A 17.8-billion-baht offer by SCBX, the holding company of Siam Commercial Bank, for a majority stake in Bitkub Online was supposed to be the deal of the year in 2022. The ambitious foray into the world of digital assets, however, unravelled in months amid cryptocurrency firms going bankrupt and digital assets seeing a sharp erosion in value.

Arthid Nanthawithaya, the CEO of SCBX, had informed the Stock Exchange of Thailand that the company’s board, at its meeting on November 2, 2021, had approved the purchase of a 51 per cent stake in Bitkub Online, from Bitkub Capital Group Holdings.

Months later, on August 25, 2022, SCBX withdrew the offer.

The company cited many reasons for reneging on the plan to acquire a majority stake in Bitkub, Thailand’s largest cryptocurrency exchange.

SCBX conducted due diligence for several months and although the results revealed no major issues, there were areas for concern, especially as Bitkub was under the scrutiny of  Thailand’s Securities and Exchange Commission (SEC).

Since no major irregularities were found during due diligence, many observers attributed SCBX’s backtracking to the worldwide crash in the crypto market.

Last year, Bitkub Capital Group CEO and founder Jirayut Srupsrisopa claimed that Bitkub’s market capitalization had hit 35 billion baht, raising it to the level of a unicorn —  a startup having a market cap of US$1 billion.

Founded in 2018 with a registered capital of 290 million baht, Bitkub is one of Thailand’s few fast-growing startups, which became a unicorn within three years of its inception.

Jirayut’s claim was supported by the rising popularity of digital assets last year. For example, the value of bitcoin, the world’s most-traded cryptocurrency, reached a record $68,000 per unit in November 2021.

Liquidity squeeze

The impact of the COVID-19 lockdowns disrupted global supply chains, resulting in rising prices of goods and services. Inflation in developed countries in Europe and the US has been soaring since Russia’s invasion of Ukraine in February, leading to economic sanctions and high prices of gas and oil.

Central banks in many countries, the US in particular, started to raise interest rates sharply in order to contain runaway inflation. The US Federal Reserve started to increase its policy rate from March this year.

Unfavourable market conditions globally, the local interest rate hikes, and deceleration in cash injection into the economy, have sparked investor fears of an economic recession, leading to a sell-off of equity and other risky assets.

As huge liquidity starts to dry up, it is taking a toll on the digital asset market. The prices of digital assets have plummeted this year. Bitcoin in early December had crashed to around $17,000 per unit from its peak of $68,000 in November last year.

Confidence crisis

Many experts criticized SCBX’s 17.8-billion-baht offer for a majority stake in Bitkub as expensive. Well-known value investor Niwet Hemwachirawarakorn openly expressed his skepticism about the deal’s valuation. Eminent figures on the world stage have been dismissive about digital assets trading in general. The legendary investor, Warren Buffett, and Nobel Economics laureate Paul Krugman have both expressed strong opinions against the global crypto industry, dubbing it as useless and harmful.

As the digital market has been hit hard this year, many companies engaged in the digital asset business have gone bankrupt. Zipmex, a rival of Bitkub, in July applied for bankruptcy protection in Singapore as it could not repay clients who had deposited cryptocurrencies on its platform for interest rate returns.

Though Bitkub Online has not suffered a financial loss, the SEC has come down hard on the company and imposed fines on Bitkub and its executives several times since 2020 for operating the business in an extravagant way in the past.

On the global scale, many crypto firms have filed for bankruptcy protection this year, including Sam Bankman-Fried, one of the pioneers and a former CEO and founder of FTX, the world’s second-largest crypto exchange. He has been charged by US authorities with multiple offences, including fraud and money laundering.

Regulators get tough 

Regulators worldwide have cautioned against adopting cryptocurrency as a medium of exchange, despite a few countries, such as El Salvador, adopting bitcoin as legal tender since September last year.

Despite seeing the benefit of blockchain technology that underpins cryptocurrency, concerns about the large number of young investors entering digital asset trading prompted Thai authorities this year to step in and tighten the regulations for the digital market. Among measures, the SEC limited the scope of advertising by digital exchange operators.

Worried about the impact on the stability of the baht, and the overall financial system, the Bank of Thailand and the SEC banned in April this year the use of cryptocurrencies as a means of payment for goods and services.

Other countries, such as China, have also banned cryptocurrencies issued by private companies. New regulations have limited the scope of usage of cryptocurrencies and other digital assets.

The regulatory interventions have made digital assets less attractive, as their potential for growth has been reined in by the authorities. The cumulative impact of these factors piled pressure on SCBX’s Bitkub deal, leading to its collapse. 

By Thai PBS World’s Business Desk