Thailand advances Bitcoin, Ether ETF rules with new draft regulations

The SEC announced on Monday that it is soliciting feedback on two consultation papers. One paper details the draft regulations for Thai crypto ETFs, while the second proposes governing principles for the qualifications of foreign digital asset custodians that mutual and private funds investing in digital assets may engage.

Initially, asset managers will be able to establish passive ETFs that track either Bitcoin (BTC) or Ether (ETH), which are the only two crypto assets designated as eligible. These draft regulations follow an April consultation that addressed the framework's broader principles. The SEC noted that while most respondents supported the framework, feedback regarding custody arrangements prompted revisions to the proposed approach.

The framework is part of Thailand's broader strategy to position itself as a global digital asset hub for institutional investors. Under the proposed rules, Bitcoin and Ether ETFs would be listed and traded exclusively on the Stock Exchange of Thailand (SET). Each ETF would be required to track a single crypto asset and maintain an average net exposure of at least 80% of its net asset value to that asset over each accounting year.

The proposed rules would also permit mutual funds and private funds to invest in Thai-domiciled crypto ETFs, in addition to foreign crypto ETFs they are already permitted to invest in, subject to existing investment limits. However, alternative products linked to foreign crypto ETFs, such as depositary receipts, will not be allowed during this initial phase.

Regarding crypto custody, the revised approach will continue to prioritize onshore digital asset custodians as the primary providers for crypto ETFs during the initial phase. The SEC stated that while crypto ETFs will primarily be required to use onshore digital asset custodians, the regulator may permit the use of qualified foreign digital asset custodians when deemed necessary and appropriate based on prevailing circumstances.

Under the separate custodian proposal, foreign providers serving mutual and private funds that invest in digital assets would need to be supervised by a regulatory authority with legal powers. They would also be required to operate under regulatory and investor asset protection standards that the Thai SEC considers adequate.

The SEC will accept public comments on both consultation papers until September 20.