There is more than one way to drastically curtail crypto activity in a country. China’s approach has been largely effective, but is generally not applicable elsewhere. In the case of India, which has a very different political system than China, blanket bans could face legal challenges while being difficult to enforce. A better approach is to tax the heck out of crypto transactions, which regulators and some politicians almost certainly hope will reduce the attractiveness of the asset class.
When it comes to the cryptocurrency policies of Asia’s regulators, it pays to not be overly sanguine. While most regulators in Asia are happy to let crypto evolve as a regulated asset class, payments are another story. Thailand is the latest Asian country to crack down on using crypto for payments.
On March 23, Thailand’s Securities and Exchange Commission on Wednesday banned the use of cryptocurrency for payments, effective April 1. That means no bitcoin or any other crypto can be used to purchase goods and services. Digital assets payment operators will be given a grace period through the end of April to cease providing payment services. Trading of digital assets for investment purposes will be not affected by the SEC’s ban on payments.
South Korea’s people have long been more enthusiastic about crypto than the country’s regulators and politicians. By one estimate, in 2021 one in three South Koreans either invested in crypto or was paid in digital assets. A study by the Korean government’s Financial Intelligence Unit (FIU) found that South Korea’s cryptocurrency market value was estimated at 55 trillion won (US$45.6 billion) as of the end of last year, that 15.2 million Koreans have accounts and 5.6 million registered users of crypto actually trade. Yet heading into Korea’s recent presidential election, the country was tightening oversight of cryptocurrencies in a manner detrimental to market growth.
Could Malaysia become a crypto hub in Asia? A recent CoinDesk article made that case, pointing out that some of the necessary ingredients are already there, such as a common law system and institutional use of English. Further, Malaysia's crypto ownership rate of 19.9% is above the global average of 15.5%, according to Finder’s latest Cryptocurrency Adoption Index.
With CBDC hype subsiding – at least in most advanced economies – Japan’s plans for a digital yen are coming into focus and unsurprisingly, Tokyo is in no rush to launch a digital fiat currency even if it sees some upside to the idea in the long term. Japan has no compelling policy reasons to quickly roll out a digital yen, regardless of what China is doing. And in fact, Beijing spent about six years getting the digital RMB ready and it remains in the pilot stage.
Remember when more crypto was traded in China than any other country in the world? Though it was less than five years ago, it seems like a lifetime ago. In 2021, China accelerated a long-running crackdown on decentralized virtual currencies, banning just about everything crypto-related but possession. While some diehard crypto enthusiasts in China may carry on, Beijing has made crypto trading more trouble than it is worth for most Chinese. With crypto out of the way, Beijing can now concentrate on developing its own blockchain ecosystem.
Why ban crypto when you can discourage its use by taxing it heavily? That seems to be at least part of the rationale behind India’s plan to forego a ban on decentralized virtual currencies but tax income from digital assets at a flat 30% rate with no deductions or exemptions. At the same time, India plans to go ahead with a digital rupee by early 2023.
Somewhere in between the El Salvador and China approaches to crypto is a middle road, neither a full-throated embrace nor a strict ban. Call it crypto agnostic. Thailand appears to be taking that road, allowing the digital assets business to grow organically, while gradually implementing regulations as needed. For Thai regulators, the priority is not developing a regional hub for decentralized virtual currencies – that is more of a Singapore project and something Japan has considered – but simply ensuring they are used in a manner beneficial for the country’s economy and overall society.
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.