Thailand’s Securities and Exchange Commission (SEC) has moved forward with draft regulations designed to govern locally listed spot Bitcoin and Ether exchange-traded funds (ETFs), while also proposing new rules for foreign digital asset custodians servicing domestic funds.
Regulatory framework for crypto ETFs advanced
The SEC has opened public consultations on two new documents: one containing draft regulations for Thailand’s first crypto ETFs, and another setting stricter criteria for foreign digital asset custodians engaged by mutual and private funds investing in cryptocurrencies.
Officials stated that only spot Bitcoin (BTC) and Ether (ETH) would be eligible for these ETFs during the initial phase. Asset managers could establish passive funds tracking the price of these two cryptocurrencies.
The regulatory move comes after an April consultation in which most respondents supported the concept of local crypto ETFs but expressed concerns about digital asset custody arrangements. As a result, the SEC decided to update its approach regarding custodians for these new products.
ETH
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AAPLThis regulatory effort aligns with Thailand’s broader goal to establish itself as a global digital asset hub by bringing institutional-grade investment products to the domestic market.
Bitcoin and Ether ETFs to trade on SET
Under the draft rules, these ETFs would be listed exclusively on the Stock Exchange of Thailand (SET), the country’s main securities marketplace. Each ETF must track only one of the two eligible cryptocurrencies and maintain an average net exposure of at least 80% of net asset value in the underlying asset throughout each accounting year.
| ETF Asset | Exchange | Net Exposure Requirement |
|---|---|---|
| Bitcoin (BTC) | SET | At least 80% |
| Ether (ETH) | SET | At least 80% |
The rules permit mutual and private funds to allocate resources to these domestic crypto ETFs, as well as to existing foreign crypto ETFs, subject to Thailand’s current investment limits. However, alternatives such as depositary receipts referencing foreign crypto ETFs will be excluded during the initial implementation phase.
Custody requirements and foreign custodians
The SEC plans to continue requiring crypto ETFs to use onshore digital asset custodians initially. The regulator noted that it may allow qualified foreign digital asset custodians when the circumstances justify it, taking into account prevailing market and regulatory conditions.
Under the revised approach, crypto ETFs will continue to be primarily required to use onshore digital asset custodians, while the SEC may permit the use of qualified foreign digital asset custodians when necessary and appropriate in light of prevailing circumstances.
Foreign custodians serving Thai mutual and private funds must be regulated by authorities with legal oversight powers. Additionally, these providers must uphold asset protection standards and other investor safeguards deemed satisfactory by the Thai regulator.
The SEC is inviting feedback from the public and industry stakeholders on the two sets of draft rules until September 20.
The Stock Exchange of Thailand (SET) is the national securities exchange responsible for listing and facilitating trading of various investment products, including equities, funds, and ETFs.
Mini dictionary: Digital asset custodian, a company or institution responsible for securely holding and safeguarding cryptocurrency and related digital assets on behalf of institutional clients, ensuring regulatory compliance and investor protection.
