Despite regulatory uncertainty in the U.S., Asia is fostering crypto clarity, which, according to industry observers, may make the region more appealing to investors.
According to Ben Charoenwong, assistant professor of finance at the National University of Singapore Business School, cryptocurrency rules in Asia have advanced more quickly and clearly—green light or red light—than in the U.S.
According to Charoenwong, this has elevated Asia to the top location for fintech innovation.
A month ago, Hong Kong updated the licenses of two exchanges and formally authorized cryptocurrency trading to retail investors. Now that retail investors are able to participate in their business, HashKey and OSL can grow beyond professional investors.
Lennix Lai, global chief business officer at cryptocurrency exchange OKX, said that it demonstrates how virtual assets are becoming into a recognized asset class with a regulatory status comparable to traditional asset classes.
This will increase investor confidence even more, increasing Hong Kong’s appeal as a possible worldwide center for virtual assets, according to Lai.
Hong Kong stated last year that it understands the potential of Web 3.0 and distributed ledger technologies to transform finance and commerce, and it anticipates that with the right regulations, these technologies will increase efficiency and transparency.
Competing regional financial center Singapore has also been at the forefront of cryptocurrency regulation. Blockchain.com received an upgrade to the in-principle permission it received in October when the Monetary Authority of Singapore gave it a license in August. Ripple, another competitor, was given in-principle clearance in June. It follows that Blockchain.com and Ripple are permitted to offer regulated cryptocurrency services in Singapore.
While Indonesia and Thailand have banned the use of cryptocurrency for payments, they do permit the trading of it as a commodity.
On the other hand, the U.S. Securities and Exchange Commission has filed cases against Coinbase and Ripple, accusing them of breaking securities laws. In reaction to the SEC’s crackdown, companies like Coinbase, Ripple, and other cryptocurrency businesses have vowed to leave the country.
Turmoil in the U.S.
Undoubtedly, the sector has spent the past year mired in scandal and intense drama. While Terraform and its CEO Do Kwon were accused of scamming investors in February, FTX filed for bankruptcy in November.
Since its all-time high of more than $65,000 in 2021, the price of bitcoin has fallen to trade at about $28,373.
Leaders in the cryptocurrency industry have criticized the United States and its regulatory strategy, particularly for its ambiguity.
By selling its native cryptocurrency, XRP, without first registering it with the SEC, Ripple and its co-founders were allegedly in violation of securities laws in 2020, according to the SEC. But in July, a landmark decision found that the token was not necessarily a security in and of itself.
In the meantime, Coinbase was sued by the SEC in June on the grounds that it was running an unlicensed broker and exchange. Binance was accused of breaking various securities laws in the same month.
It might be fair to say that the U.S. has done everything in its power to make it unclear what the regulations for the crypto business are. According to Ripple CEO Brad Garlinghouse, the SEC has been at the forefront of this confusion since May. He came to the conclusion that some crypto companies would decide to relocate to nations with more progressive laws.
The regulatory clarity in Asia
Singapore and Hong Kong provide much more operational certainty for many industry players across the Pacific.
In the Asia Pacific, Singapore is ahead of Hong Kong and has the first mover advantage. According to Cavenagh Law associate Janice Goh, there were no other nations that were that far ahead in establishing an advanced licensing structure.
In January 2020, Singapore’s Payment Services Act, a framework for governing payment services and the public’s access to crypto services, went into effect.
In contrast, Hong Kong had the chance and hindsight to experience the crypto winter and examine what other regulators have done to improve and implement their systems, according to Goh.
Singapore has increased oversight on cryptocurrency businesses. Before the end of the year, it required businesses to place consumer assets under a statutory trust. Additionally, the MAS is preventing businesses from assisting loan or staking of the assets of their retail consumers.
The city-state published regulations for stablecoins, a sort of digital money, on Tuesday, making it one of the first nations in the world to do so.
Singapore wants to be a hub for digital assets, not one for cryptocurrency speculation, according to managing director of MAS Ravi Menon, who made this clear in November.
Ong Chengyi, head of APAC policy at blockchain analytics company Chainalysis, said Hong Kong and Singapore share a similar approach to upholding extremely high regulatory standards and being very aggressive in building an atmosphere that is conducive to digital asset enterprises.
Ong anticipates that Hong Kong will grant more licenses and that more crypto businesses would move to Asia.
Gemini said in June that it would expand its workforce there and make Singapore its regional headquarters, joining Coinbase and Ripple in growing their Asian operations.
