Representation of cryptocurrencies seen in this illustration taken Jan 24. The global cryptocurrency market has slumped since the beginning of this year. Reuters
After months of market volatility and sliding prices, the digital asset landscape in Thailand is poised for intense competition, with new players set to enter the sector amid a tight regulatory environment.
The global cryptocurrency market is expected to remain stagnant for the next 6-12 months as US interest rate policies and balance sheet cuts 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, reducing investor confidence.
While the external market outlook is not as bright as last year, internal factors have also improved the crypto climate, which has led some investors to reduce their positions significantly.
Investors were unable to withdraw money from the Zipup+ platform after Zipmex, which operates in Singapore, Thailand, Australia and Indonesia, suffered a liquidity crisis after exposure to Babel Finance and Celsius Network faded.
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 fined by the Securities and Exchange Commission (SEC) for not complying with the regulator’s digital asset listing rules. The BO and five members of the digital asset selection committee were each fined about 2.5 million baht.
Data from the SEC showed the number of active crypto trading accounts in Thailand fell to 260,000 at the end of June, from 692,000 in January. Crypto trading value dropped from 120 billion baht in January to 71 billion in June, with an average of only 2.37 billion baht per day.
Last Thursday the SEC moved to tighten rules on digital asset advertising. For example, from September 1, digital asset ads must not contain false, misleading or exaggerated information, or anything that could cause misunderstandings among the public.
In addition, advertising should provide investment risks and all the necessary information, in a balanced view for people who want to make investment decisions. Volatile cryptocurrencies can now be advertised only on official channels.
Poramin Insom, the founder of Satang Corporation, said that the current condition of the crypto market is similar to other risky assets, with the global economic slowdown and the increase in interest rates having a significant impact.
The domestic crypto market has also been affected by regulatory issues and subdued investment sentiment. The market has been dominated by big players, while smaller players have been disadvantaged, he said.
New players are not necessarily financial institutions, but large companies, such as the alliance formed between Gulf Energy Development and Binance, the world’s largest crypto exchange platform.
Peeradej Tanruangporn, chairman of the Thai Digital Asset Operators Trade Association and chief executive of Upbit Thailand, said the arrival of large new players would increase competition in the crypto exchange business and could lead to operator consolidation.
According to Coingecko.com, the cryptocurrency market capitalization peaked at US$2.9 trillion in November 2021 and has fallen by 70% to around $1 trillion.
The global crypto market has fallen since the beginning of the year due to macroeconomic factors and concerns about liquidity tightening.
Efforts to tackle inflation with a series of large US interest rate hikes have caused funds to move from high-risk assets to the relative safety of the dollar market.
According to Coingecko.com, the crypto market capitalization peaked at $2.9 trillion in November 2021, but has since declined by 70% to around $1 trillion.
In Thailand, the number of active trading investors continued to decline from about 260,000 in July.
Bitkub, Thailand’s largest crypto exchange, was affected by the collapse of SCB’s bid 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 August 25, both parties canceled the deal, citing regulatory issues.
On August 30, the SEC fined Samret Wajanasathian, chief technology officer at Bitkub Blockchain Technology, for allegedly using insider information to purchase KUB coins in connection with SCB’s acquisition attempt from 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 Thailand’s Zipmex. 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, a Singapore-based digital asset exchange operator, 1.92 million baht for two violations of the Digital Assets Act. According to the SEC statement, from July 20-28 Zipmex suspended all or part of the digital asset trading service without complying with the rules, conditions and trading methods.
From July 20 to August 25, Zipmex suspended the withdrawal service of clients’ assets in 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 deteriorated. It remains to be seen whether the entry of large players such as the Gulf-Binance alliance convinces new investors to trade as the volume remains low.
The Gulf-Binance alliance has not yet applied for a business license and the process may take some time.
Investing in unregulated digital asset exchanges involves high risk, as the SEC cannot assist in legal proceedings and investors must bear their own losses in the event of damage.
Representatives of cryptocurrencies Bitcoin, Ethereum, DogeCoin, Ripple, Litecoin are placed on a PC motherboard in this illustration taken June 29, 2021. REUTERS
Competition is increasing
Gulf Energy Development said it will boost investment in the blockchain ecosystem to diversify sources of income, 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 license in the third quarter of this year.
Sources in the crypto industry who requested anonymity said that new entrants backed by large companies are coming, especially telecommunications companies that have the technology and customer base of fixed and mobile systems to increase the number of users.
The source is monitoring True Corporation to predict that it will 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, co-founded by Charoen Pokphand (CP) group heir Chatchaval Jiaravanon, is a joint venture partner for True, the telecom giant controlled by CP’s Chearavanont family.
The bank entered
SCB applied for three digital asset business licenses through its subsidiary SCB Securities: for digital asset exchange, digital asset broker for cryptocurrency, and digital token.
SCB develops investments into technology companies and startups through its subsidiary SCB 10X, which is SCB’s holding company for technology investments.
SCB 10X established Token X, which has a license for initial coin offering (ICO) portal business.
Even after SCB canceled its deal with Bitkub Online, Thailand’s oldest lender still has a digital license.
Kasikornbank (KBank) entered the digital asset business through its subsidiary, Kasikorn Business Technology Group, which invests in technology companies and startups.
KBank established another subsidiary, Kubix Digital Asset Cloud, which is licensed as an ICO portal.
Krungthai Bank (KTB) entered the digital asset business through KT XSpring Co. Krungthai’s joint venture XSpring has been licensed to operate a digital asset broker, which has yet to operate.
KTB entered the digital business through the “Pao Tang” application, an open digital platform accessible to more than 33 million people.
The state-owned bank also developed the Krungthai Gold Wallet service with MTS Gold, trading gold through the Pao Tang app.
Pao Tang offers digital corporate bond distribution through the app and has sold bonds for PTT Exploration and Production, Minor International and Sansiri.
Bank of Ayudhya has also expressed interest in entering the digital asset business through its Krungsri subsidiary Finnovate, which holds 1% of Zipmex and invests in other technology companies and startups.