Blockchain Research

Cambodia became one of the first countries in the world to launch a central bank digital currency (CBDC) in October 2020. As adoption of Cambodia’s blockchain-based retail CBDC Project Bakong proceeded expeditiously, other Southeast Asian countries with similar financial inclusion needs and openness to digitization of financial services were expected to follow suit.

Yet two years after Bakong’s launch, no other ASEAN country has launched a digital fiat currency. As the hype around CBDCs has cooled, Southeast Asian countries are worrying less about being first movers in this nascent field and more about if a CBDC offers them benefits that justify its costs.

The crypto bear market sure is not slowing down North Korea’s cyber criminals. Chainalysis data show that North Korean hackers stole US$840 million in decentralized virtual currencies from January to May, about US$200 million more than they pilfered in 2020 and 2021 combined. "By any standard, they [North Korea] are a crypto superpower,” former North Korea analyst at the FBI Nick Carlsen told CNET in a recent interview.

In early October, the Reserve Bank of India (RBI) published a 50-page concept note outlining its vision for a digital rupee. The document explains the RBI’s reasons for rolling out a central bank digital currency, such as boosting financial inclusion, accelerating financial digitization and enhancing financial stability, but does not offer a specific timeline for the launch of the Indian digital fiat currency.

Did Thailand’s Siam Commercial Bank (SCB) have a crystal ball handy when it nixed a plan to acquire the troubled Thai crypto exchange Bitkub? The deal, announced in the late-stage crypto bull market of November 2021, had been on thin ice for months. Then came the announcement on August 25: The 17.8-billion-baht (US$536,000) deal was off. In a statement, SCB cited Bitkub’s “various issues” it was sorting out with Thai regulators as the reason the deal was being scrapped. On August 30, it became clear that the issues were serious.

When Cambodia swiftly launched its retail central bank digital currency (CBDC) Project Bakong, it seemed that other Southeast Asian countries might also make similar moves. Yet in the nearly two years since Bakong went live in October 2020, not a single nation in the region has launched a CBDC of its own. Even the pilot programs are proceeding slowly. It seems that the hype around digital fiat currencies is subsiding and governments are worrying less about whether their nations will be left behind in the next generation of finance and more about if a CBDC offers clear benefits that justify its costs.

Crypto believers will point to Thailand recently greenlighting four new digital assets companies to say that the kingdom remains a booster of decentralized virtual currencies. These include Krungthai XSpring, a crypto broker affiliated with one of the country’s leading banks, crypto exchange T-BOX Thailand, crypto adviser and fund manager Coindee and Leif Capital Asset Management, which also manages funds. We reckon Thailand is not going to crack down on crypto as China and India have, but the digital assets’ freewheeling days in the kingdom are quickly winding down. Tighter regulation is inevitable given retail investors’ recent losses in the digital assets market.

Digital transformation at incumbent banks is all well and good, but maybe making a huge bet on crypto as a traditional lender is still a bit risky. At least that is the sense we get from Thailand’s Siam Commercial Bank (SCB) and its digitally forward holding company SCB X. While many aspects of SCB’s pivot to fintech are proceeding smoothly, the planned acquisition of the crypto exchange Bitkub is not. The deal was supposed to be concluded by now, but it appears SCB is having second thoughts about it.

Surprise, surprise: Japan is in no hurry to issue a digital yen. In a June report that declared proof of concept in the first-phase study, the Bank of Japan (BOJ) repeated its stance that it has “no plans to issue” a CBDC, though the Japanese central bank believes it is “important to be prepared thoroughly to respond appropriately to any future changes in the environment.” Talk about a general statement.  The BOJ’s stance has to be viewed within the wider context of CBDC development in Asia, especially the underwhelming performance – at least in relation to the hype surrounding it – of China’s digital renminbi.

2022 is turning out to be the worst crypto bear market yet. Bitcoin’s price is hovering around US$20,000 while most traders of the paramount cryptocurrency traders are underwater and continuing to sell at a loss. The dismal crypto market conditions – and how they highlight decentralized digital currencies’ inherent volatility – are forcing regulators in many Asian countries to consider tightening relevant regulations. However, there are exceptions, and the Philippines is a notable one. Cryptocurrencies remain very popular in the country; trading is still brisk and regulators have yet to signal a tougher stance.

Singapore has been viewed as the most likely crypto hub in Asia after China’s crackdown on decentralized virtual currencies effectively ended Hong Kong’s prospects for taking on such a role. The city-state has never been that gung-ho about the idea though. Its regulators recognize crypto offers certain opportunities to Singapore, but they also are aware of its inherent volatility. The current crypto bear market and related collapses that are occurring are likely to spur Singapore to take an even more cautious approach to decentralized digital currencies.

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