Thailand sets rules for domestic Bitcoin, Ethereum ETFs

Thailand’s Securities and Exchange Commission announced Oct. 8 that 11 regulatory notifications will establish a framework for cryptocurrency ETFs listed on the Stock Exchange of Thailand. The rules take effect Oct. 16.

The SEC has not approved a Bitcoin or Ethereum ETF and has not announced when the first product will begin trading.

Thailand will initially prohibit the issuance and offering of investment products linked to foreign crypto ETFs. The restriction includes depositary receipts that could give local investors exposure to overseas funds through domestic securities markets.

Securities companies will also be barred from arranging investments in foreign crypto ETFs for clients who are not institutional investors or ultra-high-net-worth individuals. The restrictions cover specified investment products and brokerage services, rather than all overseas cryptocurrency investments.

The SEC said the framework is intended to support Thailand’s domestic crypto ETF market and strengthen local financial institutions. Thai mutual funds and private funds will be allowed to invest in ETFs listed in Thailand. Previously, those funds could invest in foreign crypto ETFs but not domestic equivalents. Existing investment limits will continue to apply.

Only Bitcoin and Ethereum will initially qualify as underlying assets. Each ETF must passively track one cryptocurrency and maintain average net exposure of at least 80% of its net asset value to that asset during each accounting year.

Asset managers must demonstrate that they have sufficient staff, operating systems and service-provider arrangements before launching a fund. Digital assets held by the ETFs must be kept with custodians regulated by Thailand’s SEC.

Securities companies will be prohibited from providing margin loans for crypto ETF purchases. Before trading, investors must receive information about each product’s features and risks and confirm that they understand them. Brokers must also emphasize diversification and investments that match an investor’s risk tolerance.

The SEC has separately permitted licensed digital asset fund managers to outsource investment management functions. Qualified digital asset businesses may apply to serve as supervisors for mutual funds.

Thailand’s rules follow the growth of spot Bitcoin and Ethereum ETFs in the United States. The funds had attracted about $70.37 billion in combined cumulative net inflows since their launches and held roughly $121 billion in combined net assets as of Oct. 12, according to market data.

The SEC consulted on the proposed framework between April and September and reported that most respondents supported the rules. The regulations will take effect Oct. 16.