Crypto Market Regulation in Asia
In Asia, the main centres of the crypto market are Japan, Hong Kong and Singapore.
Japan established itself early on as one of the main hubs for exchanges in the crypto market. This great rise of the nation was aided by the fact that in 2017, the Chinese government closed some exchanges in cryptocurrency trading. It is also one of the first nations to introduce regulation in this context, not so much as a matter of ambition but mainly due to a series of regulatory constraints that had been created internationally and which it had to sign up to. Lately, Japan, also from a political point of view, has been advocating the need for increasingly stringent regulation of this market, which still lacks well-defined rules.
Hong Kong, the city that in the past hosted Bitmain and the now defunct FTX, was home to the biggest names in the crypto market until its Securities and Futures Commission (SFC) began examining token listings. Against this backdrop, regulation began to stifle companies to the point where they fled and found other, more challenging realities.
Generally, it is Singapore that is the most attractive to the market, as Japan imposes taxes on token-issuing companies and even Hong Kong has started to be less welcoming since the spectre of regulation has spread.
The Situation in Singapore
Cryptocurrency has been gaining increasing importance in Singapore, with investment in the country’s crypto and blockchain companies surging to $1.48 billion in 2021. This has been accompanied by a corresponding increase in the number of crypto companies in Singapore, with 6% of the world’s crypto funds based in the country. These developments have necessitated the implementation of regulations by the Monetary Authority of Singapore (MAS) to ensure the safety of investors while allowing innovation to continue.
MAS’ two-part approach to crypto regulation focuses on growing digital asset capabilities by clarifying the tax treatment and managing the risks related to money laundering, terrorism financing, consumer protection, technology and cyber risks, and financial stability. Depending on the type of digital asset, it is regulated either under the Securities and Futures Act or the Payment Services Act. MAS’ expectations of crypto service licensees include the ability to manage risks, have a strong board and management, a strong risk governance culture, and capabilities. Organizations that facilitate the buying, selling, or holding of Cryptocurrencies must also implement stringent KYC, Anti-Money Laundering (AML), as well as Combating the Financing of Terrorism (CFT) protocols to guarantee they are in compliance with the PSA.
MAS is also investigating the feasibility of using blockchain and distributed ledger technologies for payments through their joint venture called “Project Ubin”. They are also keeping an open mind about the potential of retail Central Bank Digital Currencies (CBDCs).
Overall, Singapore’s approach to crypto regulation is aimed at protecting investors while allowing innovation to continue. By implementing a number of regulations and requirements, MAS is helping to ensure the safety of investors in the crypto sector.
What about CBDC?
A retail CBDC is a central bank digital currency that is issued to members of the public, who have an account with the central bank. Its use cases are not clear, given that today’s digital payment system is already effective and efficient in transferring money. We are keeping an open mind and watching this closely
Decentralised finance will be part of the future. There will be a case for having direct, peer-to-peer financial services provided through decentralised protocols like the blockchain, in a Web 3.0 world. Smart contracts that are self-executing and where you do not need an intermediary. This will disintermediate the banks to some extent. But there will be a large category of financial services which will still require customisation, and direct connection between a financial institution and a customer. The two forms of finance will coexist, but it will be a very interesting dynamic to watch in the coming years.
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