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 is-layout-flow wp-block-quote-is-layout-flow">“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 is-layout-flow wp-block-quote-is-layout-flow">“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.

arit Bulakul

Thailand’s SCB is Buying 51% of Bitkub

<div id="highlights-block_611d845b65c3c" class="highlights">
 <ul>
 <li>Bitcoin on the corporate balance sheet has become a popular trend in the last year for publicly listed companies, but Thailand’s SEC is casting a wary regulatory eye on the practice</li>
 <li>Thailand continues to be a regional hotspot for crypto adoption, with hundreds of thousands of active users according to reports from its SEC</li>
 </ul>
 
</div>



Companies looking to put bitcoin on their balance sheet in Thailand, one of Asia’s up-and-coming crypto hubs, might be getting a call from the country’s Securities and Exchange Commission.&nbsp;



Thailand’s SEC has been a keen regulator for the country’s burgeoning digital asset market, recently <a href="https://cms.blockworks.co/thailand-bans-nfts-meme-tokens-from-regulated-exchanges/" target="_blank" rel="noreferrer noopener">banning NFTs and meme tokens</a> for their lack of ‘substance’ as Thai’s begin investing in crypto by the hundreds of thousands. As the country’s digital asset market matures, an emerging trend will be for publicly listed companies to put bitcoin on their balance sheets — a trend that <a href="https://news.bitcoin.com/nasdaq-microstrategy-bitcoin-425-million/" target="_blank" rel="noreferrer noopener">MicroStrategy kicked off in September 2020</a> with its first bitcoin purchase. Now, publicly-listed companies, mainly in the US, Canada, and Europe, <a href="https://bitcointreasuries.net/" target="_blank" rel="noreferrer noopener">own around $75 billion in crypto</a>.



“If you try and become a proxy company, the Thai SEC will definitely investigate that company,” Varit Bulakul, President of the Digital Asset Division of Bangkok-listed The Brooker Group, told Blockworks in an interview. “They don&#8217;t really like the company to become a proxy of other assets. They rather have a listed company focusing on the actual core business.”



The Brooker Group, a business consultancy and financial advisory firm, is the “precedent case” for bitcoin on the balance sheet in Thailand, explains Bulakul. It’s also a trailblazer in the accounting treatment for digital assets, which Bulakul says is fairly clear cut&nbsp; — a trading security, or digital asset inventory, which is already codified in Thai law and profit is marked when the asset is sold — unlike in the US where things can get <a href="https://news.bloomberglaw.com/financial-accounting/tesla-bitcoin-bet-exposes-limits-of-crypto-accounting-rules" target="_blank" rel="noreferrer noopener">extraordinarily complicated</a>. And, as it is a precedent case, Bulakul said that the company has gotten a number of calls from the SEC on the topic.&nbsp;



“They talked to us about this issue, but we informed them that it&#8217;s not our goal to accumulate coins and stop doing other businesses. As in the first and second quarter we still generate income from our advisory services, equity investment, and other loan deals,” he explained. “We said we are not going to become a bitcoin or digital asset proxy in the future.”



All this is in contrast to the stance of the US SEC. Hester Peirce, one of its commissioners, has declined to publicly comment on US-listed firms putting bitcoin on their balance sheet, believing it&#8217;s an issue between executives and shareholders, not a company and its regulator.



“I don’t want to be in the business of running companies,” she said during last month’s<a href="https://cms.blockworks.co/bitcoin-etf-money-laundering-concerns-at-center-of-b-word-event-regulatory-panel/2/" target="_blank" rel="noreferrer noopener"> ‘B-Word’ conference</a>, stating that the US SEC was not a “merit regulator.”&nbsp;



MicroStrategy’s stock is now seemingly divorced from the fundamentals of the company, and <a href="https://www.forbes.com/sites/chuckjones/2021/06/30/microstrategys-stock-is-tied-to-bitcoins-success-or-failure/?sh=40b167902450" target="_blank" rel="noreferrer noopener">critics have pointed out</a> that it&#8217;s now tied to bitcoin’s success or failure. But, in the eyes of Peirce, this isn’t a regulatory issue.&nbsp;&nbsp;



Back in Thailand, Bulakul doesn’t think that the trend of bitcoin on the corporate balance sheet isn’t going to take off anytime soon. Not because of regulation, but more so because Thai companies are conservative and don’t quite understand it yet.&nbsp;



The action, Bulakul says, is on the retail and infrastructure side. There’s plenty of institutional interest in blockchain and DeFi infrastructure — Siam Commercial Bank, one if Thailand’s biggest, is a prolific investor in DeFi via its SCB 10x arm — and weekly reports from the Thai SEC puts the number of crypto users in-country at around 800,000. Thai’s are intense market speculators, after all, and the confidence in the nation’s currency, the Baht, is faltering as it slips due to closed borders and a non-existent tourist industry (a pillar of the economy). Mixed together, it’s a perfect concoction for apeing into crypto.&nbsp;



With an eye towards the future, one of the things Bulakul is looking for in Thailand is the emergence of more digital asset investment opportunities. In 2019, Thailand, along with Taiwan, <a href="https://forkast.news/balancing-blockchain-innovation-and-conservatism-taiwans-conundrum/" target="_blank" rel="noreferrer noopener">ratified laws</a> for Security Token Offerings. But in the time since then<a href="https://www.coindesk.com/why-security-token-offerings-are-a-big-yawn-in-parts-of-asia" target="_blank" rel="noreferrer noopener"> nothing has really happened</a>, with some calling it a “<a href="https://forkast.news/thailands-crypto-cold-season-makes-for-a-land-of-frowns/" target="_blank" rel="noreferrer noopener">land of frowns</a>”. But Bulakul is optimistic, citing filings for up-and-coming STOs for REIT-like real estate funds.&nbsp;



While there might not be a Thai version of MicroStrategy anytime soon, it’s very possible that the market in the country could simply skip this step as digital assets and DeFi flourish in the “land of smiles.”



Want more investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a> September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.

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