The Thailand Securities and Exchange Commission (SEC) has introduced a proposal that could expand investment options for mutual and private funds, allowing them to invest in digital assets. 

This move, designed to keep pace with international developments, opens the door for institutional investors to diversify into cryptocurrency markets under the guidance of professional fund managers. 

The proposal is currently open for public feedback.

Aligning with Global Trends

The Thai SEC’s proposal reflects the growing international interest in cryptocurrencies, particularly after the approval of U.S.-listed Bitcoin and Ethereum exchange-traded funds (ETFs). 

While Thai investors have had access to these ETFs abroad, domestic mutual funds have been limited in their ability to invest directly in digital assets. The SEC aims to modernize Thailand’s regulations to align with global trends, allowing more flexibility for fund managers to incorporate crypto-related products into their portfolios.

In adjusting the rules, the SEC seeks to give investors more opportunities to diversify their investments and take advantage of digital asset growth. 

New Opportunities for Securities Companies and Fund Managers

Under the new rules, securities companies and asset management firms would be allowed to offer services to institutional and high-net-worth investors interested in crypto-related products like ETFs. These firms could help investors navigate the complexities of digital assets while managing associated risks.

For retail mutual funds, the SEC proposes a 15% cap on digital asset exposure. This limit aims to protect retail investors from high-risk volatility in the crypto market. In contrast, more sophisticated funds designed for institutional investors would face no cap, though they would still be required to diversify their investments to mitigate potential risks.

Differentiating Between High-Risk and Stable Assets

The SEC's draft proposal also introduces guidelines to differentiate between various types of digital assets. High-risk assets like Bitcoin would be treated differently than stablecoins such as Tether, which are designed to maintain a steady value. 

Fund managers would need to exercise caution and adhere to their fiduciary duties when selecting appropriate investment channels for these assets.

To manage market risks, the SEC also proposes limits on the temporary holding of assets like Bitcoin or Ethereum. These assets could only be held for a maximum of five business days for trading purposes, ensuring that fund managers remain responsive to market changes while limiting prolonged exposure.

Expanding the Digital Asset Regulatory Sandbox

In addition to the proposed investment rules, the Thai SEC continues to explore digital asset innovation through its regulatory sandbox, which launched in August. The sandbox provides a controlled environment where companies can test new financial products and services that may not yet be covered by existing regulations.

Participants in the sandbox include digital asset exchanges, brokers, dealers, fund managers, advisors, and custodial wallet providers. The sandbox trial period is set at one year, with participants eligible to apply for extensions. Companies must demonstrate sufficient capital, robust management systems, and a clear plan for risk management to participate.

Implications for Thailand's Crypto Market

Thailand has long been a forward-looking player in the cryptocurrency space.

According to Chainanalysis' '2023 Global Cryptocurrency Adoption Index', Thailand ranks 10th in civilian adoption. Among internet users worldwide, Thailand ranks as one of the nations with the highest proportion of cryptocurrency ownership, per Global 2022 Digital Overview Report. 

Further, data from Statista(.)com suggest that Thailand had 13.02 million crypto users as of January 11, 2024, corresponding to approximately 18.1% of the total population. The number of users is projected to reach 17.67 million in 2028 after continuous growth for ten consecutive years.