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All Eyes On Asia – Crypto’s New Chapter After China

A fundamental feature of crypto is that it is an asset class that transcends jurisdictions. Yet Asia is one of the most important hubs for adoption and innovation. Since the heady days of Korea’s Kimchi bounty and Bitcoin (BTC) arbitrage opportunities, the region has played a role in defining crypto’s development paths and anchoring its future. According to Chainanalysis’s report, in the first half of 2021, Asia was already the destination for 28% of the total global transaction volume — $1.16 trillion worth of cryptocurrency. In Central and South Asia alone, crypto transactions grew 706% year over year, making it the third fastest growing region in the world. Last year, Asian headlines were dominated by developments in China. However, the rest of the region was also in turmoil, boosted by the halo of perceived legitimacy with clarity over Singapore’s regulations surrounding digital assets. The pace of innovation in decentralized finance (DeFi) in Southeast Asia has been supported by an increase in fundraising and investment in projects. As investors become more familiar with and confident in DeFi’s yield opportunities, institutional underwriting is well positioned to continue its growth trajectory into 2022. A New Chapter, Without China China’s stance on crypto is not unexpected, given its long-standing policy of capital control. While the pace of recent enforcement has taken many in our industry by surprise, to their credit, players have adapted quickly. Miners settled in Kazakhstan and the United States, with exchanges and traders settling in Singapore and Hong Kong. Related: Finding a New Home: Bitcoin Miners Settle in After the Exodus From China As decentralized assets, crypto development and innovation are not limited to a single jurisdiction. Investment capital and talent are flowing to wherever there is an enabling environment, so countries with a welcoming regulatory framework that encourages innovation, coupled with progressive immigration policies, will be big beneficiaries. Already a global hub for financial services and wealth management, Singapore is a clear frontrunner – crypto has been regulated under new legislation since 2019. That said, the bar has certainly been set high with many players reportedly struggling to meet the stringent requirements of the Monetary Authority of Singapore. 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. Asia’s other crypto-rising stars Outside of Singapore, Thailand is buzzing with the active participation of crypto startups and traditional financial institutions alike. Thailand’s fourth largest bank, Kasikornbank, began experimenting with DeFi, in addition to launching its own non-fungible token (NFT) marketplace. The country’s oldest lender, Siam Commercial Bank, has also acquired a majority stake in Bitkub, Thailand’s largest digital asset exchange. Meanwhile, the state-owned Tourism Authority of Thailand is investigating utility tokens, part of a payment ecosystem that negates the need for cash transactions. As interest in digital assets is expected to increase in the coming years, the country’s central bank plans to introduce more comprehensive rules around this asset class in early 2022. Players looking to enter this market would do well to closely monitor developments in the Bank of Thailand (BOT) consultation paper due out this year, which seeks consensus on certain restrictions surrounding crypto business activity. Like the Singapore government’s stance, the BOT aims to mitigate systemic risk without suppressing development and innovation. Indonesia, with over 66% of the population without a bank account, is an Asian market ripe for new uses of crypto. Crypto trading volume exploded tenfold, from nearly $4.5 billion to about $50 billion in October 2021. There are now more crypto traders than equity investors on the Indonesian stock exchange. Retail investors are drawn to the ease of trading crypto in the country, where all you need is a smartphone with internet access and about $0.75. Related: Indonesian crypto industry in 2021: a kaleidoscopeSigns from Indonesian authorities are mixed, banning crypto payments but legalizing trade, with plans for a national crypto exchange. The Central Bank of Indonesia is also examining a national digital rupiah to “fight” against cryptocurrencies, in the hopes that users would find central bank (CBDC) digital currencies more secure and legitimate. As Southeast Asia’s largest economy, we can expect local conglomerates to participate in crypto development through partnerships with global incumbents. Momentum in 2022: Increased Funding Drives Innovation The rising popularity of Crypto has meant that not only retail traders, but also institutional investors such as hedge funds and family offices are now exploring the asset class’s promising growth potential. Asia is no exception, as large-scale investors accounted for a significant share of crypto trades in the past year, according to the Chainlalysis 2021 report. Traditional asset managers have recognized the high return potential of crypto and are exploring how to best take advantage of this asset class, with players like Fidelity Investments investing heavily in a Hong Kong-based crypto operator. Increased institutional interest has also led more digital asset management platforms to innovate and develop more sophisticated products targeting a wider range of users with varying risk appetites. Last March, a Malaysia-based Bitcoin fund was launched, which claims to be the first in Southeast Asia to offer insured institutional crypto products. Conglomerates are positioning themselves for a future around digital assets. Asia also represents tremendous innovation potential to address the unmet needs of the region’s 290 million sub-bankers, where DeFi services can accelerate with specific use cases, such as services serving the region’s sub-bankers with smartphone access. More funding will drive more innovation in addition to crypto adoption in a virtuous cycle of value creation across Asia. This article does not contain investment advice or recommendations. Every investment and trading move carries risks, and readers should do their own research when making a decision. co-founder and head of business development and sales at Matrixport. Before that, she was an investment director at Bitmain Technologies, focused on blockchain investments for the financial services industry. Before venturing into crypto, Cynthia was vice president at Hong Kong Exchange (HKEX), responsible for derivative product development and institutional selling. She started her career as a commodity trader.
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