Sam Reynolds

<div id="highlights-block_61826d261e4dd" class="highlights">
 <ul>
 <li>SCB announced Wednesday that it is taking a 51% stake in Thai SEC regulated exchange Bitkub. In July the bank also announced it was launching a fund to invest in DeFi projects in order to prepare for “an era of disintermediation”</li>
 <li>This continues a trend of Asia’s emerging banks investing in digital assets. Earlier this year, Korean banks began to invest in some of the country’s largest exchanges as local regulators required a partnership in place for tax compliance reasons</li>
 </ul>
 
</div>



Thailand’s Siam Commercial Bank (SCB) announced Wednesday that it was taking a 51% stake in locally licensed crypto exchange Bitkub, pushing the exchange into Southeast Asia’s small unicorn club with a valuation just over $1 billion.&nbsp;



The terms of the deal published by SCB show the bank will take the majority stake in Bitkub for $535 million. Bitkub’s eponymous token, a rough proxy of a public listing for the exchange, shot up by 74% since the deal was announced according to <a href="https://www.coingecko.com/en/coins/bitkub-coin">CoinGecko data</a> and is now trading at $2.44.&nbsp;



“Overall the market reacted very positively to the event, SCB share price went up nearly 10% this week, increase market cap by over $900 million (30 billion THB), approximately double the deal size to buy Bitkub exchange,” Varit Bulakul, head of digital assets at Bangkok’s <a href="https://cms.blockworks.co/thailand-sec-not-a-fan-of-listed-bitcoin-macro-proxies/" target="_blank" rel="noreferrer noopener">Brooker Group</a>, told Blockworks in an email.&nbsp;



This is SCB’s second major investment in digital assets this year. In July, the bank announced the founding of its digital assets themed venture fund, SCB 10x, with a specific DeFi mandate.&nbsp;



SCB’s rival, Kasikorn Bank, is also doubling down on digital assets, opening an <a href="https://cms.blockworks.co/thailands-regulators-soften-ban-on-nfts-as-local-banks-invest-in-ecosystem/" target="_blank" rel="noreferrer noopener">NFT marketplace earlier in October.</a>&nbsp;



“The best way to do that is to invest in DeFi very actively to learn and prepare the bank, find DeFi partners, integrate DeFi into traditional finance, become a player in this area, and potentially be the disruptor in this area,” SCB 10x’s Chief Venture and Innovation Officer Mukaya Tai told Blockworks in an <a href="https://cms.blockworks.co/thailands-siam-commercial-bank-investing-in-defi-to-prepare-for-an-era-of-disintermediation/" target="_blank" rel="noreferrer noopener">interview at the time</a>.



<blockquote class="wp-block-quote">“My view is that in the future, there will be an integration of traditional finance with DeFi.”</blockquote>



<h3 class="wp-block-heading">Asia’s emerging banks betting big on crypto</h3>



While Hong Kong is often <a href="https://www.ft.com/content/c6477ab5-0063-404b-8e9d-a69f7237ac06" target="_blank" rel="noreferrer noopener">associated with Asia’s premier financial center</a>, it certainly doesn’t <a href="https://cms.blockworks.co/bankman-fried-says-ftx-no-longer-calls-hong-kong-home-heres-why/" target="_blank" rel="noreferrer noopener">carry that crown</a> in the era of digital assets.&nbsp;Instead, emerging banks around Asia are picking up the slack and doubling down on crypto.&nbsp;



In Korea, there’s a <a href="https://cms.blockworks.co/morgan-stanleys-rumored-bithumb-play-shows-institutional-interest-in-koreas-digital-asset-infrastructure/" target="_blank" rel="noreferrer noopener">strong interest in digital assets infrastructure</a> by legacy financial institutions, first spurred by rules requiring banks to partner with crypto exchanges attaching a bank account to every account on an exchange. This form of Know-Your-Customer authentication is a way to combat tax evasion, and is said to have attracted interest in Bithumb from Morgan Stanley, though a deal never materialized.&nbsp;&nbsp;



However, in the time since, all four of the major Korean exchanges <a href="https://pulsenews.co.kr/view.php?year=2021&amp;no=869508" target="_blank" rel="noreferrer noopener">now have strategic investment</a> and partnerships with legacy banks in the country, including KB Bank, the largest in Korea.&nbsp;



Back in Thailand, Brooker Group’s Bulakul thinks that this move by SCB as well as Kasikorn Bank, will mean regulators will act quickly in Thailand and put forward an industry-friendly digital assets framework.&nbsp;



<blockquote class="wp-block-quote">“Now that the top two banks are pursuing digital assets, we can expect to see regulations to support the growth of digital assets in Thailand in the near future at a much faster speed,” Bulakul said.</blockquote>



“SCB and Kasikorn Bank will definitely push for mass adoption in Thailand, using the existing customer base. Another reason for fast regulation: these banks will be unable to compete with global and regional peers if they have to endure through regulatory delays,” Bulakul added.&nbsp;&nbsp;



Of course, the elephant in the room is that retail investors in Asia appear to be more interested in crypto than they are traditional equities.&nbsp;



In Korea, the combined volume of the four major digital asset exchanges in the country — Upbit, Bithumb, Coinone and Kobit — is $14.6 billion, surpassing the local stock index called KOSPI’s volume of $14.5 billion.



