Thailand advances Bitcoin, Ether ETF rules with 80% exposure floor

Thailand's securities regulator has moved its Bitcoin and Ether ETF framework from proposed principles to draft rules, setting an 80% minimum exposure floor and keeping domestic custodians at the center of the structure.

Thailand's Securities and Exchange Commission advanced its spot Bitcoin and Ether ETF framework to draft regulations on Aug. 24, requiring locally listed funds to hold at least 80% exposure to the underlying asset.

"Under the revised approach, crypto ETFs will continue to be primarily required to use onshore DA custodians, while the SEC may permit the use of qualified foreign DA custodians when necessary and appropriate in light of prevailing circumstances," the regulator said.

The first stage limits eligible assets to Bitcoin and Ether, with passive ETFs tracking a single cryptocurrency and trading exclusively on the Stock Exchange of Thailand. Each fund must maintain average net exposure of at least 80% of net asset value to its underlying asset over each accounting year.

The SEC will accept comments on both consultation papers until Sept. 20 before finalizing the rules, part of Thailand's push to become a regional digital asset hub.

Draft rules set 80% exposure floor

The proposal, opened for public comment on Aug. 21, follows an April consultation on the framework's broader principles. Most respondents supported the plan, the SEC said, though feedback on custody arrangements led officials to revise part of the original approach.

Asset management companies would establish and manage the funds, while investment activity involving digital assets could be delegated only to a licensed digital asset fund manager. Fund managers must demonstrate operational readiness, including qualified personnel, appropriate systems, and access to service providers capable of handling the products.

The rules would also expand options for existing mutual funds and private funds, which can already invest in foreign crypto ETFs under applicable limits. The amendments would allow them to invest in Thai-domiciled crypto ETFs under the same investment control framework. Alternative instruments referencing overseas crypto ETFs, including depositary receipts, would remain unavailable during the first stage.

Custody revisions keep onshore providers in front

Custody emerged as one of the main issues during the April consultation. Under the revised model, foreign custodians serving mutual and private funds investing in digital assets would need to operate under a regulator with legal authority over their activities, with home-jurisdiction standards the Thai SEC considers adequate.

The framework also allows qualified digital asset custodians and other prepared digital asset businesses to serve as trustees for crypto ETFs, provided they hold sufficient financial resources, personnel, and operating systems. Thailand had already moved to expand local custody capacity in May, when the SEC proposed changes to net capital and digital asset custody rules intended to reduce dependence on overseas service providers.

ETF rules follow derivatives expansion

The ETF framework builds on Thailand's broader expansion of regulated crypto products. In February, the government recognized cryptocurrencies as underlying assets under the Derivatives Trading Act, allowing assets such as Bitcoin to serve as the basis for regulated futures and options contracts. SEC secretary-general Pornanong Budsaratragoon said at the time that cryptocurrencies would be treated as permissible goods and variables under the derivatives framework.

Two months later, regulators proposed simplifying derivatives access by allowing licensed digital asset companies to apply for derivatives licenses without establishing separate corporate entities. The February framework also called for cooperation with the Thailand Futures Exchange on crypto-linked products, including Bitcoin futures.

Thailand's work on locally traded crypto ETFs follows an earlier product approved for a narrower investor group. In June 2024, regulators approved the country's first spot Bitcoin ETF fund for institutional and ultra-high-net-worth investors — One Asset Management's ONE Bitcoin ETF Fund of Funds Unhedged and not for Retail Investors, structured as a fund of funds and not offered to ordinary retail investors.

The SEC's January ETF plans formed part of a regulatory program that also included crypto derivatives and tokenization, with regulators working with the Bank of Thailand on a tokenization sandbox that counts bond tokens among the assets under consideration. Investor protection requirements remain part of the draft, including disclosures explaining each fund's structure and risks.

The draft rules point to growing institutional appetite for regulated crypto exposure in Southeast Asia, with the 80% floor ensuring funds hold meaningful direct positions in Bitcoin or Ether rather than layered derivatives. A successful rollout could set a template for neighboring regulators weighing similar products, while the domestic custody requirement stands to deepen Thailand's local digital asset infrastructure.

This article is for informational purposes only and does not constitute investment advice.