After months of market volatility and sliding prices, the digital asset landscape in Thailand is poised for intense competition, with new players lining up to enter the sector amid a tightening regulatory environment.
The global cryptocurrency market is expected to remain stagnant for the next 6-12 months as US interest rate policy and cuts to balance sheets reduce market liquidity. Many investors are licking their wounds after several crypto platforms went bankrupt, while problems have hampered Thailand's two main crypto exchanges, dampening investor confidence.
While the external market outlook is not as bright as last year, internal factors have also aggravated the crypto climate, prompting a number of investors to significantly reduce their positions.
Investors were unable to withdraw their money from the Zipup+ platform after Zipmex, which operates in Singapore, Thailand, Australia and Indonesia, ran into a liquidity crunch after its exposure to Babel Finance and Celsius Network soured.
The collapse of Siam Commercial Bank's (SCB) plan to buy into Bitkub Online (BO) has affected the price of Bitkub's KUB coin. Bitkub was also hit by Securities and Exchange Commission (SEC) fines for non-compliance with the regulator's digital asset listing rules. BO and five members of its digital asset selection committee have each been fined around 2.5 million baht.
Data from the SEC indicates the number of active crypto trading accounts in Thailand dropped to 260,000 at the end of June, from 692,000 in January. Crypto trading values fell from 120 billion baht in January to 71 billion in June, with an average value of only 2.37 billion baht per day.
Last Thursday the SEC moved to tighten its rules over the advertising of digital assets. For example, from Sept 1 digital asset ads must not contain false, distorted or exaggerated information, or anything that could lead to misunderstanding amongst the public.
In addition, an ad must lay out investment risks and all the information needed, with balanced views for those interested in making investment decisions. Volatile cryptocurrencies can now be advertised only on official channels.
Poramin Insom, founder of Satang Corporation, said current crypto market conditions are similar to other risky assets, with the global economic slowdown and interest rate hikes having a significant impact.
The domestic crypto market has also been affected by regulatory issues and dampening investment sentiment. The market has been dominated by big players, while smaller players are disadvantaged, he said.
New players are not necessarily financial institutions, but large corporations, such as the alliance formed between Gulf Energy Development and Binance, the world's largest crypto exchange platform.
Peeradej Tanruangporn, chairman of the Thailand Digital Asset Operators Trade Association and chief executive of Upbit Thailand, said the arrival of large new players will intensify competition in the crypto exchange business and could lead to consolidation of operators.
According to Coingecko.com, the cryptocurrency market capitalisation peaked at US$2.9 trillion in November 2021 and has declined by 70% to about $1 trillion.
The global crypto market has slumped since the beginning of the year because of macroeconomic factors and concerns about liquidity tightening.
Attempts to tame inflation with a series of large US interest rate increases has led to funds shifting from high-risk assets to the relative safety of the dollar market.
According to Coingecko.com, crypto market capitalisation peaked at around US$2.9 trillion in November 2021, but has since declined by 70% to about $1 trillion.
In Thailand, the number of active trading investors has continued to drop from roughly 260,000 in July.
Bitkub, Thailand's largest crypto exchange, was affected by the collapse of SCB's offer to buy a 51% stake for 17.8 billion baht.
In November last year, the board of SCB Securities Co, a subsidiary of SCB X, approved the acquisition of BO from Bitkub Capital, but on Aug 25 both parties called off the deal, citing regulatory issues.
On Aug 30, the SEC fined Samret Wajanasathian, chief technology officer at Bitkub Blockchain Technology, for allegedly using inside information to buy KUB coins in relation to SCB's attempted acquisition of BO.
BO, a subsidiary of Bitkub Capital Group Holdings, remains the largest player in the market with a share of more than 90%, followed by Zipmex Thailand. The rest of the Thai market is made up of smaller digital exchange platforms such as Satang Pro, Upbit, Z.ComEX, and others from digital asset brokers like Bitazza and Kulap.
Last Thursday, the SEC fined Zipmex, the Singapore-based digital asset exchange operator, 1.92 million baht for two breaches of the Digital Asset Act. According to the SEC statement, from July 20-28 Zipmex suspended all or parts of its digital asset trading service without complying with the rules, conditions and methods of trading.
From July 20 to Aug 25, Zipmex suspended its clients' asset withdrawal service in its Trade Wallet and Z Wallet, which the SEC said did not comply with professional standards.
With Bitkub and Zipmex stung by negative news, the condition of the Thai crypto market has been deteriorating. It remains to be seen whether the entrance of large players such as the Gulf-Binance alliance convinces new investors to trade as volume remains low.
The Gulf-Binance alliance has not applied for a business licence and the process might take some time.
Investing on an unregulated digital asset exchange involves high risks, as the SEC is unable to assist in legal proceedings and investors have to shoulder the losses themselves if damage occurs.
Representations of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin are placed on PC motherboard in this illustration taken, June 29, 2021. REUTERS
Gulf Energy Development said it would boost its investments in blockchain ecosystems to diversify its earnings sources, even as Thai regulators tightened supervision of fintech and related platforms amid a plunge in the value of many tokens. The alliance with Binance is expected to apply for a licence in the third quarter of this year.
A source in the crypto industry who requested anonymity said new entrants backed by large companies are arriving, specifically telecom firms that have both the technology and the customer base from fixed and mobile systems to grow their user numbers.
The source is monitoring True Corporation to predict any move into this business, as Advanced Info Service (AIS) is likely to join the Gulf-Binance partnership. Gulf currently holds about 46% of Intouch Holdings Plc, the parent company of AIS.
Upbit, which was co-founded by Charoen Pokphand (CP) group heir Chatchaval Jiaravanon, is a possible joint venture partner for True, the telecom giant controlled by CP's Chearavanont family.
SCB applied for three digital asset business licences through its subsidiary SCB Securities: for a digital asset exchange, a digital asset broker for cryptocurrency, and digital tokens.
SCB expanded its investments to tech companies and startups through its subsidiary SCB 10X, which is SCB's holding company for tech investment.
SCB 10X established Token X, which has a licence for the initial coin offering (ICO) portal business.
Even after SCB scrapped its deal with Bitkub Online, Thailand's oldest lender still holds the digital licences.
Kasikornbank (KBank) entered the digital asset business through its subsidiary, Kasikorn Business Technology Group, which invests in tech companies and startups.
KBank established another subsidiary, Kubix Digital Asset Cloud, which is licensed to be an ICO portal.
Krungthai Bank (KTB) entered the digital asset business through KT XSpring Co. Its joint venture Krungthai XSpring is licensed to operate a digital asset broker, which is not yet in operation.
KTB entered the digital business through its "Pao Tang" application, an open digital platform that can be accessed by more than 33 million people.
The state-owned bank also developed a Krungthai Gold Wallet service with MTS Gold, trading gold through the Pao Tang app.
Pao Tang offers digital corporate bond distribution through its app and has sold bonds for PTT Exploration and Production, Minor International and Sansiri.
Bank of Ayudhya also expressed interest in entering the digital asset business through its subsidiary Krungsri Finnovate, which holds 1% of Zipmex and invests in other technology firms and startups.