Thailand is undertaking a significant initiative to incorporate digital assets into its regulated financial markets.
The Cabinet of Thailand has recently approved a proposal that permits digital assets, encompassing cryptocurrencies and tokens, to serve as underlying assets within both derivatives and capital markets. This decision reflects an increasing acknowledgment that digital assets are transcending their original role as speculative instruments, now being recognized as a legitimate asset class that can potentially transform capital markets.
Nirun Fuwattananukul, the Chief Executive of Binance Thailand, characterized this development as a “watershed moment” for the country’s capital markets. He expressed that this action sends a robust message regarding Thailand’s determination to establish itself as a pioneer in the digital economy of Southeast Asia, as reported by the Bangkok Post.
As part of this initiative, the Securities and Exchange Commission (SEC) will modify the Derivatives Trading Act to officially recognize digital assets as reference assets for derivatives contracts. This modification will enable licensed operators to offer contracts linked to cryptocurrencies, such as futures and options, under suitable regulatory oversight.
SEC Secretary-General Pornanong Budsaratragoon explained, “The expansion of permissible goods and variables is designed to support emerging asset classes, such as digital assets. This will bolster the recognition of cryptocurrencies as an asset class, enhance portfolio diversification, and improve risk management for investors.”
The SEC is currently developing comprehensive rules and licensing frameworks for derivatives brokers, exchanges, and clearinghouses to facilitate crypto-based products. Furthermore, it is collaborating with the Thailand Futures Exchange (TFEX) to finalize contract specifications that are consistent with the risk characteristics and practical applications of digital assets in trading.
In addition to cryptocurrencies, the proposed amendments will reclassify carbon credits as “goods” rather than “variables.” This reclassification allows for the introduction of physically delivered carbon credit futures alongside cash-settled contracts, aligning with Thailand’s objectives regarding climate change and carbon neutrality as outlined in the draft Climate Change Act.
Thailand’s Bitcoin ETF Initiative
Thailand has recently established a pivotal regulatory framework aimed at positioning itself as a premier bitcoin hub within Asia. The SEC announced that it is rolling out regulations pertaining to bitcoin and crypto exchange-traded funds (ETFs), futures trading, and tokenized investment products, thereby creating a solid legal foundation for digital assets under the existing derivatives law.
The SEC has provisionally approved crypto ETFs and is currently developing operational guidelines that encompass custody, liquidity, and collaboration between asset managers and licensed exchanges.
Investors are expected to allocate up to 4-5% of diversified portfolios to digital assets, with domestic ETFs poised to trade on the Stock Exchange of Thailand, thereby facilitating exposure without necessitating direct ownership of cryptocurrencies.
In 2024, Thailand approved its first spot bitcoin ETF and plans to expand its offerings to include other cryptocurrencies, such as ether and diversified baskets.
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