Cryptocurrency representations are shown in this illustration taken on January 24th. The global cryptocurrency market has declined since the beginning of this year. (Reuters photo)
After months of market volatility and price drops, Thailand’s digital asset landscape is set for stiff competition, with new players lining up to enter the sector amid a tight regulatory environment.
The global cryptocurrency market is expected to remain in recession for the next six to twelve 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 crippled two major crypto exchanges in Thailand, eroding investor confidence.
While the outlook for the external market is not as bright as last year, internal factors have also exacerbated the crypto climate, prompting a number of investors to significantly reduce their positions.
Investors were unable to withdraw funds from the Zipup+ platform after Zipmex, which operates in Singapore, Thailand, Australia and Indonesia, faced a liquidity crisis after its dealings with Babel Finance and Celsius Network soured.
The collapse of Siam Commercial Bank (SCB)’s plan to buy into Bitkub Online (BO) has affected the price of Bitkub’s KUB coin. Bitkub has also been fined by the Securities and Exchange Commission (SEC) for failing to comply with the regulator’s digital asset listing rules. BO and five members of the digital asset selection committee were each fined about 2.5 million baht.
Data from the Securities and Exchange Commission indicates that the number of active cryptocurrency trading accounts in Thailand fell to 260 thousand at the end of June, from 692 thousand in January. Cryptocurrency trading values dropped from 120 billion baht in January to 71 billion in June, averaging just 2.37 billion baht a day.
Last Thursday, the Securities and Exchange Commission (SEC) moved to toughen its rules on advertising digital assets. For example, ads for digital assets as of September 1 must not contain false, distorted or exaggerated information, or anything that could lead to misunderstanding among the public.
In addition, the advertisement should identify the investment risks and all required information, with balanced views of those wishing to make investment decisions. The volatile cryptocurrency can now be announced only on official channels.
Buramin Insum, founder of Satang Corporation, said that the current crypto market conditions are similar to other risky assets, where the global economic slowdown and rising interest rates have had a significant impact.
The local cryptocurrency market has also been affected by regulatory issues and dampened investment sentiment. He said that the big players dominate the market, while the smaller players are not in a good position.
The new players are not necessarily financial institutions, but rather large companies, such as the alliance formed between Gulf Energy Development and Binance, the largest cryptocurrency exchange in the world.
Peeradej Tanruangporn, President of the Trade Association of Digital Asset Operators of Thailand and CEO of Upbit Thailand, said that the arrival of major new players will intensify competition in the cryptocurrency exchange business and potentially lead to operator consolidation.
According to Coingecko.com, the cryptocurrency market capitalization peaked at $2.9 trillion in November 2021 and declined by 70% to around $1 trillion.
The global cryptocurrency market has declined since the beginning of the year due to macroeconomic factors and concerns about tightening liquidity.
Attempts to tame inflation with a series of big increases in US interest rates have shifted funds from riskier assets to relatively safe ones in the dollar market.
According to Coingecko.com, the cryptocurrency market cap peaked at around $2.9 trillion in November 2021, but has since fallen by 70% to around $1 trillion.
In Thailand, the number of active commercial investors continued to decline from around 260,000 in July.
Bitkub, Thailand’s largest crypto exchange, was affected by the collapse of SCB’s bid for a 51% stake for 17.8 billion baht.
In November last year, the board of directors of SCB Securities Co, a subsidiary of SCB X, approved the acquisition of BO from Bitkub Capital, but on August 25, both parties canceled the deal, citing regulatory issues.
On August 30, the Securities and Exchange Commission (SEC) fined Samret Wajanasathian, chief technology officer of Bitkub Blockchain Technology, for allegedly using inside information to purchase KUB coins in connection with 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 over 90%, followed by Zipmex Thailand. The rest of the Thai market consists of smaller digital exchange platforms such as Satang Pro, Upbit, Z.ComEX and other digital asset brokers such as Bitazza and Kulap.
Last Thursday, the Securities and Exchange Commission (SEC) fined Zipmex, the Singapore-based digital asset exchange operator, 1.92 million baht for two breaches of the Digital Asset Act. According to a statement from the SEC, from July 20-28, Zipmex has suspended trading services for digital assets or parts thereof without complying with the trading rules, conditions, and methods.
From July 20 to August 25, Zipmex suspended the withdrawal of its clients’ assets in Trade Wallet and Z Wallet, which the SEC said did not comply with professional standards.
With Bitkub and Zipmex affected by the negative news, the state of the Thai crypto market has deteriorated. It remains to be seen if the entry of major players such as the Gulf-Binance alliance will convince new investors to trade as volumes remain low.
The Gulf-Binance alliance has not applied for a trade license and the process may take some time.
Investing in an unregulated digital asset exchange has a high risk, as the SEC is unable to assist with legal proceedings and investors have to bear the losses themselves in case of damage.
Representations of the cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple, and Litecoin are placed on a PC motherboard in this illustration taken on June 29, 2021. Reuters
Gulf Energy Development said it will boost its investments in the blockchain ecosystem to diversify its revenue streams, even as Thai regulators tighten controls on fintech and related platforms amid a drop in the value of many tokens. The alliance with Binance is expected to apply for a license in the third quarter of this year.
A source in the cryptocurrency industry, who asked to remain anonymous, said that new entrants backed by large companies are arriving, specifically telecom companies that have the technology and customer base of fixed and mobile systems to grow their user numbers.
The source is watching True Corporation to anticipate any move in this business, as Advanced Info Service (AIS) is likely to join the Gulf-Binance partnership. Gulf currently owns about 46% of Intouch Holdings Plc, the parent company of AIS.
Upbit, co-founded by Charoen Pokphand (CP) group heir Chatchaval Jiaravanon, is a potential joint venture partner of True, the telecom giant controlled by CP’s Chearavanont family.
SCB has applied for three digital assets business licenses through its subsidiary SCB Securities: a digital asset exchange, a digital asset broker for cryptocurrency, and digital tokens.
SCB has expanded its investments to technology companies and startups through its subsidiary SCB 10X, the technology investment holding company SCB.
SCB created 10X Token X, which has a license to operate an Initial Coin Offering (ICO) gateway.
Even after SCB canceled its deal with Bitkub Online, the oldest bank in Thailand still holds digital licenses.
Kasikornbank (KBank) has entered the digital asset space through its subsidiary, Kasikorn Business Technology Group, which invests in technology companies and start-ups.
KBank has created another subsidiary, Kubix Digital Asset Cloud, which is licensed to be an ICO gateway.
Krungthai Bank (KTB) entered the digital asset space with KT XSpring Co.
KTB entered the digital business with its “Pao Tang” app, an open digital platform that can be accessed by more than 33 million people.
The state-owned bank has also developed a Krungthai Gold Wallet service with MTS Gold, to trade gold through the Pao Tang app.
Pao Tang offers digital corporate bond distribution through its app, and has also sold bonds to PTT Exploration and Production, Minor International and Sansiri.
Ayudhya Bank has also expressed interest in entering the digital asset business through its subsidiary Krungsri Finnovate, which owns 1% of Zipmex and invests in technology companies and other start-ups.