Crypto retains its popularity in India
The Indian government has long eyed cryptocurrencies warily, viewing them largely as contributing to money-laundering risk and challenging the central bank’s monetary authority. Though India has stopped short of outright banning digital assets – or a de facto ban like what China has – it has nonetheless made investing in them smoothly a challenging process – especially the 30% tax on gains from cryptocurrency. Nevertheless, crypto remains popular among with Indians, with a recent Chainalysis study showing that India leads the world in crypto adoption.
China tightens oversight of crypto
In the alternate reality inhabited by crypto bros, most jurisdictions are always on the cusp of a full-throated embrace of digital assets. Case in point: in late August, Tron founder Justin Sun wrote on X, “China unbans crypto. What’s the best meme for this?” Regardless of Sun’s true intentions in this post, Beijing is not only “unbanning” crypto, it is tightening oversight of the industry.
Crypto sees mixed signals in Singapore
Singapore is continuing to take a measured approach to digital assets as seen by the growing prevalence of stablecoin payments in the city-state. In the second quarter, stablecoin payments reached a new high of US$1 billion in Singapore, according to data from blockchain research firm Chainalysis. With the announcement of stablecoin regulations in August 2023, Singapore bet that these “safer” cryptocurrencies have staying power and will play an increasingly important role in the future of financial services.
Hong Kong is learning that becoming a crypto hub is tough
It was inevitable that Hong Kong’s much-hyped cryptocurrency initiative would run into some serious challenges. We are not surprised to learn that the city’s regulators are not satisfied with the compliance level at some “deemed to be licensed” exchanges operating in the city. While demand for digital assets remains strong in many markets, and Hong Kong has a strong foundation as a financial services hub on which it can build, the crypto sector itself remains immature and prone to malfeasance while there is no global consensus on how to manage digital asset flows.
Why the digital rupee is losing momentum
2024 might be remembered as a turning point for central bank digital currencies (CBDCs) – the year when interest in them began to significantly wane. In the case of India, while the government seems determined to push forward with the digital rupee, retail users are more circumspect. The Reserve Bank of India (RBI) highlights its estimation of 5 million digital rupee users. If we stop to consider that India has more than 1.4 billion people, then less than ½ of 1% of the population is not a particularly strong adoption rate – especially for something that has such strong government backing.
Nations team up to combat crypto crime by North Korea
Cryptocurrency crime committed by the Democratic People’s Republic of Korea (DPRK) has become so pervasive that it requires a stronger international effort to bring under control. With that in mind, the U.S. Department of State and the Ministry of Foreign Affairs of the Republic of Korea (ROK) co-hosted an event about the issue in New York City on August 27.
Why China will keep its strict crypto controls
Every few months, it seems that rumors start circulating in the cryptocurrency community about a possible liberalization of China’s strict digital asset controls. The rumors rarely have any basis in reality, and this time is no different. A number of cryptocurrency news sites have published stories over the past few weeks suggesting change could be afoot, citing a legal victory for Tron blockchain founder Justin Sun in Chinese court.
Hong Kong is hedging its bets on stablecoins
Hong Kong seems determined to become a major hub for digital assets and adopting a stablecoin regime is a key part of that policy. However, crypto bros hoping for a highly permissive regime appear to be out of luck. The city’s stablecoin regulations have changed very little from the ones proposed in December 2023. They require issuers of fiat currency-backed tokens to obtain a license from the Hong Kong Monetary Authority (HKMA), that stablecoins be fully backed by reserve assets “at any given point in time” and that issuers publish monthly confirmation of those assets from an independent auditor.
Retail CBDCs are off to a slow start in Asia
The hype is being separated from the reality when it comes to retail central bank digital currencies (CBDCs) in Asia, and adoption is underwhelming. Nearly five years after China launched its first digital renminbi (e-CNY) trials, only two other Asian countries actually have a functional retail CBDC: India (though it remains in a pilot stage) and Cambodia.
Partior raises US$60 million in Series B round
JPMorgan estimates that global corporates move nearly US$23.5 trillion across countries each year, equivalent to roughly 25% of global GDP. Since they rely on what the bank calls “sub-optimal wholesale cross-border payment processes,” annual transaction costs for the companies have reached US$120 billion. This is where atomic settlement comes in – and where the ambitious blockchain firm Partior – which was founded by JPMorgan, DBS and Temasek sees a large market opportunity.
