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Following the U.S. Securities and Exchange Commission’s approval of spot Bitcoin ETFs, Thailand’s Securities and Exchange Commission (SEC) is reassessing regulations on the investments of mutual funds and private funds (collectively “Funds”). The SEC has launched a public consultation on new draft notifications introducing  the new asset classes that can be held by Funds, and aims to bring these rules into effect on January 1, 2025.

The highlights of these changes are set out below.

Eligible New Asset Classes

The new asset classes that can be held by Funds can be categorized into two types—investment tokens and crypto assets—and the determination will focus on substance over form.

Investment tokens: If the substance involves raising funds, regardless of what the assets are called, and they are legally issued and offered or approved by home regulators that are members of the International Organization of Securities Commissions (IOSCO), Funds can invest in these types of assets as transferable securities within the permitted ratio.

Crypto assets: The eligible crypto assets which Funds are entitled to hold focus on crypto ETFs or offshore funds investing in crypto assets, and they are subject to investment limits. Funds can hold crypto assets directly, but only temporarily, and only for the purpose of purchasing, selling, or exchanging the crypto assets, not speculative purposes. The notifications state that Funds may hold Bitcoin/Ethereum for no longer than five business days and USDT/USDC for no more than one month.

Investment Limits

Typically, the rules segregate investment limits into listed and non-listed digital assets, and the limits depend on the sophistication of the investors in the Funds.

In general, UI Funds (mutual funds offered to institutional investors or ultra-high net worth investors) can invest in these new asset classes without any limitations, although net exposure to other crypto assets  –  which are not crypto ETFs – is limited to the 20% net asset value (NAV) threshold. Private funds with retail investors will be subject to the same investment limits as retail mutual funds. Accredited funds (AI Funds or mutual funds for non-retail investors) have higher investment limits than retail mutual funds.

In the draft notifications that are under consultation, the investment limits for investment tokens are set at a relatively high level for retail funds, as set out below.

For listed digital assets:

  • Single entity limit of the issuer: 10% of NAV.
  • Group limit for all issuers in the same industry: 25% of NAV.
  • Concentration limit (considering the total issued tokens of each issuer): One-third of the offering value of the total issued tokens of the issuer.

For non-listed digital assets:

  • A limit of non-listed digital assets at 5% of NAV (calculated from all issuers), and a total limit for all other unspecified investment products (SIP), e.g., unrated bonds, of 15%.
  • Group limit: 25% of NAV.
  • Concentration limit: One-third of the offering value.

These notifications will open up the market for digital assets and investors. Funds will, however, be required to comply with the relevant disclosure requirements and investor protection measures.

WRITTEN BY

For further information, please contact:

Kobkit Thienpreecha – Tilleke & Gibbins,
kobkit.t@tilleke.com

Kobkit Thienpreecha, a seasoned partner at Tilleke & Gibbins, specializing in corporate law, M&A, and regulatory compliance in Thailand, with a reputation for excellence recognized by leading legal directories.

Kobkit Thienpreecha, a partner and director of Tilleke & Gibbins’ corporate and commercial group, has been a leading corporate lawyer with the firm for over a decade. Having been selected as counsel by numerous foreign clients that wish to do business in Thailand—ranging from private entrepreneurs to multinational industrial manufacturers, traders, and service providers from various industries—Kobkit excels at designing targeted, legitimate, and practical solutions for foreign business start-up structures.

Kobkit also specializes in offering diverse legal support services at the highest standard, including antitrust and trade competition, company incorporation, joint ventures, M&A, investment promotion, Foreign Business License, capital markets and IPOs, specific business permits and licenses, immigration, regulatory compliance, and all foreign clients’ affairs. With support from his experienced service team, Kobkit continues to overcome challenges and succeed in landmark cases, which further his reputation, attract referrals, and build his incomparable clientele.

Kobkit has received remarkable recognitions by several publishers. He was ranked as a “Recognized Practitioner” in Corporate/M&A practice in the 2019 edition of Chambers, while the Legal 500 Asia Pacific 2019 rankings note that clients speak of Kobkit as a “go-to-guy” for corporate and M&A work, and elsewhere in the guide he is identified as a “capital markets specialist.” Kobkit was also ranked as “leading lawyer” in Asialaw Profiles 2019, and as one of the top 100 lawyers in Thailand by Asia Business Law Journal.

Known for delivering sharp and reliable advice, Kobkit’s performance is outstanding and dynamic, as represented by his involvement in IPOs, securities transactions, M&A deals, bids for government projects, joint ventures, shareholders’ disputes, and NGO licenses.

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