with the two ongoing consultations.

The question of depositaries, a point of friction since April

The subject that most raised eyebrows during the first consultation in April concerned the custody of assets, as is often the case.

The revised version maintains local depositories as the default option, while giving the SEC leeway to authorize qualified foreign providers “if circumstances warrant.” A compromise that protects the local digital asset custody industry without completely closing the door to international expertise. Mutual and private funds already authorized to invest in foreign crypto ETFs will be able, under the same regulatory ceilings, to turn to these new Thai vehicles once the framework is finalized. Representative certificates backed by foreign crypto ETFs will remain prohibited during this first phase: Bangkok wants to keep control of locally domiciled products before considering opening the door further.

Consultation open until September 20, verdict expected thereafter

The comments window remains open for now, nothing is set in stone yet. The public and industry players have until September 20 to respond to the two texts, before the SEC continues the regulatory process. This project is progressing in parallel with another: since February, cryptocurrencies have been recognized as valid underlying assets for regulated futures contracts in Thailand, a distinct but complementary framework which also aims to bring traditional finance closer to the local crypto market.