All Eyes Are On Asia - Crypto's New Chapter After China

A fundamental trait of crypto is as an asset class that transcends jurisdictions. Yet Asia is one of the main drivers of adoption and in...

A fundamental trait of crypto is as an asset class that transcends jurisdictions. Yet Asia is one of the main drivers of adoption and innovation. Since the heady days of Premium Korea Kimchi and bitcoin (BTC) arbitrage opportunities, the region plays a role in defining development paths for crypto and anchoring its future.

According to Chainanalysis reportin the first half of 2021, Asia was already the destination of 28% of the global volume of global transactions – 1.16 trillion dollars value of cryptocurrency. Central and South Asia alone saw crypto transactions increase by 706% year over year, making it the the third fastest growing region in the world.

Last year, headlines from Asia were dominated by developments in China. However, the rest of the region was also buzzing, boosted by the halo of perceived legitimacy with regulatory clarity in Singapore around digital assets. The pace of decentralized finance (DeFi) innovation in Southeast Asia has been supported by an acceleration in fundraising and project investment. As investors become more comfortable and confident in DeFi’s return opportunities, institutional adoption is well positioned to continue its growth trajectory in 2022.

A new chapter, without China

China’s stance on crypto is not unexpected, given the country’s longstanding capital control policy. While the pace of recent enforcement has surprised many in our industry, players have, to their credit, adapted quickly. Miners resettled in Kazakhstan and the United States, with exchanges and traders moving to Singapore and Hong Kong.

Related: Finding a New Home: Bitcoin Miners Settle After China Exodus

As a decentralized asset, crypto development and innovation is not limited to a single jurisdiction. Investment capital and talent flow wherever there is an enabling environment, so countries with a welcoming regulatory framework that encourages innovation, coupled with progressive immigration policies, will stand to benefit most.

Singapore, already a global center for financial services and wealth management, is clearly a frontrunner – crypto has been regulated since 2019 under new legislation. That said, the bar has certainly been set high, many players would have struggling to meet the strict requirements of the Monetary Authority of Singapore.

While this may have dampened some initial optimism about Singapore’s crypto-friendliness, the city-state remains a leader in a progressive regulatory framework, backed by a business-friendly environment with low corporate tax rates, solid infrastructure and political stability. .

Asia’s Other Rising Crypto Stars

Outside of Singapore, Thailand is buzzing with active participation from crypto startups and traditional financial institutions. The fourth largest bank in Thailand — Kasikornbank — started experimenting with DeFi, in addition to recently introducing its own non-fungible token (NFT) market. The country’s oldest lender, Siam Commercial Bank, has also entered the game, having acquired a majority stake in Thailand’s largest digital asset exchange, Bitkub. Meanwhile, the Thailand Public Tourism Board explore utility tokenspart of a payment ecosystem that eliminates the need for cash transactions.

With interest in digital assets expected to grow over the next few years, the country’s central bank has planned to introduce more comprehensive rules around this asset class in early 2022. Players looking to enter this market would do well to keep a close eye on the Bank of Thailand (BOT) consultation paper to be released this year, which seeks consensus on certain restrictions around crypto business activities. Similar to the position of the Singapore government, the BOT aims to mitigate systemic risks without stifling development and innovation.

Indonesia, with over 66% of its population remaining unbanked, is an Asian market ripe for new crypto use cases. Crypto trading volume exploded by ten, from nearly $4.5 billion to around $50 billion in October 2021. There is now more crypto traders than stock investors at the Indonesia Stock Exchange. Retail investors are drawn to the ease of trading crypto in the country, where all one needs is a smartphone with internet access, and around $0.75.

Related: Indonesia’s Crypto Industry in 2021: A Kaleidoscope

The signals from the Indonesian authorities have been mixed, ban crypto payments but legalize trade, with plans for a national crypto exchange. The Central Bank of Indonesia is also exploring a national digital rupee to “fight” against crypto-currencies, hoping that users would find central bank digital currencies (CBDCs) safer and more legitimate. As the largest economy in Southeast Asia, we can expect local conglomerates to participate in crypto development through partnerships with global incumbents.

Momentum in 2022: Increased funding drives innovation

The rising popularity of crypto has driven not only retail traders, but also institutional investors such as hedge funds and family offices who are now exploring the promising growth potential of the asset class. Asia is no exception, as large-scale investors have accounted for a large share of crypto transactions over the past year, according to to the 2021 Chainlalysis report.

Having recognized the high return potential of crypto, traditional asset managers are exploring how best to capitalize on this asset class, with players such as Fidelity Investments invests heavily in a Hong Kong-based crypto operator. Increased interest from institutions has also pushed more digital asset management platforms to innovate and offer more sophisticated products that cater to a wider range of users with diverse risk appetites. Last March, a Malaysia-based bitcoin fund launchedwhich claims to be the first in Southeast Asia to provide institutional insured crypto products.

Old money flows into new

In the coming years, we can expect more investment in Asian crypto projects as “old-school” conglomerates position themselves for a future around digital assets. Asia also represents immense innovation potential for to serve the unmet needs of the region’s 290 million underbanked people, where DeFi services can accelerate with specific use cases such as services that serve the region’s underbanked with smartphone access.

Increased funding will further drive innovation alongside crypto adoption in a virtuous cycle of value creation across Asia.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Cynthia Wu is the founding partner and Head of Business Development and Sales at Matrixport. She was previously Chief Investment Officer at Bitmain Technologies, which specialized in blockchain investments for the financial services industry. Prior to getting into crypto, Cynthia was Vice President of Hong Kong Exchange (HKEX), responsible for derivatives development and institutional sales. She started her career as a commodities trader.