March 5, 2021

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Thai Stock Exchange to launch digital asset trading platform

The Stock Exchange of Thailand (SET) will launch a digital asset trading platform in the second half of 2021 to allow trading on all types of digital token assets excluding cryptocurrencies. According to the SET, cryptocurrencies do not meet its product qualifications and could facilitate money laundering, while causing harm to the bourse’s image as a “high trust” exchange.

The Executive Vice-President of the SET stated that the digital asset platform will be similar to other popular e-commerce marketplaces but all products on SET’s platform will be digital token assets. He said tokens traded on the platform must meet at least one of three conditions. First, the token must have an underlying asset that investors can analyse on value. Second, it must be a valuable product that supports economic activities. Third, the product must have benefits to society and the environment.

The bourse also formulated a fully integrated distributed ledger technology (blockchain) and digital asset investment service in 2020 to link various digital asset exchanges, digital wallets and initial coin offering (ICO) portals in Thailand under one platform via a collaboration with an arm of a banking group in Thailand.

The bank will be responsible for sourcing and screening products entering the SET digital asset marketplace. The SET is looking to sign an agreement with other partners with an aim to achieve exponential growth through tech innovations and investments via its three arms.

The SET also has studied several ICO cases. Most projects being studied have the possibility of making profits in the future. In order to protect investors, the digital asset must meet at least one of the three conditions set by the SET but cryptocurrencies don’t meet any of them. Thus, they cannot be counted as the SET’s product even though some countries accept payments in cryptocurrencies.

Cryptocurrencies are currently used in some countries which are experiencing high inflation and currency fluctuations such as Zimbabwe and Venezuela as an equivalent of fiat money. Thailand has a strong economy. As inflation has remained low and the Bank of Thailand’s measures to keep the baht stable have worked in the past, the SET has no reason to support cryptocurrencies at the moment.

However, the Executive Vice-President said some stock exchanges in Europe currently provide cryptocurrency trading to attract digital asset investors before launching other digital token assets via their platforms.

He said one of the measures to prevent money laundering is to do “Know Your Customer” (KYC) with clients who open trading with the exchanges. KYC will filter and screen unusual investors who come to open trading accounts. Cryptocurrency is just one digital asset product among others, he added.

The bank and other ICO portal firms will search for new products and evaluate the ICO project before putting them on the trading platform. As each product has different characteristics, the bourse must employ experts from different areas to help screen the products.

Digital token assets can be many valuable things such as diamonds and title deeds.

The SET expects that the digital asset marketplace will grow faster than today’s stock market as it emerges in the 4.0 era, while the traditional markets were established in the 1.0 or 2.0 eras which had less technologies to facilitate trading. The stock and bond markets are also governed by regulations that are far less flexible than the digital asset law and usually need intermediaries such as brokers and banks to make transactions.

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