Cross-border CBDC project mBridge moves forward
For more than three years, the Bank of International Settlements (BIS) and the central banks of China, Hong Kong, Thailand and the United Arab Emirates (UAE) have been working on a cross-border central bank digital currency (CBDC) project known as mBridge. In a nutshell, the project aims to improve efficiency, speed and transparency in cross-border payments.
Why is Taiwan facing rising crypto crime?
Taiwan’s Financial Supervisory Commission (FSC) has historically taken a hands-off approach to cryptocurrency focused on segregating the local digital assets ecosystem from the banking system – which it wants to protect from volatility and risk. As long as banks stay away from digital assets, the FSC is willing to let local crypto exchanges operate with a high degree of autonomy provided they pay their taxes and keep on the straight and narrow. However, Taiwan has since the collapse of FTX been dealing with a surge in crypto-related crime, both money laundering and fraud. Criminals are exploiting unsuspecting investors and taking advantage of limited knowledge of digital assets among the general public, lawmakers and regulators.
Asia remains interested in Web3 - for now
2023 may be remembered as the year that the Web3 bubble burst. Hype about the third iteration of the internet had reached a feverish pitch by early last year, though actual use cases remained limited. Yet amid the highest interest rates in three decades, as well as stubborn inflation, investors started to get cold feet about what is still a nebulous and nascent ecosystem underpinned by technology that many central banks do not trust.
South Korea charts middle path on crypto
South Korea has long had an enthusiastic cryptocurrency investing community. According to the Korea Financial Intelligence Unit (KoFIU), by mid-2024 Korea will have about 6 million crypto investors, equivalent to 11.5% of the population. At the same time, crypto related crime is rising in Korea. While the most infamous example remains Do Kwon’s multi-billion-dollar TerraUSD-Luna fraud, other, smaller scale scams are proliferating, necessitating new regulation to protect investors and both deter and penalize crime. According to the FoFIU, Korean digital asset exchanges flagged 49% more suspicious transactions in 2023 compared to 2022.
The Philippines in late March began to blocking access to Binance, the world’s largest cryptocurrency exchange by trading volume. The country’s Securities and Exchange Commission (SEC) said it received the assistance of the National Telecommunication Commission (NTC) to block access to Binance’s website and online trading platform, according to a statement published by the SEC.
Hong Kong accelerates work on e-HKD
The March 7 launch of Hong Kong’s wholesale CBDC project was memorable. Firstly, the enthusiasm of the city’s financial regulators for this project is strong. While painting in broad brushstrokes, they outlined some lofty objectives for the digital HKD. The project aims to develop an interoperable platform that will improve efficiency, transparency and financial inclusion in the monetary and financial systems. “We’re calling it Project Ensemble” internally, to conjure a group of items working together, Hong Kong Monetary Authority (HKMA) deputy chief executive Howard Lee said at a press conference. “We hope it will play beautifully, like music.
Assessing the big bet Hong Kong has made on crypto
Since its return to China in 1997, Hong Kong has become the country’s indispensable offshore financial center, with considerable international links. It has engaged in financial innovation, such as the cultivation of the world’s premier offshore renminbi trading hub. However, Hong Kong also faces much more competition from Singapore than it did in the late 1990s, and other Asian cities like Tokyo.
There is still no timeline for mBridge to go live
Undertaking cross-border payments involving central bank digital currencies (CBDCs) is a complicated endeavor, and despite some media hype in the summer of 2023, the mBridge project of the Bank of International Settlements (BIS) and the central banks of mainland China, Hong Kong, Thailand and the United Arab Emirates (UAE) did not launch late last year. Many questions remain about the ultimate utility of using CBDCs in cross-border payments as well as any attempt to directly challenge the US dollar in global financial flows.
Crypto hacking remains a serious problem
With the crypto bear market receding and the possible return to a bull market, it is interesting to note that the amount stolen from crypto exchanges fell in 2023. However, the overall number of digital asset hacks still grew. Maybe it was the belief that the bear market would endure that partially deterred the cybercriminals? Probably not. As it turns out, the main reason that less crypto was stolen last year was that digital asset platforms are becoming more sophisticated in their security and responses to attacks, and are working more successfully with law enforcement than in the past.
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.
What will 2024 bring for the digital renminbi?
2023 was a year of incremental progress for the digital yuan and we expect more of the same in 2024. Gradually, hype about China’s central bank digital currency (CBDC) is easing, though it still flares up from time to time. Case in point: that report published by Bloomberg last summer that depicted the mBridge cross-border CBDC initiative as a potential challenger to the US dollar in the global financial system. As much as such narratives may generate clicks, they fail to ring true.
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?
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.
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.
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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.