In order to foster cryptocurrency adoption in Asia, financial services hubs are seeking to strengthen cryptocurrency regulations, while at the same time minimising speculative and compliance risks. With less-developed countries adopting cryptocurrency rapidly, financial risks are high, and some governments may opt to issue a central bank digital currency or stablecoins issued by domestic banks. While these soft measures may help cryptocurrency adoption, onerous rates will likely discourage retail investors.
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Japan’s Financial Services Agency
What do Asian government regulations on cryptocurrency look like? In 2020, Japan is expected to create new laws governing the use of cryptocurrencies. In addition, it will establish a Japanese Virtual Currency Exchange Association (JVCXA) to oversee the market. Moreover, the JVCXA will require member CAESPs to conduct an internal assessment and submit the results to the regulator. Additionally, the JVCEA will have the power to object to the listing of the new Crypto Asset.
Asia has several countries whose governments have varying attitudes toward cryptocurrency. China has banned mining, while the Philippines and Cambodia have adopted a more lenient approach. However, in China, cryptocurrency mining is illegal and most governments have imposed tax rates ranging from 5% to 45%. The government of Cambodia has also integrated blockchain technology into its public goods. In Japan, there are also legal and policy challenges to consider with regard to cryptocurrency mining. While China and the Philippines are moving in the right direction, some countries in the region have been hesitant to implement cryptocurrency regulation. Other countries have implemented stricter rules, requiring citizens to register their wallets before investing in the exchange.
South Korea’s Financial Services Agency
Currently, the Singapore government is debating the tax implications of cryptocurrencies and exploring ways to generate revenue through these digital assets. The introduction of a new cryptocurrency regulation was initially scheduled for the winter session of parliament in 2021, but closer scrutiny delayed its implementation. Singapore has long encouraged the development of blockchain and innovative use cases for cryptocurrencies. Here are some of the things to look forward to in 2022.
While Asian countries are increasingly adopting cryptocurrency, there is currently a fragmented regulatory framework. While China has banned cryptocurrency trading and mining, the regulatory environment varies from country to country. North Korea has used cryptocurrency to evade sanctions and fund their nuclear missile program. Other Asian countries, however, are experimenting with the use of digital currencies. For example, Bhutan has partnered with Ripple to create CBD, while Myanmar has recognized the stablecoin Tether as legal tender.
Singapore’s Financial Services Agency
A decade from now, what will Asian government regulations on cryptocurrency look like? A recent report by the World Economic Forum suggests that financial regulators in Asia will increase their oversight of digital assets. The report also highlights how the current financial regulatory framework can act like a wolf in sheep’s clothing. Fintech regulatory lawyers will need to strike a delicate balance between innovation and regulation. It will be interesting to see what changes we will see.
One of the first Asian governments to regulate crypto has been Singapore. Its central bank and currency board have made clear that they will not allow retail trading or cryptocurrency advertisements. In fact, the MAS has even banned advertisements for retail cryptocurrency. But despite these restrictions, the government has also hinted that it may accept stablecoins and restrict retail access to cryptocurrencies. What do Asian government regulations on cryptocurrency look like in 2022?
Vietnam’s Financial Services Agency
What will be the impact of the Regional Comprehensive Economic Partnership (RCEP) on trade in Asia? The RCEP is an ambitious free trade agreement, which will take effect on January 1, 2022. The 11 signatories account for approximately 28 per cent of the world’s GDP, and comprise over 30 percent of the population. China and Japan have ratified the RCEP, making it the first free trade agreement to include these two countries. To be considered a successful deal, at least six ASEAN member countries must sign the agreement and three non-member nations must ratify it. These countries include Singapore, Australia, and Brunei.
China’s foreign investment laws, which prohibit foreign investment in some sectors, are easing. The 2019 Negative List has removed restrictions on certain sectors, and certain financial industries will be fully open to foreign investment in 2022. China’s Encouraged Industries Catalogue (EIC) is expanding to welcome more foreign investment. This catalogue now covers high-end manufacturing and service industries, advanced agriculture and new materials, and modern pharmaceuticals.
Thailand’s Financial Services Agency
The regulatory landscape for cryptocurrencies varies considerably across Asia. Singapore, for example, has a robust regulatory framework for crypto exchanges, implementing the Payment Services Act, which has also regulated the industry for money laundering and terrorist financing. While MAS issued a press release warning investors of the risks of cryptocurrency speculation, the Philippines has taken a more permissive approach. Since implementing the Payment Services Act, MAS has issued operating licenses to crypto service providers including FOMO Pay, an innovative payments fintech from Singapore, and DBS Vickers, a brokerage arm of the DBS Bank. Further, as the adoption of cryptocurrencies continues to grow across the region, some Asian governments may opt for stablecoins issued by domestic banks. While such soft measures are beneficial in the long run, onerous regulations will likely deter retail investors from engaging in the
Despite the recent emergence of stablecoins, the regulatory landscape in the region remains complex. While the SEC has not yet passed a comprehensive crypto regulation law, it is making headway in understanding the crypto-verse. Meanwhile, the SEC is focusing on the regulatory framework for Web3, which is a type of digital asset. While the SEC has not passed legislation, its interest is progressing in understanding the crypto-verse, which may help in future regulatory decisions.
