Bank of Thailand to limit banks’ exposure to digital assets

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As more investors in Thailand turn their attention to digital assets, the country’s central bank is concerned about the involvement of commercial banks in the sector and is looking to limit their exposure.

The Bank of Thailand (BOT) has announced a new order that requires commercial banks to limit their investment in digital asset businesses, including exchanges, to 3% of their capital. In addition, these banks can’t invest directly in such businesses and must only do so through units, which the regulator says will shield the confidence of depositors and the banking system.

“We will use regulatory measures to ring-fence the banks by allowing only units to invest in digital assets. We want banks to invest in digital assets gradually and focus on quality more than going into it at full-speed on fears of falling behind,” Roong Mallikamas, the deputy governor at the BOT, revealed.

This prohibition will work to the banks’ advantage as it has done in the past, Roong added. Previously, the BOT had curtailed banks’ investment in fintech to just 3% of their capital as it monitored developments in the space. This limit was lifted on the same day that the new digital asset investment limit was imposed.

The measure comes at a time when Thai investors have indulged in digital asset investment aggressively. According to data from the country’s Securities and Exchange Commission (SEC), Thai investors now hold $3.4 billion worth of digital assets, up from $280 million just a couple of years ago. The average daily turnover has shot up 2,000% in that time to average $140 million, while the number of active accounts on exchanges is now just shy of 2 million, up from 170,000.

Thai banks have already made inroads into the digital asset industry. Siam Commercial Bank, the Southeast Asian country’s oldest bank, invested $537 million in November last year for a 51% stake in Bitkub, Thailand’s largest exchange which some estimate controls over 90% of the market. However, this deal has yet to gain the approval of regulators, including the central bank.

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