Thailand has finalized a regulatory framework that allows locally established crypto exchange-traded funds to track Bitcoin and Ether and trade on the Stock Exchange of Thailand, opening a new regulated route into the two assets for both retail and institutional investors.

Exchange-traded funds list on a stock exchange and track the price of an underlying asset, letting investors gain exposure through standard brokerage accounts rather than holding crypto directly.

The country's Securities and Exchange Commission issued 11 new regulations on October 8, which will take effect on October 16. The rules establish the requirements under which asset management companies can create crypto ETFs, although they do not themselves approve any specific Bitcoin or Ether fund for listing. The SEC published the regulations in an official announcement.

Bitcoin and Ethereum are the only crypto assets eligible during the initial phase. The SEC can expand that list later based on factors including liquidity, broad market acceptance, network security, and investor protection. Thailand's framework follows other jurisdictions that have opened spot crypto ETF access, including the United States, which approved spot Bitcoin ETFs in January 2024 and spot Ether ETFs later that year, and Hong Kong, which listed spot Bitcoin and Ether ETFs in April 2024.

The final framework follows consultations conducted between April and May and a second review of the draft regulations between August and September.

Passive Funds With at Least 80% Exposure

Thai crypto ETFs must operate as passive investment vehicles designed to track the price of a single eligible cryptocurrency. Each fund is required to maintain an average net exposure of at least 80% of its net asset value to its underlying crypto asset over the accounting year.

Asset managers seeking to launch a fund must also demonstrate that they have sufficient personnel, operational systems, and service-provider arrangements to manage digital assets securely. Crypto held by the funds must be safeguarded by digital asset custodians regulated by the Thai SEC. A mutual fund supervisor may use a sub-custodian, but the entity actually holding the digital assets must still be a licensed crypto custodian.

The regulator left room to permit qualified foreign digital asset custodians in the future when circumstances justify their use.

Thailand has been building a broader supervised framework around crypto infrastructure this year. The SEC recently finalized a Travel Rule covering self-hosted wallets, requiring licensed operators to verify wallet ownership or control when assets move between regulated businesses and private addresses.

Trading Restricted to the Stock Exchange of Thailand

Domestic crypto ETFs will be listed and traded exclusively on the Stock Exchange of Thailand. Brokerages cannot provide margin loans for purchases of the funds. Before trading, investors must receive information explaining the products' characteristics and risks and confirm that they understand them.

Asset managers face additional disclosure requirements covering fund structure, investment mechanisms, service providers, and risks specific to crypto assets.

Mutual funds and private funds will also be permitted to invest in Thai ETFs within their existing investment limits. They were previously able to obtain comparable exposure through eligible foreign crypto ETFs.

During the initial rollout, Thailand will restrict alternative products tied to overseas crypto ETFs, including depositary receipts referencing foreign crypto funds and certain brokerage arrangements that give retail clients access to overseas products. Institutional and ultra-high-net-worth investors are treated separately under the framework.

The ETF rules arrive as Thai regulators simultaneously expand digital-asset oversight elsewhere. Authorities introduced closer scrutiny of high-volume USDT trading this year, while the Bank of Thailand is separately developing a baht-backed stablecoin framework.

The new ETF regulations become effective on October 16, after which qualifying asset managers can use the framework to pursue domestic Bitcoin and Ether ETF products.

Source: Crypto Adventure