he Securities and Exchange Commission (SEC) of Thailand announced a change to its regulations on March 12th, 2024 that will have significant impacts. Pornanong Budsaratragoon, Secretary-General of the Thai SEC, revealed asset management firms can now seek permission to invest client funds in spot Bitcoin exchange-traded funds (ETFs) trading on major US exchanges like the CME.
This marks a shift from the SEC's previous stance in January when it stated it had no plans to allow direct investment in Bitcoin or crypto ETFs from fund managers. The reclassification of spot Bitcoin ETFs as securities rather than digital assets under Thai law enabled this regulatory change. It opens the door for local financial institutions to also access these investment products for the first time.
Risk-Based Approach For Sophisticated Investors
The Thai SEC took a balanced, risk-based approach in implementing this framework. While individual retail investors are still restricted to domestic crypto exchanges only, the top-tier accredited investors and institutional allocation managers can utilize the regulated crypto investment routes. According to Pornanong, "Asset management firms asked the SEC for them to have exposure in digital assets, especially Bitcoin and spot Bitcoin ETFs, but we need to consider carefully whether to allow asset management firms to invest in digital assets directly due to the high risk."
This carve-out acknowledges the volatile nature of cryptocurrencies but also recognises that institutional allocators and wealthy individuals can appropriately manage downside risks. It will expand professional investment options without exposing unsophisticated money to undue hazards from short-term crypto price fluctuations. The regulator left open the possibility of extending the program to qualified individual investors at a future date once the impacts are assessed.
Regulated Products Mitigate Risk Concerns
There are good reasons for the SEC to feel more comfortable approving access to regulated crypto investment vehicles over direct holdings. Spot Bitcoin ETFs trading on major securities exchanges must meet stringent listing requirements around liquidity, surveillance, custody, and valuation. They are removed from the risks of unhosted crypto wallets being hacked or lost private keys blocking access.
Settlement happens in fiat currency too, avoiding issues like transfer delays or confirmation errors that unregulated exchanges sometimes face. The underlying Bitcoin is also held by a licensed custodian like Fidelity rather than self-managed. For sophisticated investors and professional fund managers, these regulated products likely represent a lower risk profile than direct trading or holding of cryptocurrencies. It shows balanced foresight from the Thai SEC to recognize this and adjust rules accordingly based on investor classification.
