Thailand's securities regulator has finalized its crypto exchange-traded fund (ETF) framework, clearing the way for the country's first digital-asset funds built around Bitcoin and Ether. The rules take effect on October 16.

A Rulebook Finalized After Months of Consultation

Thailand's Securities and Exchange Commission (SEC) issued 11 notifications covering the creation, management, custody and trading of crypto ETFs. The package moves the country from public consultation to a working rulebook after months of feedback and regulatory drafting.

The SEC had already outlined the proposed structure in August. It has now set the standards that asset managers, custodians and brokers must meet before a product reaches investors.

The October 16 date applies to the regulations themselves rather than to any specific product. A fund manager still needs to assemble the fund, appoint service providers and publish its own documents before shares can be listed. The SEC has not identified a first issuer, ticker, fee schedule or opening trading date.

Bitcoin and Ether Are the Only Eligible Assets at Launch

At launch, the permitted underlying assets are Bitcoin and Ether, the two largest cryptocurrencies by market value. Regulators elsewhere began with the same assets: spot Bitcoin ETFs started trading in the United States in January 2024, US Ether funds followed that July, and Hong Kong listed spot Bitcoin and Ether ETFs in April 2024. The SEC said it will evaluate adding future assets based on liquidity, broad market acceptance, network security and investor-protection considerations.

Each ETF must track a single crypto asset through a passive strategy and maintain average net exposure of at least 80% of its net asset value in that asset over an accounting year. A Bitcoin ETF, for instance, is expected to deliver predominantly Bitcoin-linked exposure rather than mixing its portfolio with unrelated tokens.

The framework also establishes a domestic route to crypto ETF exposure. Shares must list and trade exclusively on the Stock Exchange of Thailand (SET), and the initial rules do not permit alternatives such as depositary receipts linked to foreign crypto ETFs for local retail investors. The policy gives Thai asset managers and digital-asset service providers the first opportunity to build the market within the country's existing securities framework.

How the First Thai Crypto ETFs Will Be Structured

• One asset per fund: Bitcoin or Ether.
• Passive exposure: each fund tracks the price of its chosen asset.
• SET trading: investors buy and sell shares through the Thai stock market.
• Regulated custody: the underlying crypto is held with a Thai SEC-regulated digital-asset custodian.

Investors Hold Shares, Not Coins

Under the new products, a Thai investor would hold ETF shares through a securities broker, while the fund manager and its custodian handle the management and safekeeping of the underlying Bitcoin or Ether. That removes the need for each investor to set up a wallet, protect private keys or trade on a crypto exchange directly.

The convenience comes within a conventional investment-fund structure. Fund managers must give investors sufficient information to understand the product, its service providers, its investment mechanics and its risks. Brokerage firms must also provide risk education and obtain an acknowledgement that clients understand the product before they trade it.

The SEC has additionally barred brokers from extending margin loans for crypto ETF purchases. This limits the ability to amplify exposure with borrowed money and keeps the first products closer to cash-funded investment funds than leveraged trading vehicles.

Custody Puts the Regulator Close to the Assets

The crypto backing an ETF must be held by a custodian regulated by the Thai SEC. Eligible digital-asset operators may also apply to supervise these funds, provided they meet the regulator's standards for capital, staff and operational systems.

Thailand may later permit qualified foreign custodians where their use is necessary and appropriate. The framework places SEC-regulated custodians at the center of safekeeping and fund oversight, giving the regulator clearer visibility into the assets behind shares listed on the SET.

Asset managers may also outsource digital-asset investment management, though only to licensed digital-asset fund managers. The arrangement separates the roles of managing a portfolio, holding its assets and supervising the fund, mirroring the division of responsibilities investors already encounter in traditional ETFs.

Local Funds Gain a New Route to Crypto Exposure

The SEC has amended its rules so that Thai mutual funds and private funds can invest in locally established crypto ETFs, subject to existing investment limits. Previously, their crypto-ETF exposure was restricted to foreign products.

The change could eventually broaden participation beyond individual brokerage accounts. A Thai fund manager may be able to include a domestic Bitcoin or Ether ETF within a diversified portfolio, provided it stays within the limits that already apply to its fund type.

Whether the route sees wide adoption will depend on the first products. Fund fees, liquidity, custody arrangements, creation-and-redemption procedures and the quality of market making will determine how useful the ETFs prove once trading begins.

Prospectuses Will Show the Rules in Practice

With the rules in place, the next decisions rest with asset managers. Their prospectuses will reveal which asset they choose, what fees they charge, who safeguards the coins and how ETF shares will trade on the SET.

Thailand has now created a regulated route for investors seeking Bitcoin or Ether exposure through a local brokerage account. The first launch will show whether that route becomes a genuine alternative to buying crypto directly.

This article is for informational purposes only and does not constitute financial, investment or legal advice. Product approvals, listings and rules may change.

Source: Coindoo