Crypto competition intensifies

After months of market volatility and falling prices, Thailand’s digital asset landscape is set for intense competition, with new players lining up to enter the industry amid an increasingly stringent regulatory environment.

The global cryptocurrency market is expected to remain stagnant for the next 6-12 months as US interest rate policy and balance sheet reductions reduce market liquidity. Many investors are licking their wounds after the failure of several crypto platforms, while problems have plagued Thailand’s two major crypto exchanges, undermining investor confidence.

While the outlook for the external market is not as bright as it was last year, internal factors have also worsened the crypto sentiment, prompting a number of investors to drastically reduce their positions.

Investors were unable to withdraw their money from the Zipup+ platform after Zipmex, which operates in Singapore, Thailand, Australia and Indonesia, encountered a liquidity crunch after its exposure to Babel Finance and Celsius Network has deteriorated.

The collapse of Siam Commercial Bank (SCB) plan to buy Bitkub Online (BO) affected the price of Bitkub’s KUB coin. Bitkub has also been hit with Securities and Exchange Commission (SEC) fines for non-compliance with the regulator’s digital asset listing rules. BO and five members of its digital asset selection committee were each fined around 2.5 million baht.

Data from the SEC indicates that the number of active crypto trading accounts in Thailand fell to 260,000 at the end of June, from 692,000 in January. The value of crypto exchanges fell from 120 billion baht in January to 71 billion in June, with an average value of just 2.37 billion baht per day.

Last Thursday, the SEC decided to tighten its rules on advertising digital assets. For example, from September 1, announcements of digital assets must not contain false, distorted or exaggerated information, or anything that could cause misunderstanding among the public.

In addition, an announcement should set out investment risks and all necessary information, with balanced viewpoints for those wishing to make investment decisions. Volatile cryptocurrencies can now only be advertised on official channels.

Poramin Insom, founder of Satang Corporation, said the current crypto market conditions are similar to other risky assets, with the global economic slowdown and rising interest rates having a significant impact.

The domestic crypto market has also been affected by regulatory issues and a drop in investment sentiment. The market has been dominated by large players, while smaller players are at a disadvantage, he said.

The new players are not necessarily financial institutions, but large companies, such as the alliance formed between Gulf Energy Development and Binance, the largest crypto exchange in the world.

Peeradej Tanruangporn, chairman of the Thailand Digital Asset Operators Trade Association and managing director of Upbit Thailand, said that the entry of major new players will increase competition in the crypto exchange industry and could lead to operator consolidation.

Crypto market

The global crypto market has crashed since the start of the year due to macroeconomic factors and concerns over tight liquidity.

Attempts to rein in inflation with a series of sharp interest rate hikes in the United States led to transfers of funds from risky assets into the relative safety of the dollar market.

According to Coingecko.com, the crypto market capitalization peaked at around US$2.9 trillion in November 2021, but has since declined by 70% to around US$1 trillion.

In Thailand, the number of investors active in trading continued to decline, falling from around 260,000 in July.

Bitkub, Thailand’s largest crypto exchange, was hurt by the collapse of SCB’s bid to buy a 51% stake for 17.8 billion baht.

In November last year, the board of directors of SCB Securities Co, a subsidiary of SCB X, approved the acquisition of BO from Bitkub Capital, but on August 25, the two parties canceled the agreement, citing regulatory issues.

On August 30, the SEC fined Samret Wajanasathian, Chief Technology Officer at Bitkub Blockchain Technology, for allegedly using inside information to purchase KUB coins in connection with SCB’s attempted acquisition of BO.

BO, a subsidiary of Bitkub Capital Group Holdings, remains the biggest player in the market with a share of over 90%, followed by Zipmex Thailand. The rest of the Thai market is made up of smaller digital exchanges such as Satang Pro, Upbit, Z.ComEX and other digital asset brokers like Bitazza and Kulap.

Last Thursday, the SEC fined Singapore-based digital asset exchange Zipmex 1.92 million baht for two breaches of the Digital Assets Act. According to the SEC statement, from July 20 to July 28, Zipmex suspended all or part of its digital asset trading service without complying with trading rules, conditions and methods.

From July 20 to August 25, Zipmex suspended the service of withdrawing assets from its clients in its Trade Wallet and Z Wallet, which the SEC found did not meet professional standards.

With Bitkub and Zipmex stung by negative news, the state of the Thai crypto market has deteriorated. It remains to be seen whether the entry of big players such as the Gulf-Binance alliance convinces new investors to trade as volume remains low.

The Gulf-Binance alliance has not applied for a trading license and the process could take some time.

Investing on an unregulated digital asset exchange carries high risks, as the SEC is unable to assist in legal proceedings and investors must bear the losses themselves in the event of damage.

Growing competition

Gulf Energy Development said it would increase its investments in blockchain ecosystems to diversify its revenue streams, even as Thai regulators tighten oversight of fintech and related platforms amid a slump in value many tokens. The alliance with Binance is expected to apply for a license in the third quarter of this year.

A crypto industry source who spoke on condition of anonymity said new entrants backed by large corporations were coming in, particularly telecommunications companies that have both the technology and the customer base of fixed and fixed systems. mobiles to increase their number of users.

The source is watching True Corporation to predict any moves in this business as Advanced Info Service (AIS) is likely to join the Gulf-Binance partnership. Gulf currently owns approximately 46% of Intouch Holdings Plc, the parent company of AIS.

Upbit, which was co-founded by Charoen Pokphand (CP) Group heir Chatchaval Jiaravanon, is a potential joint venture partner for True, the telecommunications giant controlled by CP’s Chearavanont family.

Bank entry

SCB has applied for three digital asset trading licenses through its subsidiary SCB Securities: for a digital asset exchange, a digital asset broker for cryptocurrency, and digital tokens.

SCB has extended its investments to technology companies and startups through its subsidiary SCB 10X, which is SCB’s holding company for technology investment.

SCB 10X created Token X, which is licensed for Initial Coin Offering (ICO) portal activity.

Even after SCB canceled its deal with Bitkub Online, Thailand’s oldest lender still holds the digital licenses.

Kasikornbank (KBank) entered the digital asset space through its subsidiary, Kasikorn Business Technology Group, which invests in technology companies and startups.

KBank has created another subsidiary, Kubix Digital Asset Cloud, which is licensed to be an ICO portal.

Krungthai Bank (KTB) entered the digital asset business through KT XSpring Co. Its joint venture Krungthai XSpring is licensed to operate a digital asset broker, which is not yet operational.

KTB entered the digital sector through its “Pao Tang” app, an open digital platform accessible to more than 33 million people.

The state-owned bank has also developed a Krungthai Gold Wallet service with MTS Gold, trading gold through the Pao Tang app.

Pao Tang offers digital distribution of corporate bonds through its 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 space through its subsidiary Krungsri Finnovate, which owns 1% of Zipmex and invests in other tech companies and startups.