Thailand Greenlights Cryptocurrency ETFs Under Tight Rules

Thailand has approved cryptocurrency exchange-traded funds, setting strict conditions for how they can be offered and traded. New crypto ETF products must be traded exclusively on the Stock Exchange of Thailand (SET). For local investors, eligible assets are limited to two cryptocurrencies: Bitcoin and Ethereum. Regulators said the roster could be expanded later, based on liquidity, market capitalization, the security of the underlying network, and the strength of investor-protection measures. Under Thai SEC rules, each cryptocurrency ETF must be structured as a passive fund that tracks the price of its underlying cryptocurrency. Throughout each reporting year, the ETF must hold an average of at least 80% of net assets in a single eligible cryptocurrency. Custody requirements are also tightly defined. Fund assets must be held solely with licensed custodians regulated by the Thai SEC. Investment management may be outsourced, but only to firms licensed for digital asset fund management. The framework also sets licensing expectations for would-be managers. Custodians and other digital-asset firms may apply to act as crypto ETF fund managers under Thailand's Securities and Exchange Act, provided they can demonstrate adequate financial resources, qualified personnel, and secure operating systems. Distribution to retail investors is constrained. Brokers are barred from offering foreign crypto ETFs to retail clients unless those clients qualify as high-income investors. Thailand will also prohibit the primary issuance and offering of alternative products linked to foreign crypto ETFs, including depositary receipts. The restriction applies even when the foreign product tracks Bitcoin or Ethereum, according to the regulator's document. For retail trading of local crypto ETF units on the SET, brokers must explain product risks before execution. Investors must confirm they understand those risks, and issuers are required to provide detailed disclosures on investment structure, service providers, and custody arrangements. The regulator also banned brokers from extending margin loans to finance purchases of cryptocurrency ETFs, citing the need to curb excessive leverage in a volatile market. Brokers must also advise clients on asset allocation aligned with each client's risk tolerance. Separately, in September, Thailand's SEC approved new requirements for digital asset transactions. Crypto service providers will be required to collect sender and recipient information for transfers and verify ownership of any noncustodial wallets used.