The Thailand Securities and Exchange Commission (SEC) is making significant strides towards implementing a distributed ledger technology (DLT)-based trading system for debt instruments. This initiative serves a dual purpose: to modernize the trading process and to encourage securities firms to adopt digital token trading. By venturing into the realm of blockchain technology, the SEC aims to resolve several inefficiencies currently plaguing traditional debt instrument trading.
Jomkwan Kongsakul, the deputy secretary-general of the SEC, revealed the momentum building behind this initiative, noting that four digital token projects have already received approval, with two more currently under evaluation. These projects prioritize green financing and initiatives aimed at driving investments. The embrace of environmental consciousness reflects a broader global trend, illustrating Thailand’s commitment to sustainable development while promoting innovative financial solutions.
In the existing landscape, purchasing bonds from the primary market can be a cumbersome process for investors, often taking anywhere from seven to fourteen days before these bonds are tradable in the secondary market. This lag not only limits access but also deters potential investors from entering the market, especially those who require rapid liquidity. Furthermore, investors encounter obstacles such as high costs associated with certain bonds and overall illiquidity, which can erode confidence and participation in the bond market.
On the other side of the equation, issuers are mired in extensive manual paperwork, leading to delays that can detract from market efficiency. The reliance on outdated manual systems creates opportunities for errors and compliance issues. Given these challenges, adopting DLT systems promises a more streamlined and efficient trading process, addressing significant pain points for both investors and issuers.
The SEC’s vision extends to achieving complete digitalization of the bond trading ecosystem, encompassing every aspect from settlement to trading, investor registration, and return payments. This comprehensive framework strives to enhance the overall functionality of the capital market. One noteworthy aspect emphasized by Kongsakul is the assurance that competition will thrive under the new system. Firms capable of developing their own DLT infrastructure will be encouraged to create independent chains, provided they conform to a unified standard that ensures interoperability.
The potential for multiple chains to emerge from this initiative could lead to a more robust and interconnected DLT network, where various systems can communicate via a shared ledger. Such interconnectivity is pivotal for creating a cohesive trading ecosystem that can adapt to the evolving financial landscape. Moreover, existing financial products will not be sidelined; instead, they will transition into digital forms that facilitate ease of transactions, promoting fractional trading and drawing in a broader range of participants.
A significant advantage of the proposed digital system is its ability to enhance liquidity and boost participation in the market. Real-time transactions minimize delays typically associated with settlement processes, ensuring a faster flow of capital. Additionally, the SEC’s development of an Open API platform to provide access to comprehensive data on listed companies will empower investors. Armed with better analytical tools and information, investors can make more informed and strategic decisions.
As Thailand gears up to embrace digital assets by 2025, the potential for innovative applications like a pilot scheme for crypto payments in tourist hotspots like Phuket has garnered attention. Finance Minister Pichai Chunhavajira recognizes the need for a robust framework that can facilitate the adoption of digital assets while ensuring compliance with existing regulations. The envisioned pilot program seeks to create a seamless experience for tourists, enabling them to register their digital assets for real estate transactions, complete with automatic conversions to Thai Baht.
Thailand stands on the brink of a transformative phase in its financial market with the SEC’s commitment to integrating digital technologies. By embracing DLT and fostering a regulatory environment conducive to innovation, the country is poised to attract more participants to its capital markets. While challenges remain, the commitment to creating a digital framework demonstrates the SEC’s awareness of the evolving financial landscape, ensuring that Thailand does not lag behind in the global financial arena. This shift not only promises enhanced efficiency but also a forward-looking approach to sustainable financing and investment strategies that benefit all market stakeholders.
