2021 has been a pathbreaking year for decentralized digital currencies. They have made more headway into the mainstream financial system than in any previous year. The Indian government has been watching these developments closely and has quietly walked back its erstwhile anti-crypto stance. A blanket ban of crypto no longer makes sense for India, as it would be both detrimental to financial inclusion and cashless payments objectives, while offering questionable benefits for combating money laundering and terrorism financing.
Taiwan’s financial sector is known for its conservatism, so it is no surprise that the island has not embraced cryptocurrency. Yet, to their credit, nor have Taiwan’s regulators taken an overly harsh approach to decentralized digital currencies. Unfortunately, the lack of regulatory clarity that initially allowed crypto to gain a foothold in Taiwan is not sufficient for the island to become a hub for the industry.
Australia may be reaching its crypto inflection point. Canberra has never repudiated crypto but nor has it embraced decentralized virtual currencies. However, as other countries in the Asia-Pacific region like Singapore and Japan step up their efforts to become crypto hubs, Australia is realizing that decentralized digital currencies offer it an opportunity as well. A report published by Australia’s Senate in late October recommends that the country alter its laws to make them more amicable to crypto.
One after another, Asia’s major economies are developing their crypto policies. Singapore and Japan have decided to embrace decentralized digital currencies, albeit in a step-by-step manner. South Korea is less sanguine, although it is stopping well short of China’s near-blanket ban. As for India, it once seemed to be moving in the direction of a crypto ban, but that seems less feasible by the day given the industry’s burgeoning expansion and the potential benefits of that growth for the overall Indian economy.
Southeast Asia is fast warming to central bank digital currencies (CBDCs) with Laos the latest country in the region to signal its intention to develop one. What makes Laos’s situation unique is that the same Japanese company that developed Cambodia’s retail CBDC, Project Bakong, will be involved in exploring the possibility for a digital kip (the Laotian currency).
Japan is one of the top contenders for the Asia crypto crown. The only other jurisdiction that can challenge it is Singapore. Hong Kong is no longer in the running given the city's close links with mainland China and Beijing's tough approach to decentralized digital currencies. But before Japan can solidify its status as an Asian crypto hub, it first needs to figure out how to better regulate crypto to protect investors and safeguard against malfeasance.
Australia has yet to make up its mind about crypto. On the one hand, it allows crypto exchanges. It has dozens of them. Finder estimated that 17% of Australians own cryptocurrency in a June survey. There are no regulations banning the holding or trading of cryptocurrencies. However, Australia’s incumbent financial institutions are ambivalent about decentralized digital currencies and generally stay away from them.
It seems that just about every major Asian economy is warming to the idea of a CBDC now, and India is no exception. Shaktikanta Das, governor of the Reserve Bank of India (RBI), said recently New Delhi may be ready for digital rupee trials by year-end.
Southeast Asia is home to some of the world’s fastest growing economies and is rapidly adopting digital financial technology, including blockchain-based solutions. Thus, it is only natural that central banks in the region are starting to think about a possible role for digital fiat currencies. The first country to make the jump to a CBDC is Cambodia, and it will definitely not be the last.
Try as it might, the cryptocurrency industry has not yet been able to shake its reputation for being not quite above board. The rebellious, underground side of crypto has won it many devoted fans – just not usually among financial regulators. But what if crypto – like many segments of Asia’s fintech industry – found a home in Singapore?
The crypto party may be over in South Korea, where the government is less than ecstatic about the widespread use of decentralized virtual currency in its economy. Unlike Japan, a crypto pioneer that has always been tolerant of decentralized digital currency, South Korea sees it as somewhere in between an annoyance and systemic financial risk. Seoul is now moving to curtail crypto’s influence in the country through strict regulation and higher taxation.
To date, South Korea has been less enthusiastic about launching a central bank digital currency (CBDC) than China or Japan. Beijing leads the world in CBDC development while Tokyo sees a CBDC as a necessity to stay competitive with its giant neighbor. Yet Seoul is now coming around to the need for a digital fiat currency, even if one of the government's purposes in developing one is to reduce the use of crypto in its economy.
Korea's K bank may have finally found the secret sauce. Long a laggard among Korean fintechs, the country's first digital lender is now riding the bitcoin boom thanks to a tie-up with the crypto exchange Upbit. Under a deal K bank and Upbit reached in June 2020, retail investors who want to trade crypto with Upbit must do so through the digital lender. Since last March, Korea has required exchanges to work with lenders like K Bank to ensure the use of valid, real-name accounts for trading. Eager to capitalize on the bitcoin boom, retail customers are signing up at K bank in droves.
The crypto faithful are crying foul as India once again mulls banning decentralized virtual currency. They say pulling the plug on crypto now would be like banning the internet in the 1990s - a reactionary move that would have grim repercussions for India's economy. To be sure, some Indian investors would lose out if they could no longer trade cryptocurrencies. They currently hold about US$1 billion worth. The fintech startup ecosystem might be hurt. But it is hard to imagine the broader Indian economy suffering.