The new journey of Asian cryptocurrencies after China left the game

Cryptocurrencies function as an asset class that transcends jurisdictions. One of the most important hubs for adoption and innovation is Asia. The region has had a busy day with premium Korean kimchi and Bitcoin (BTC) arbitrage opportunities. Asia plays a role in defining the development paths of cryptocurrencies and underpins their future.

According to a report by Chainalysis, Asia is the destination for 28% of the total global trade volume worth $1.16 trillion in the first half of 2021. In Central and South Asia alone, crypto transactions grew 706% year over year, making it the third fastest growing region in the world.

Regulatory developments in China made headlines across Asia last year. However, the rest of the region is also “waking up” to the clarity of digital asset regulation in Singapore. The pace of innovation of DeFi in Southeast Asia is fueled by fundraising and investment in projects. As investors become more comfortable and confident in DeFi’s profit opportunities, many institutional investors are poised to keep the market growing in 2022.

Trading volume of cryptocurrencies in Central and South Asia | Source: chain analysis

A new journey, without China

China’s stance on cryptocurrencies is based on the country’s longstanding capital control policies. While the recent pace of bans has surprised many in the industry, players have been quick to adapt. Miners have settled in Kazakhstan and the United States, and exchanges and traders have settled in Singapore and Hong Kong.

As a decentralized asset class, cryptocurrency development and innovation is not limited to one jurisdiction. Investment and talent are flowing wherever the environment develops, so countries are forming crypto-friendly regulatory frameworks that foster innovation, along with progressive immigration policies that will be major beneficiaries.

Singapore, a global center for financial services and wealth management, is a pioneer in this market as cryptocurrencies have been regulated by new laws since 2019. High standards have certainly been set as many players are reportedly struggling to meet the strict requirements of the Monetary Authority of Singapore.

While this may hurt Singapore’s crypto-friendliness, the country still leads the way when it comes to a progressive regulatory framework underpinned by a business-friendly environment with low tax rates, low, strong infrastructure, and political stability.

Total volume of cryptocurrency trading in Central and South Asia – Oceania| Source: chain analysis

Asia’s Rising Stars

Alongside Singapore, Thailand has resonated with the active involvement of crypto startups and traditional financial institutions. Thailand’s fourth-largest bank, Kasikornbank, has started experimenting with DeFi while launching its own NFT marketplace. The country’s oldest lender, Siam Commercial Bank, has also gotten into the game, acquiring a controlling stake in Thailand’s largest digital asset exchange, Bitkub. Meanwhile, Thailand’s state tourism agency is exploring utility tokens, which are part of a cashless payments ecosystem.

With interest in digital assets expected to surge over the next few years, the country’s central bank plans to introduce more comprehensive rules for the asset class as early as 2022. Players wishing to participate in this market must closely follow the advice of the central bank The Bank of Thailand (BOT), which is set to launch this year, is seeking consensus on certain restrictions surrounding cryptocurrency trading. Similar to the Singapore government’s position, BOT aims to reduce risks to the system without stifling development and innovation.

Indonesia, with more than 66% of the population unbanked, is the right Asian market for emerging cryptocurrency use cases. Cryptocurrency trading volume has exploded 10-fold, growing from nearly $4.5 billion to around $50 billion in October 2021. The stock market now has more crypto traders than stock investors. Retail investors are attracted by the ease of trading cryptocurrencies in the country, where all a user needs is an internet-enabled smartphone and around $0.75.

Indonesian authorities have given mixed signals, banning crypto payments but legalizing trading, with plans to launch a national cryptocurrency exchange. The Central Bank of Indonesia is also studying the national digital rupiah to “fight” against cryptocurrencies in hopes that users will find central bank digital currencies (CBDCs) safer and more legal. As Southeast Asia’s largest economy, domestic companies are likely to participate in cryptocurrency development through partnerships with major global players.

Innovation capital will skyrocket in 2022

The skyrocketing popularity of cryptocurrencies has prompted not only retail traders but also institutional investors such as hedge funds and family offices to explore the promising growth potential of this asset class. Asia is no exception, with large investors accounting for a significant portion of crypto transactions over the past year, according to a Chainlallysis 2021 report.

Share of trade volume in the region | Source: chain analysis

Traditional money managers have recognized the potential of the high-yield market and are looking for ways to make the most of this asset class, with players like Fidelity Investments investing heavily in the operator. Growing interest from institutional investors has also prompted many digital wealth management platforms to innovate and launch more sophisticated products that appeal to a wider range of users with different levels of risk tolerance. A Malaysia-based bitcoin fund was launched last March, claiming to be the first fund in Southeast Asia to offer insured crypto products to institutional investors.

Traditional company enters new market

In the coming years we can expect further investments in crypto projects in Asia as “old” corporations shape the future around digital assets. Asia also represents a potential region of innovation to address the unmet needs of the region’s 290 million unbanked people, where DeFi services, such as B. services for the unbanked, can be accelerated by smartphones.

The increased capital will drive more innovation and increase crypto adoption in a series of events across Asia.

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