The Stock Exchange of Thailand (SET) will launch a digital asset trading platform in the second half of this year to allow trading on all types of digital token assets excluding cryptocurrencies.
The SET says 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.
SET executive vice-president Kitti Sutthiatthasil said the digital asset platform will be similar to other popular e-commerce marketplaces such as Amazon, Lazada or Shopee, 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 last year to link various digital asset exchanges, digital wallets and initial coin offering (ICO) portals in Thailand under one platform via a collaboration with Kasikorn Business Technology Group (KBTG), an arm of Kasikornbank.
KBTG 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 such as SCB 10X, the venture capital arm of Siam Commercial Bank, with an aim to achieve exponential growth through tech innovations and investments via its three arms, namely Venture Builder, Venture Capital, and Strategic Investment & Partnership.
The SET also has studied several ICO cases. Most projects being studied have the possibility of making profits in the future, Mr Kitti said.
WHY NO CRYPTO?
When the SET launches a new exchange or product, investor protection will be taken as the topmost priority.
"We just 'buy the future' and hopefully the digital asset marketplace will grow as expected." — Kitti Suthiatthasil, Executive vice-president, SET
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.
They thus cannot be counted as the SET's product even though some countries accept payments in cryptocurrencies, said Mr Kitti.
Cryptocurrencies like bitcoin 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.
Another reason why the SET is not interested in cryptocurrencies despite their recent surges is because they can easily be used for money laundering.
If people are caught laundering money on the SET digital asset platform using cryptocurrencies, it could harm the SET's reputation and overall investor confidence, Mr Kitti said.
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, Mr Kitti said.
However, he 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 said.
KBTG, 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.
"We just 'buy the future' and hopefully the digital asset marketplace will grow as expected," Mr Kitti said.