SEC to allow mutual and private funds to invest in crypto ETFs

SEC seeks public feedback on draft amendments to regulations for Funds investing in digital assets to ensure fairness and investor protection. Key points include adding Investment Token as an eligible asset and setting investment limits based on investor types.

The Securities and Exchange Commission (SEC) is seeking public comments on the principles and draft amendments to the regulations concerning investment in digital assets* by mutual funds and private funds (“Funds”). The proposed amendments aim to ensure fairness in the provision of foreign investment to high net worth investors through securities companies and asset management companies and to support asset allocation by fund managers. 

Following the approval for crypto ETF establishment and trading on the US stock exchanges, a number of Thai investors show investment interest in such product. Securities companies are allowed to provide services to non-retail investors** regarding investment in foreign products without investment limit. However, the current regulations concerning investment of Funds do not cover investment in digital assets.

Therefore, the SEC, with the approval of the SEC Board at its meetings convened in December 2023 and March 2024, and the Capital Market Supervisory Board at its meeting in April 2024, deems it is appropriate to amend the regulations for the Funds investing in digital assets with proper measures for investor protection.

The key points of the amendments are as follows: 

1. To add Investment Token as an eligible asset for investment with an investment limit similar to that of transferable securities such as stocks and bonds because of similar characteristics and risks; 

2. To allow the Funds to invest in crypto assets under a risk level appropriate for the types of investors. For the Funds targeting ultra-high net worth investors***, they would be allowed to invest in crypto ETFs without any investment limit in order to create equal competition between securities companies and asset management companies.

In the case where such Funds invest in crypto assets directly or indirectly via derivatives, the investment must be capped at 20 percent of the NAV. Meanwhile, the Funds for retail investors**** would be allowed to have total crypto asset exposure through ETFs or foreign mutual funds, capped at 5 percent of the NAV, for the benefit of asset allocation through experts. These Funds must meet the following criteria:

     (1) Being established after the amendments take effect to prevent impacts on the existing investors who may not wish to carry risks in such products;  

   (2) Implementing an active management strategy and being a mixed fund with an investment policy primarily focusing on asset allocation, equity funds or alternative funds, excluding tax incentive funds; 

Source : SEC public hearing on proposed amendments to the regulations for digital asset investment of mutual funds and private funds