Thai Stock Exchange to launch digital asset trading platform in 2021
Pawee Jenweeranon - Thammasat University and The Chinese University of Hong Kong
-- Thailand's Securities and Exchange Commission (SEC) is the country's main regulator in the supervision of digital asset-related activities in the country. Over the past few years, the Thai SEC has played an active role, especially since the emergence of initial coin offering (ICO) projects in January 2018, ensuring fair market competition and mitigating consumer risks through a series of legislative acts and new regulatory frameworks.
In 2020, the Stock Exchange of Thailand (SET) announced its plan to build a digital assets platform that can be considered as part of its three-year strategic plan (2019-2021); specifically, the SET’s digital assets platform makes up a segment of the SET’s four pillar strategy to build a digital asset ecosystem in the country.
Throughout 2020, following its initial announcement concerning the launch of the digital assets platform initiative, the SET collaborated with global partners to develop the platform. For instance, it employed the services of some of the world’s leading consultants in the field, such as Blocksize Capital, a technological specialist, and a legal expert from the Cambridge Centre for Alternative Finance (CCAF), as it sought to make its digital assets platform global in scope, rather than merely domestic.
The plan was updated in October 2020, when the SET issued a public release on its collaboration with Kasikorn Business Technology Group (KBTG) in the launching of the platform; it was then confirmed that the platform will be unveiled in the second half of 2021.
Specifically, as expressed in the project’s press release from October 2020, the SET aims to support the Thai digital asset ecosystem at full scale by connecting primary market ICO portals with digital asset exchanges in the secondary market, as well as digital asset wallet service providers. The SET’s proposed digital assets platform will link together all relevant market players in the (digital assets) market under the Emergency Decree on Digital Assets Businesses, B.E.2561 (2018).
The goal is to improve the digital asset ecosystem in the country and provide businesses with access to an alternative channel for public fundraising, as well as to create investment opportunities in alternative assets.
To highlight the key points, tokens traded on the platform will be subject to various requirements and restrictions. Tokens must also be asset-backed. This is also to differentiate them from cryptocurrency investment, especially given their lower volatility.
In this respect, tradable tokens could be regarded as investments or asset-based instruments. Hence, from the perspective of the national digital assets industry (i.e., Bitkub, the largest Thai digital assets cryptocurrency exchange platform), the SET platform will not be a competitor to current platforms, which focus on cryptocurrency exchange/trading. In addition, the emergence of the SET platform will also help attract more institutional investors and, finally, may help develop the overall digital asset ecosystem. In addition, the SET has broadly considered that such tokens must be a valuable product that promotes economic activity and benefits both society and the environment.
It is important to note that cryptocurrencies will be excluded from the asset classes that will be admitted to trading on the SET platform. The main reason for this is that cryptocurrencies lack the characteristics required by the SET. As per the public statement, the SET excludes cryptocurrencies from the platform because investing in them is likely to be considered mere speculation rather than a legitimate investment. KBTG has stated that this restriction is also to avoid the high volatility of cryptocurrencies, which could lead to a loss of trust in the newly-established platform.
According to the SET, KBTG will be the first ICO portal listed on the SET digital assets platform. In terms of the regulatory framework, they aim to obtain operational licenses from the SEC, as the platforms fall within the scope of the Emergency Decree on Digital Asset Businesses, administered by that Commission. Specifically, the SET will apply for the license in order to operate as a digital asset exchange platform, whereas KBTG will apply for the ICO portal license.
Finally, with respect to the SET’s rationale in seeking more partners to further develop such an initiative, it will be interesting to observe future trends concerning digital asset investment in Thailand in the coming years.