The main feature of crypto is like an asset class that transcends jurisdictions. However, Asia is one of the most important centers of adoption and innovation. Since the heady days of the arbitrage opportunities of the Korean Kimchi Prize and Bitcoin (BTC), the region has played a role in shaping the crypto path and securing the future.
According to a Chainanalysis report, in the first half of 2021, 28% of the total volume of global transactions – $1.16 trillion in cryptocurrency – was sent to Asia. In Central and South Asia alone, cryptocurrency transactions grew by 706% year-on-year, making it the third fastest growing region in the world.
In the past year, events in China dominated headlines from Asia. However, the rest of the region has also filled in, bolstered by an aura of perceived legitimacy with Singapore’s regulatory clarity in relation to digital assets. The pace of innovation in decentralized finance (DeFi) has accelerated in Southeast Asia with increased fundraising and venture investment. As investors become more confident in the prospects for Davy’s return, the institutional offering is well positioned for continued growth in 2022.
A new chapter, without China
China’s stance on cryptocurrencies is not surprising given the country’s longstanding capital controls. While the recent pace of enforcement has surprised many in our industry, players have quickly adapted. Miners moved to Kazakhstan and the United States, while traders and stock exchanges settled in Singapore and Hong Kong.
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As a decentralized resource, the development and innovation of cryptocurrencies is not limited to any one jurisdiction. Venture capital and talent flow where there is an enabling environment, so countries with an attractive regulatory framework that encourages innovation, along with progressive immigration policies, will benefit greatly.
Singapore, which is already a global hub for financial services and wealth management, is the clear leader – cryptocurrencies have been regulated since 2019 under new legislation. However, high standards were set and many players struggled to meet the stringent requirements of the Singapore Monetary Authority.
While this may limit initial optimism about the Singaporean cryptocurrency, the city-state remains at the fore when it comes to a progressive regulatory framework backed by a business environment with a low corporate tax rate, robust infrastructure and political stability.
Other Asian Crypto Stars
Outside of Singapore, both crypto startups and traditional financial institutions are actively involved in Thailand. The fourth largest bank in Thailand, Kasikornbank, has begun experimenting with DeFi and recently entered the non-fungible tokens (NFT) market. The country’s oldest bank, Siam Commercial Bank, also got into the game by buying a majority stake in Thailand’s largest digital asset exchange, BitCoop. Meanwhile, the Tourism Authority of Thailand is looking into usage tokens, which are part of a payment ecosystem that eliminates the need for cash-based transactions.
Interest in digital assets is expected to increase over the next few years, and the country’s central bank is set to introduce more comprehensive regulations on this asset class in early 2022. It would be wise for players looking to enter this market to keep a close eye on the bank. . The Thai Consultation Paper (BOT), released this year, seeks consensus on certain restrictions on cryptocurrencies. Similar to the position of the Singapore government, the BOT seeks to reduce systemic risk without impeding development and innovation.
Indonesia, where more than 66% of the population does not have a bank account, is a ripe Asian market for new cryptocurrency applications. The volume of cryptocurrency transactions has grown tenfold, from about $4.5 billion to about $50 billion in October 2021. There are now more cryptocurrency traders on the Indonesian stock exchange than there are stock investors. Retail investors are drawn to the simple trading of cryptocurrencies in a country that requires only an internet-connected smartphone and around $0.75.
Related: Indonesia’s Crypto Industry in 2021: A Kaleidoscope
Signals from the Indonesian authorities were mixed: crypto payments were banned, but trading was legalized, and there were plans to create a national cryptocurrency exchange. Indonesia’s central bank is also exploring the national digital rupiah to “fight” cryptocurrencies in the hope that users will find CBDCs to be safer and more legitimate. We can expect local agglomerations, which are the largest economies in Southeast Asia, to participate in the development of sprawl.