Blockchain Research
India tightens the screws on crypto
We have long held the view that India sees little upside in cryptocurrency, whether as an asset class or for payments – the latter for which it is developing a central bank digital currency (CBDC). Indeed, the Indian government has made a conscious decision to promote the digital rupee while simultaneously gradually reducing the space in which the cryptocurrency market can operate. Recent regulatory actions have tightened the screws on crypto in India and are likely to drive it further underground and offshore.
Why China has a substantial 'underground' crypto market
Although China cracked down hard on cryptocurrency beginning in late 2017, it did not succeed in eradicating demand for digital assets. And unsurprisingly, given the size of the country, it remains unofficially a big crypto market. Data compiled by research firm Chainalysis show that the Chinese crypto market recorded an estimated US$86.4 billion in raw transaction volume between July 2022 and June 2023. Further, the proportion of large retail transactions of US$10,000-US$1 million is nearly twice the global average of 3.6%. While crypto bros would have us believe that a full-throated revival of crypto in the world’s second largest economy is just around the corner, the reality is more nuanced.
Why is Kasikornbank bullish on crypto?
Incumbent banks more often than not take a cautious if not skeptical approach to cryptocurrency, so it is surprising to see that Thailand’s Kasikornbank appears to be going all in on digital assets. After all, it was not so long ago that its competitor Siam Commercial Bank (SCB) thought better of acquiring the Thai crypto exchange Bitkub.
Why China will not ease crypto restrictions anytime soon
China made clear its stance on cryptocurrency with a crackdown that began in late 2017. The Chinese authorities then and now view decentralized digital currencies as more harmful than useful. From Beijing’s perspective, cryptocurrencies empower non-state actors in the financial system in a way that that they believe aggravates systemic financial risk.
Parsing the GBA Capital US$10 billion Web3 fund
In late December, the Chinese venture capital fund Greater Bay Area (GBA) Capital announced that it would set up a US$10 billion Web3 fund – the largest such initiative we know of in China. Unsurprisingly, this fund was established with considerations beyond actual market demand. Because GBA Capital, which is owned by the China Europe International Financial Group, has a state background, its thinking behind this fund is strategic. Beijing is trying to develop the Greater Bay Area as a financial center for China’s Pearl River Delta region. Becoming a domestic Web3 hub might be one way to do that.
Hong Kong doubles down on crypto
Cryptocurrency’s future looks uncertain in many respects, but that is not deterring Hong Kong from doubling down on its digital assets bet. The erstwhile British crown colony seems determined to transform itself into Asia Pacific’s premier cryptocurrency hub at the soonest and recently launched both stablecoin regulation consultation and signaled its intention to allow retail access to exchange-traded funds (ETFs) that invest directly into cryptocurrencies.
Stablecoins are gaining traction in Asia, but challenges remain
One of the biggest pieces of news at November’s Singapore FinTech Festival was the city-state’s decision to award in-license approvals to stablecoin issuers Paxos Digital Singapore Pte and StraitsX. That move came with a cautious endorsement of the less-volatile form of cryptocurrency that is typically pegged to a fiat currency at 1 to 1 and backed by reserves such as cash and bonds.
Is South Korean crypto regulation moving in the right direction?
It has become apparent in 2023 that South Korea intends to regulate cryptocurrencies, an important development given the country’s economic and geopolitical significance. South Korean has long had an active crypto retail investing community, which is one of Asia’s largest, so to a certain extent implementing regulations simply represents regulators acquiescing to reality. The devil, of course, will be in the details, and it is those details that remain hazy. After all, what do regulators mean when they say they will aim to strike a balance between protecting investors and fostering innovation?
SBI leans further into digital assets
The Japanese financial services group SBI Holdings has become an aggressive fintech investor, taking stakes in many different digital financial services startups that it views as promising. Earlier this year, it led a US$28 million Series A round in German fintech Pliant, while its digital banking unit SBI Sumishin Net Bank went public in March, becoming the first Japanese online lender to do so – despite the less-than-optimal market conditions. In recent months, SBI has made a series of new investments that show its growing interest in digital assets.
The Asian countries that need a CBDC
At the recent Singapore Fintech Festival, the city-state’s announcement that it would pursue a wholesale central bank digital currency (CBDC) pilot next year was big news, and justifiably so. As Southeast Asia’s key financial center, Singapore’s monetary policy decisions usually have regional implications.
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What ever happened to Bitcoin mining in China?
It is hard to believe China used to be a hub for Bitcoin mining. While the crackdown on mining activity has been ongoing for several years now, things got real in August when a Chinese government official was sentenced to life in prison for illegitimate business operations related to running an RMB 2.4 billion (US$329 million) Bitcoin mining enterprise and for unrelated charges of corruption. Maybe it was the corruption that landed the official, Xiao Yi, such a stiff sentence from the Intermediate People’s Court of Hangzhou, but regardless, this type of precedent will probably be enough to deter most people in China from trying their luck at crypto mining.
Why CBDCs still have limited appeal
At the Singapore FinTech Festival last week, IMF managing director Kristalina Georgieva made the case for central bank digital currencies (CBDCs) in her keynote address. She succinctly highlighted most of the key reasons central bankers like the concept of a digital fiat currency: the potential for improved financial inclusion where it is most needed, replacing cash, enhanced efficiency, speed and transparency in cross-border payments.
Does K Bank have a sound business model?
South Korea is unique in that the majority of its digital banks are profitable. While Kakao Bank generates the most headlines, and has been successful in many regards, its competitor K Bank is the one we find the most intriguing. The reason is that K Bank, majority owned by the telecoms giant KT Corporation, was dogged by financial travails in its early years and even had to pause operations for a while. When the digital lender re-emerged, it was powered by a tie-up with South Korea’s leading cryptocurrency exchange Upbit. While regulatory intentions were good in this case, building a bank on the foundation of crypto seems at the very least to be a bit risky – and it brings into question K Bank’s overall business model.
Assessing the status of mBridge
Constant is the speculation about how China’s central bank digital currency (CBDC) will play a game-changing role in international financial flows, so it was not a big surprise when Bloomberg in August published a report that suggested the Beijing-backed mBridge project (which also includes Hong Kong, Thailand and the United Arab Emirates) might launch even sooner than expected – by year-end – and was on its way to disrupting the dollar’s long-established hegemony. Cutting through the hyperbole is an update on the project from the Bank of International Settlements (BIS) that suggests mBridge is progressing, but that commercialization remains a work in progress.