Down in Thailand, crypto exchanges licensed by the Thai SEC have a monthly turnover of around $3 billion (100 billion THB) while the country’s largest stock exchange, the SET, <a href="https://www.bloombergquint.com/onweb/thailand-s-new-retail-investors-boost-stock-turnover-to-record" target="_blank" rel="noreferrer noopener">reaches that volume in a day</a>.&nbsp;



But with two of the country’s largest banks betting big on crypto, that figure might change.

Thailand’s SCB is Buying 51% of Bitkub

<div id="highlights-block_60edf527d78d1" class="highlights">
 <ul>
 <li>Thailand’s SCB sees a future where DeFi protocols have disintermediated banks</li>
 <li>Its venture fund SCB 10x is investing in protocols that operate services that provide parallel platforms to traditional banks</li>
 </ul>
 
</div>



Asia’s large incumbent banks have historically had a mixed record on digital assets and DeFi. <a href="https://cms.blockworks.co/hong-kongs-digital-assets-double-standard/">Hong Kong’s HSBC</a> seems terrified of it and <a href="https://cms.blockworks.co/can-dbs-sto-revive-a-stagnant-offering-class/">DBS is making small regulated steps</a>, but Thailand’s Siam Commercial Bank (SCB)&#8217;s venture fund, SCB 10x, has taken a full embrace of the future of finance, doubling down on investments in the sector.&nbsp;



All this is to prepare for an era where banks and other financial institutions are possibly “completely disintermediated,” said SCB 10x&#8217;s Chief Venture and Innovation Officer Mukaya Tai.&nbsp;



“The best way to do that is to invest in DeFi very actively to learn and prepare the bank, find DeFi partners, integrate DeFi into traditional finance, become a player in this area, and potentially be the disruptor in this area,” Tai told Blockworks in an interview. “My view is that in the future, there will be an integration of traditional finance with DeFi.”



SCB 10x, SCB&#8217;s venture arm, invests in projects that parallel traditional finance, such as lending protocol Alpha and fixed income protocol Anchor. The fixed income market, Tai said, has a global value of $128 trillion creating an incredibly lucrative sector for innovation. Additionally, SCB 10x is working with Band Protocol, which develops oracles to validate real-world data such as prices for use in smart contracts, as a node validator, meaning it&#8217;s an active participant in the network.



“I am particularly proud of this because this deal marks the first time in Asia that a leading traditional bank such as ours has engaged in real involvement in the public DeFi network. Being a node validator means having certain technical skills and capabilities which we possess in-house,” Tai said. “This kind of active, hands-on engagement with the DeFi protocols and their network I believe is unique to SCB/SCB 10x among others in traditional finance, and this is something we look forward to doing with our future DeFi investments as well.”



<h3 class="wp-block-heading">There’s an appetite for DeFi, outside of Hong Kong and Singapore</h3>



Tai points to a healthy appetite for DeFi in Thailand, as demonstrated by the volume of visits to MetaMask, a popular browser-based software wallet used with Ethereum and other blockchains.&nbsp;



The number of visits to MetaMask from Thailand hit the 4.7 million mark in April 2021, according to publicly available data, with Thailand accounting for 3% of all traffic. That might not seem like much, but that puts Thailand in the top four countries behind the US, China, and Turkey.&nbsp;



Tai notes that Thai users were #1 in trading traffic on Pancake Swap, a <a href="https://cms.blockworks.co/are-nimble-dexs-a-threat-to-coinbase/" target="_blank" rel="noreferrer noopener">DEX</a> based on the Binance Service Chain, and synthetic stock trading platform Mirror.&nbsp;



While Tai would not comment on SCB 10x’s conversations with regulators, the Thai Securities and Exchange Commission has seemingly been open to forms of crypto trading, provided it stays within certain boundaries. <a href="https://cms.blockworks.co/thailand-bans-nfts-meme-tokens-from-regulated-exchanges/">In early June</a>, the regulator banned Thai-registered exchanges from listing meme tokens like DOGE that have “no clear objectives or substance, and whose prices are dictated by social media trends” as well as NFTs (which <a href="https://protos.com/nft-market-bubble-popped-crypto-collectibles-are-over/" target="_blank" rel="noreferrer noopener">market data suggests</a> fall in the same category).&nbsp;



Bangkok-based law firm Pugnatorius called the legal framework surrounding NFTs “unresolved” and pointed out that in the eyes of the law, NFT’s aren’t digital certificates of ownership but rather a “certificate of sponsorship&#8221;. This view of NFTs, which would see them popped up without much underlying substance, could be the reason why the Thai SEC has given them a red light.&nbsp;



Earlier, Pugnatorius had said Thailand was suffering from a ‘<a href="https://forkast.news/thailands-crypto-cold-season-makes-for-a-land-of-frowns/">crypto cold season</a>’ as the nation’s much-publicized regulated Security Token Offering platforms (a regulated way to raise capital via blockchain-enabled equity sales) hadn’t drawn much interest from investors.



“Potential and creativity are channeled into DeFi ventures,” Pugnatorius said at the time.&nbsp;



And what’s likely driving this appetite? Well, unlike blockchain technology ventures — which look to incorporate blockchain into different facets of the economy — that tried to raise money via STOs to not much avail, DeFi has captured the imagination and interest of the market with their quick double-digit returns.&nbsp;



Though Thailand isn’t a financial hub like Singapore and Hong Kong it does have one thing in common confirms Tai: a lack of taxes on DeFi.&nbsp;