Asia has been a hub of activity for the cryptocurrency market, continuing to dominate global charts in spite of regulatory clampdowns in key markets. Even with the Chinese ban on crypto exchanges and Initial Coin Offerings (ICOs), some countries have emerged as worthy market players in the industry.
In this article, we take a look at the state of cryptocurrency in three key Asian markets namely, Japan and South Korea in East Asia and Thailand in the South East. We will analyze the regulatory requirements in these regions and outstanding projects that have made the limelight in the recent past.
Japan ranks highly as one of the most crypto-friendly nations in the world. As investors and traders in China grapple with hostile regulations and those in South Korea deal with uncertainty, Japan has been considerably welcoming. In fact, the country has become a crypto haven for companies and is trying hard to become the Asian crypto hub.
However, its enthusiasm seems to a great extent have been tempered by events at the beginning of the year. Following the hack of Coincheck, a crypto exchange based in the country, which led to the loss of about $530 million, the situation has been tense. Since that time, the Financial Services Agency (FSA) has been exercising closer oversight over the sector.
While the FSA is imposing a more strict approach on the sector, it still wants to retain the crypto-friendly outlook. Its agenda is thus aimed at sanitizing the market to protect investors and prevent illicit activities. Crypto exchanges currently have to submit to thorough scrutiny to ensure security for investors, adhere to KYC requirements and manage user funds appropriately.
61 banks in Japan came together under the Japan Bank Consortium under the leadership of SBI Ripple Asia to launch MoneyTap. A smartphone application powered by the Ripple blockchain, MoneyTap allows customers to execute instant domestic payments 24/7. Compared to traditional bank transfers, this blockchain platform makes the process much easier and offers great flexibility.
South Korea made itself a name as one of the key cryptocurrency markets globally. As of January 11th this year, the Korean won was only second to the US dollar when it came to fiat-based cryptocurrency trading. Going further back, for most of the second half of 2017, the won was used for more than 10% of bitcoin trade. During the same period, it was the top currency globally for ethereum transactions. However, the tides have to a great extent turned since that time due to regulatory restrictions.
Korean regulators banned ICOs in September 2017. On January 30th, the use of anonymous bank accounts for crypto trading was banned. According to policy makers, this was meant to stop the use of virtual currencies for money laundering and criminal activities. The country’s regulators were also mulling over the total ban of crypto exchange sites.
However, when the Ministry of Strategy and Finance announced its intentions to lay out a digital currency tax plan by June 2018, fears of a complete ban were allayed. It is now expected that following the country’s general elections on June 13th, full-scale crypto regulations will be enacted. In the meantime, cryptocurrencies remain legal and can be used as a means of payment and for trading purposes.
Samsung SDS is one of the most outstanding Korean blockchain projects. Nexledger, its blockchain platform was commercialized for financial institutions in 2017. The same system has been applied to a shipping and logistics consortium that connects key stakeholders in the industry. Most recently, it has launched Nexfinance, a new digital finance platform offering digital identity management, automated insurance payment and finance concierge among other services.
Thailand is among the top emerging crypto markets in South East Asia. As battle lines are being drawn across the continent with regulators deciding whether to embrace the sector or suppress it, Thailand has recently taken a controversial stand.
A new law gazetted in May announced plans to ban ICOs, set up administration fees for trading tokens, define digital assets and impose heavy taxes on crypto gains. The notice required all digital asset trading exchanges to register with the Securities and Exchanges Commission (SEC). ICOs were the worst affected as they were not only required to seek approval before launch but were subjected to three taxes. A 20% corporate income tax, a 15% capital gains tax and 7% VAT essentially made it impossible to launch an ICO in the country.
Individuals trading virtual coins would also be subject to the 15% capital gains tax on all transactions carried out. But the government waived the 7% VAT requirement which it initially intended to implement.
In the first week of June 2018, the SEC legalized seven crypto coins for use as trading pairs. These include bitcoin, ethereum, bitcoin cash, litecoin, ethereum classic, Ripple and Stellar Lumens.
Under the Thailand Blockchain Community Initiative, leading banks in the country have come together to streamline operations. Collaborating with IBM under its Hyperledger Fabric, the initiative has created a shared financial platform. One of the main objectives of the platform is the digitization of Letters of Guarantee to enhance efficacy and reduce costs.
As the global crypto industry continues to seek firm footing in as far as regulations are concerned, the Asian market continues to adapt to changes. With some countries opting to curb enthusiasm and others choosing a more friendly approach, future prospects for the sector remain to be seen.