The Securities and Exchange Commission of Thailand (SEC) has moved its work on a regulatory framework for spot exchange-traded funds (ETFs) backed by Bitcoin (BTC) and Ether (ETH) from the stage of developing general principles to the stage of preparing a specific draft of regulatory rules. At the same time, the regulator has initiated a review of its approach to the use of foreign digital asset custodian services.
On Monday, the regulator published two consultation papers for public discussion. The first document contains a detailed draft of rules for Thai cryptocurrency ETFs, while the second outlines the regulatory principles and qualification requirements for foreign custodians hired by mutual and private funds to invest in digital assets.
In the initial phase of the new framework's implementation, asset managers will be permitted to create exclusively passive ETFs tracking the price of Bitcoin or Ether. These two crypto assets are currently the only ones that meet the regulator's strict requirements. This initiative follows April consultations on general regulatory principles. According to the SEC, the majority of respondents supported the proposed framework but raised a number of concerns regarding asset custody mechanisms, which prompted the regulator to adjust its original approach. The development of these rules is part of Thailand's strategic course toward establishing itself as a global digital asset hub for institutional investors.
Under the proposed rules, trading in Bitcoin and Ether ETFs will take place exclusively on the Stock Exchange of Thailand (SET). Each such fund must track the value of one specific crypto asset and maintain an average net exposure to it of at least 80% of net asset value during each reporting year. This requirement is designed to ensure that the fund genuinely reflects the performance of the underlying asset rather than diverting capital into other speculative instruments.
The new rules will also allow mutual and private funds to invest in Thailand-registered cryptocurrency ETFs alongside foreign cryptocurrency funds in which they are already permitted to invest, subject to existing investment limits. At the launch stage, however, the regulator will not allow alternative financial products linked to foreign cryptocurrency ETFs to be traded, including depositary receipts tracking their value.
With regard to asset custody, the revised approach provides that local digital asset custody service providers will remain the primary counterparties for cryptocurrency ETFs in the initial phase. Nevertheless, the SEC reserves the right to permit the use of qualified foreign custodians if this is deemed necessary and appropriate given current market conditions and the level of development of local infrastructure.
A separate proposal governs the activities of foreign service providers serving mutual and private funds. Such companies must be supervised by a regulatory authority with appropriate legal powers in its jurisdiction. In addition, they must comply with regulatory requirements and investor asset protection standards that Thailand's SEC considers adequate and fully consistent with local safety norms.