SEC Proposes the Framework for Crypto ETF Establishment and Supervision in Thailand
Introduction
The Securities and Exchange Commission of Thailand (“SEC”) has been closely monitoring developments in the digital asset (“DA”) market, including regulatory approaches in foreign jurisdictions. Regulators in jurisdictions such as the United States, Canada, Australia, and Hong Kong SAR have issued rules to support the establishment of crypto exchange-traded funds (“crypto ETFs”), which are mutual funds listed on stock exchanges and traded with relatively high liquidity under clear regulatory frameworks. These developments reflect a growing trend of cryptocurrencies being used as investment assets under appropriate regulatory supervision, enabling investors to consider crypto as part of their portfolio allocation alongside other asset classes.
In Thailand, the SEC has determined that it is appropriate to issue rules to support the establishment of crypto ETFs. This initiative aims to provide additional investment options for investors, particularly those who wish to access crypto investments through regulated capital market products, with professional fund managers handling investment management and crypto custody. The framework also seeks to promote the development of Thai business operators and strengthen Thailand’s DA ecosystem.
Additionally, under Section 121 of the Securities and Exchange Act B.E. 2535 (1992) (the “SEC Act”), fund trustees must be commercial banks or financial institutions with qualifications prescribed by the SEC. Currently, DA business operators (“DA Business Operators”), despite having expertise and readiness in DA custody, are not permitted to serve as fund trustees for mutual funds focused on crypto investments. The SEC therefore considers it appropriate to revise the rules to enable DA Custodians and other qualified DA Business Operators to serve as fund trustees for crypto ETFs.
The SEC has opened a public hearing on three key topics: (i) rules to support the establishment of crypto ETFs; (ii) rules on the delegation of DA investment management for mutual funds; and (iii) rules on allowing DA Custodians and other qualified DA Business Operators to serve as fund trustees for crypto ETFs. The public hearing is open on the SEC’s website, with comments due by 11 May 2026. The proposed rules are expected to come into effect within Q3 of 2026.
Key Provisions of the Proposed Rules
1) Eligible Cryptocurrencies and Investment Structure
The development of crypto ETFs in Thailand will begin with spot crypto ETFs in the form of mutual funds, which invest directly in cryptocurrencies and have a straightforward structure that allows general investors to understand the product characteristics and risks. Funds may only invest in cryptocurrencies with high liquidity and general market acceptance that meet all of the following criteria: (i) having a mature spot crypto trading market; (ii) having a regulated futures market; (iii) having a crypto price index prepared and published by a reliable index provider or source; and (iv) being capable of being held in custody by a DA Custodian in Thailand. In the initial phase, only Bitcoin and Ethereum qualify, although additional cryptocurrencies may be added in the future as appropriate.
2) Investment Format and Ratios
Crypto ETFs must comply with the following investment format and ratio requirements:
(a) Invest in a single cryptocurrency (e.g., Bitcoin or Ethereum) with crypto net exposure in that cryptocurrency averaging at least 80% of NAV over the fiscal year.
(b) Be established as a passive ETF with the objective of generating returns that track the price movement of a single cryptocurrency; and
(c) Be classified as an alternative investment fund with a special characteristic and risk spectrum 8+.
3) Investment Restrictions
(a) Crypto ETFs are prohibited from having crypto exposure through derivatives (futures contracts).
(b) Crypto ETFs are prohibited from generating yield from crypto, including by depositing crypto where the custodian lends it to third parties (except for yields arising from blockchain upgrade processes such as hard forks or soft forks, airdrops, or consensus mechanisms).
4) Asset Custody Requirements
Given that crypto has unique characteristics and risks that differ from those of traditional assets, its custody must be conducted by service providers with appropriate systems and standards for DA custody. The SEC proposes the following custody framework:
(a) Fund trustees must either obtain a DA Custodian license in Thailand or appoint a sub-custodian that is a licensed DA Custodian in Thailand as a primary requirement.
• Exception: Where no such service provider is available or where an event occurs preventing the provision of such services, fund trustees may appoint a foreign DA Custodian that meets the qualifications under the existing rules applicable to DA Business Operators and is under the supervision of a regulatory body that is either (i) an IOSCO member that is a Signatory A to the MMOU, or (ii) a regulator in a jurisdiction on the SEC’s approved list (currently 15 countries including the US, France, Germany, Luxembourg, the UK, Ireland, Korea, China, Japan, Malaysia, Singapore, Hong Kong SAR, New Zealand, Australia, and Liechtenstein).
• For operational necessity, fund trustees may keep some fund assets in DA wallets (e.g., with Digital Asset Exchanges) to facilitate trading, and asset management companies (“AMCs”) may access such wallets to place buy/sell orders.
• Crypto custody with Thai DA Custodians enables the SEC to coordinate and take prompt action in abnormal situations, such as crypto wallet theft, compared to custody abroad.
AMCs must exercise fiduciary duty in selecting reliable and regulated investment channels, such as DA Exchanges, DA Brokers, and DA Dealers that are licensed by the SEC or regulated in their respective jurisdictions.
