[DigitalToday reporter Yoonseo Lee (이윤서)] Thailand's Securities and Exchange Commission (SEC) has allowed the domestic inclusion of spot cryptocurrency exchange-traded funds (ETFs) limited to bitcoin and ether.

CoinPost, a blockchain media outlet, reported on Oct. 10 (local time) that the Thai SEC announced 11 related rules on Oct. 8. The new rules take effect on Oct. 16.

The initial investment universe is limited to bitcoin and ether. The Thai SEC said it adjusted the structure under which trusts and private funds could invest only in overseas spot crypto ETFs, and included domestic products within existing investment limits. The authorities cited expanding investment opportunities and strengthening business operators' responsiveness as the purpose of the overhaul.

It also set conditions for product structure. Funds must be passively managed to track the price of the underlying cryptocurrency. They must maintain an average net exposure to a single cryptocurrency of at least 80 percent of total net asset value over the full fiscal year. This effectively means the market will open with products linked to bitcoin or ether prices rather than diversified products.

It also put custody and trading infrastructure within Thailand's regulatory framework. Only digital asset custodians regulated by the Thai SEC can hold the assets. Listing and trading are limited to the Stock Exchange of Thailand. The Thai SEC left open the possibility of allowing the use of overseas custodians that meet certain qualifications if it deems it necessary and appropriate.

It also introduced investor-protection measures. Investors must complete a confirmation process that they understand the relevant risks before trading. Securities firms cannot lend funds to buy spot ETFs. This is seen as a step aimed at reducing early market volatility by blocking leveraged inflows.

At the initial stage, it also did not allow the issuance and sale of alternative products such as depositary receipts based on overseas crypto ETFs. It also banned brokering overseas spot crypto ETF investments to clients other than institutional investors and ultra-high-net-worth individuals.

Requirements for asset managers and service providers were also tightened. Asset managers must have personnel, operating systems and contractual arrangements with external service providers. If digital asset management is outsourced, it can be entrusted only to licensed digital asset fund managers. Qualified operators such as custodians can register as trust supervisors that oversee only spot crypto ETFs if they meet standards for financial condition, personnel and operating systems.

The regulatory overhaul is drawing attention because Thailand is allowing spot crypto ETFs while opening the market by limiting product scope and distribution channels. Allowing only bitcoin and ether first, and setting passive management and a net exposure requirement of at least 80 percent, can be seen as a design that puts weight on early institutional settlement. As a result, future focus is expected to be on whether local asset managers launch products and how far the Thai SEC will expand the scope for using overseas custodians.