The main advantage of cryptocurrencies is an asset class that transcends jurisdiction. However, Asia is one of the most important centers of adoption and innovation. Ever since Kimchi Premium and Bitcoin (BTC) arbitrage opportunities emerged in Korea, the region has played a role in shaping the path of cryptocurrencies and shaping the future.
In the first half of 2021, Asia was already the destination for 28% of the world’s total transactions — $1.16 trillion in cryptocurrencies — according to a Chainanalysis report. In Central and South Asia alone, cryptocurrency transactions grew by 706% year-over-year, making it the third fastest growing region in the world.
Last year, events in China dominated headlines from Asia. However, the rest of the region was also buzzing, underpinned by an aura of perceived legitimacy with the clarity of Singapore’s regulation of digital assets. The pace of decentralized finance (DeFi) innovation has accelerated in Southeast Asia, driven by increased fundraising and venture capital investment. As investors become more confident in Davy’s return possibilities, institutional adoption is well positioned to continue growing in 2022.
New chapter without China
China’s stance on cryptocurrencies is not surprising given the country’s long history of capital controls. While the recent pace of enforcement has surprised many in our industry, players – at their own discretion – have adapted quickly. The miners moved to Kazakhstan and the United States, while the merchants settled in Singapore and Hong Kong.
Related: Looking for a new home: Bitcoin miners stabilize after exit from China
As a decentralized resource, cryptocurrency development and innovation is not limited to any one jurisdiction. The flow of investment capital and talent to where there is an incubation environment, so countries with attractive regulatory frameworks that encourage innovation, along with progressive immigration policies, will greatly benefit.
Singapore, which is already a global center for financial services and wealth management, is a hot candidate — cryptocurrencies have been regulated since 2019 under new legislation. However, high standards were set and many players reportedly struggled to meet the Singapore Monetary Authority’s strict requirements.
While this may dampen initial optimism for the Singaporean cryptocurrency, the city-state remains a leader when it comes to a progressive regulatory framework supported by a business environment with a low corporate tax rate, robust infrastructure and political stability.
Other Asian Crypto Stars
Outside of Singapore, both start-ups and traditional financial institutions are actively involved in Thailand. Thailand’s fourth largest bank, Kasikornbank, has begun experimenting with DeFi and has also recently introduced a market for non-fungible tokens (NFTs). Siam Commercial Bank, the country’s oldest bank, has also entered the game by purchasing a majority stake in Thailand’s largest digital asset exchange, Bitkub. Meanwhile, the State Tourism Authority of Thailand is exploring utility tokens, which are part of a payment ecosystem that eliminates the need for cash transactions.
Interest in digital assets is expected to increase over the next few years, with the country’s central bank planning to introduce more comprehensive regulations on this asset class in early 2022. Players looking to enter this market would be wise to keep an eye on the Bank of Thailand. (BOT) advisory paper released this year. , which seeks consensus on some of the limitations of working with cryptography. Similar to the position of the Singapore government, BOT seeks to reduce systemic risk without stifling development and innovation.
With over 66% of the population unbanked, Indonesia is a mature Asian market for new ways to use cryptocurrencies. Cryptocurrency transaction volumes have increased tenfold, rising from about $4.5 billion to about $50 billion in October 2021. There are now more crypto traders on the Indonesian stock exchange than equity investors. Retail investors are drawn to the simple trading of cryptocurrencies in a country where all it takes is a smartphone with internet access and around $0.75.
Related topics: Indonesian crypto industry in 2021: a kaleidoscope
Signals from the Indonesian authorities were mixed and they banned crypto payments but legalized trading with national digital currency exchange plans. Indonesia’s central bank is also looking into the national digital rupiah to “fight cryptocurrencies”, hoping that users will find CBDCs safer and more legitimate. As the largest economy in Southeast Asia, we can expect local conglomerates to be involved in the development of cryptocurrencies through partnerships with well-established global players.