Thai SEC to launch DLT trading system for tokenized securities

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As tokenization takes off in Thailand, the country’s securities watchdog has announced plans to launch a trading system for digital tokens.

The Securities and Exchange Commission’s (SEC) deputy secretary-general, Jomkwan Kongsakul, recently revealed that the system will be built on decentralized ledger technology (DLT), allowing Thai firms to trade digital tokens efficiently and at low costs. The project is in its early phase, and as it advances, it will need regulatory changes to support tokenized securities, she added.

“The SEC is leveraging technology to enhance efficiency in the capital market by promoting an electronic securities ecosystem. In the future, new regulations will be launched to facilitate the issuance of electronic securities and online purchases of debentures,” she stated, as reported by local paper Bangkok Post.

Bond trading in Thailand faces challenges such as illiquid markets and a lack of access, especially to retail traders. Additionally, it takes up to 14 days before bonds purchased on the primary market can be traded on the secondary market. The SEC believes deploying DLT will solve these challenges and rid the sector of tedious manual paperwork, which is susceptible to costly errors.

The regulator will build the public DLT infrastructure, which any market participant can tap into “at a reasonable cost.” However, it will allow private firms to deploy their private blockchain networks, but they must abide by the SEC’s unified standard for interoperability.

“In the future, there may be multiple chains for trade. Trading through DLT on all systems is connected by a shared ledger, which is expected to be completed soon,” Kongsakul stated.

Under the new DLT system, there will be two types of securities: the digital-native tokens that will be issued exclusively on the blockchain and the digital twins of existing traditional products.

Thai firms have rapidly taken to tokenization over the past few years, and regulators are now gradually catching up. Kongsakul revealed that the SEC has approved four tokenization projects and is reviewing two more applications. Five other entities are in preliminary talks with the watchdog and are exploring the feasibility of issuing green tokens.

The SEC’s announcement came just days after Finance Minister Pichai Chunhavajira revealed plans to issue a Thai stablecoin backed by government bonds. The goal is to democratize investment in bonds, which the minister said has been dominated for too long by financial institutions.

The stablecoin will be first issued in a sandbox environment and at launch, the project will be supported by 10 billion baht ($300 million) worth of government bonds. The ministry is working on the project with the SEC and other relevant government agencies, targeting an October launch.

The Bank of Thailand (BoT) will also be involved in the stablecoin project. However, Governor Sethaput Suthiwartnarueput has expressed hesitation at any digital asset project, including the planned digital currency payments pilot in the tourist island of Phuket.

“The benefits of the use case have to be very, very clear because there are downside risks to moving to [digital assets],” he told Reuters last week.

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