SEC mulls digital asset fund viability as allure grows

The Securities and Exchange Commission (SEC) is considering allowing asset management companies to launch digital asset funds to meet growing investment demand for digital assets.

Nothing has been proposed to the SEC's board of directors because a thorough assessment is needed, said SEC deputy secretary-general Tipsuda Thavaramara.

"We have to consider this carefully because it is a new type of investment asset," Mrs Tipsuda said. "If something goes wrong, there will be a huge impact on the mutual fund industry."

Earlier, Pattera Dilokrungthirapop, chairwoman of the Association of Thai Securities Companies, said many securities firms with Asco membership were interested in operating digital assets and related businesses, including initial coin offering (ICO) portals and exchanges, as well as becoming brokers and dealers in digital asset trade.

Interest in digital assets has been growing around the globe. Bitcoin's skyrocketing value last year contributed heavily to increasing investment appetite for digital assets.

SCB Asset Management disclosed in February that the company wanted to launch a cryptocurrency fund that would invest in bitcoin futures in the global futures markets initially.

The company said it has been consulting with the SEC since February this year.

Vasin Vanichvoranun, executive chairman of Kasikorn Asset Management, said the company still has not consulted with the SEC, while adding that it will take time to launch this kind of fund because of the difficulty in asset evaluation.

According to Crypto Fund Research, there are many subcategories within digital asset funds such as cryptocurrency funds, blockchain funds or digital asset funds.

There are more than 600 cryptocurrency and blockchain investment funds, with the majority set up as hedge funds and a large number of funds identified as venture capital funds, according to Crypto Fund Research.

Hedge funds are the most common type of digital asset fund, but venture capital cryptocurrency funds have been launched at a fast pace. Existing technology and fintech venture capital firms are also expanding investments into blockchain startups that launch their own blockchain funds.

Crypto Fund Research noted that there were 455 funds invested in the cryptocurrency industry, of which 88 funds were set up before 2014.

The researcher forecasts that there will be a total of 165 digital asset funds set up this year.

Total investment in cryptocurrencies was about US$7.11 billion (232 billion baht) globally as of July 1. Almost half of all cryptocurrency investment funds are based in the US, Britain and Hong Kong.

The vast majority of cryptocurrency investment funds are small, with half of them having less than $10 million in assets under management. There are a number of cryptocurrency funds with over $100 million in assets, including Pantera Capital, Galaxy Digital Assets, Alphabet Fund and Polychain Capital, among others.

Japan's largest messaging app, Line, has established a new corporate token venture fund with $10 million in capital for startups in the blockchain and crypto industry, CNN reported.

Crypto Fund Research, however, stated that most US-based cryptocurrency funds are not registered with the US Securities and Exchange Commission. Since most cryptocurrency fund launches have been small, most qualify as exempt advisers and are not required to register.

But the Commodity Futures Trading Commission has given guidance that it considers cryptocurrencies like bitcoin and ethereum to be commodities, giving the regulator some jurisdiction over cryptocurrency funds.

The US's SEC has suggested it considers most ICOs, security tokens and even utility tokens to be securities.