(b) Trading Requirements
• Primary Market: Existing ETF rules apply. Participant Dealers may create or redeem units with AMCs through in-cash or in-kind settlement.
• Secondary Market: Crypto ETFs must be traded exclusively on the Stock Exchange of Thailand. Given the high volatility of crypto, sales through selling agents or redemption support agents are not appropriate.
• Margin Loans: Securities companies are prohibited from providing margin loans for crypto ETF purchases due to high volatility (although crypto ETFs may be accepted as collateral without creating buying power).
• Investor Protection: Business operators must provide educational materials and ensure investors understand the characteristics and risks of crypto ETFs before trading (although this does not apply to institutional investors). This includes two-way communication such as pop-up notifications before trading.
5) Disclosure Requirements
Crypto ETFs must comply with existing disclosure rules for mutual funds investing in DA, including risks, warnings, and risk spectrum explanations. Additional disclosure requirements include:
(a) Investment and fund management information: crypto management policies, rights arising from holding crypto and any restrictions, creation/redemption mechanics, trading channels, fair value determination timing, and fee payment methods.
(b) DA custody information: private key storage policies and information about DA Custodians, including sub-custodian arrangements.
(c) Risk information: additional risks related to crypto ETFs (e.g., theft/loss risk, risks in the creation/redemption process arising from Participant Dealer arbitrage) and actions in abnormal situations (e.g., when Participant Dealers cannot arbitrage, crypto markets cannot operate normally, or index prices are volatile/unavailable).
(d) Service provider information: key agreements with related service providers (e.g., AMCs, Participant Dealers, market makers, custodians, sub-advisers), including insurance and relevant risk management.
(e) Conflict of interest disclosure: where transactions may give rise to conflicts of interest, the prospectus of mutual funds must disclose such information. For example, if the fund trustee appoints a sub-custodian that is an affiliated company to hold crypto assets, the prospectus must state that such arrangement may give rise to conflicts of interest and may also specify the channels or methods by which unitholders can verify details or seek additional information.
6) AMC Qualifications
AMCs issuing crypto ETFs must demonstrate to the SEC the following when applying for fund establishment approval:
• Readiness of personnel, systems, and approaches for crypto investment management; and
• The names of, and the readiness of, service providers that will support fund operations (e.g., DA Custodian, Participant Dealer, Market Maker, crypto investment channels).
AMCs must submit applications through the normal approval process (fast track is not permitted).
Other Related Rules
1) Mutual Funds and Private Funds Investing in DA
The SEC proposes to also permit mutual funds (“MFs”) and private funds (“PFs”) to invest in Thai crypto ETFs (in addition to foreign crypto ETFs), subject to existing rules including investment limits. For UI funds/non-retail PFs, investment in foreign crypto ETFs is unlimited, and other crypto exposure is limited to 20% of NAV. For retail- MFs/AI funds/retail PFs, total crypto exposure through foreign funds or foreign crypto ETFs is limited to 5% of NAV.
2) Restrictions on Alternative Products
To ensure the appropriate development of crypto ETFs in Thailand and strengthen Thai business operators in the initial phase, the SEC proposes not to permit the issuance, establishment, or offering of alternative products related to foreign crypto ETFs, including: (a) Depositary Receipts referencing crypto ETFs, (b) Thai crypto ETFs in fund-of-funds or master-feeder formats; and (c) securities companies arranging for non-institutional and non-ultra-high-net-worth clients to invest in foreign crypto ETFs.
3) DA Investment Management Delegation
To align the rules with the nature of DA investment management, which requires specialized knowledge, expertise, and systems, the SEC proposes that delegates for the DA investment management of MFs must be DA Fund Managers rather than securities companies managing private funds, while AMCs remain responsible as the fund manager under strict delegation oversight.
4) Fund Trustee Qualifications
The SEC proposes to include DA Business Operators with appropriate personnel and system readiness (e.g., DA Custodians, DA Exchanges, DA brokers) as financial institutions qualified to act as fund trustees for crypto ETFs, in addition to existing qualified entities (commercial banks, finance companies, securities companies, life insurance companies, or financial institutions established by specific laws). Such trustees must have: (a) an adequate financial position and capital maintenance in accordance with the rules applicable to DA Business Operators; (b) personnel with appropriate knowledge, ability, and experience; and (c) systems for carrying out fund trustee duties (asset monitoring, account maintenance, fair value oversight, unit management, investor protection, etc.).
Conclusion
The proposed crypto ETF framework represents a significant milestone for Thailand’s capital and digital asset markets. By establishing a regulated pathway for crypto investment products, the SEC aims to provide Thai investors with access to cryptocurrency investments through professionally managed, regulated capital market products, while ensuring robust investor protection mechanisms. If implemented, the framework would also place Thailand alongside jurisdictions such as the United States, Canada, Australia, and Hong Kong that have already developed regulatory pathways for crypto ETFs, reinforcing Thailand’s position as a forward-looking financial hub in the region.
Given that the proposed rules are expected to come into effect within Q3 of 2026, interested parties are strongly encouraged to submit comments to the SEC by the deadline of 11 May 2026 through its website.
