In the world of crypto assets (virtual currencies), the trends of the United States and the US Securities and Exchange Commission (SEC) are attracting attention. This trend has been particularly noticeable since the approval of Bitcoin ETFs (exchange traded funds), and that’s no surprise.

America’s policies and economy have a huge impact on the world, and whether you agree with them or not, given the breadth and depth of the country’s capital market, the United States is a key player in the adoption and growth of crypto assets among institutional investors. will continue to play an important role.

What is happening in Asia is not well communicated to the United States, but as the use cases for crypto assets expand, it seems that they are becoming more popular among institutional investors, and other companies aiming for a more inclusive financial system are Regions can also serve as a model.

Expanding penetration among institutional investors in Asia

Asia is proving to be a hub for crypto innovation and adoption, driven by investment, user engagement, product expansion, and government initiatives.

For example, Bhutan recently invested $500 million (approximately 75 billion yen, at an exchange rate of 150 yen to the dollar) to expand its Bitcoin mining facilities.

In Singapore, 75% of institutional investors say they plan to increase their allocation to digital assets in 2024. In Hong Kong, Harvest Funds and Venture Smart Financial Holdings (VSFG) have announced their intention to apply for a Bitcoin ETF.

On the regulatory front, Singapore, Japan, Hong Kong and South Korea have taken steps to clarify rules regarding security tokens.

Furthermore, financial institutions such as Singapore’s DBS Bank, HSBC, and South Korea’s Hana Bank are all making moves to promote crypto assets.

The spread and daily use of crypto assets in Asia

Excerpt from Chainalysis’s “The 2023 Geography of Cryptocurrency Report” shows that Central and South Asia and Oceania (CSAO) is experiencing rapid growth in the crypto market, with the world’s largest It is a dynamic market. In terms of trading volume, CSAO ranks third after North America and Central, Northern and Western Europe (CNWE).

Taking Asia’s DeFi (decentralized finance) as an example, the share of DeFi in CSAO’s trading volume from July 2022 to June 2023 was 55.8%, a jump of more than 20% from 35.3% the previous year.

CSAO also has overwhelming purchasing power. Six of the top 10 countries were in the Asia-Pacific region. They are India, Vietnam, Philippines, Indonesia, Pakistan, and Thailand.

All of this points to a huge opportunity for crypto assets and their integration into the financial system in Asia.

As an example of the growth potential, Thailand is home to more than 71 million people, about 16% of whom still do not have a bank account. This means that even though the majority of the population uses the banking system, there are still significant numbers of people who are excluded from accessing financial services.

As demand for crypto assets exists and people adopt and interact with crypto assets, this increased engagement has the potential to have a significant impact on how people use banks. Practical retail use cases for crypto assets in Asia’s developing markets will keep pace with the institutional penetration seen in developed countries.

Regulatory advancement

Each of these countries has developed its own rules and regulations, making it a complex task to engage each country on its own terms. However, doing so effectively creates great opportunities.

Hong Kong is actively moving to become a leader in Web3. This is a rare case where regulators, government officials and industry leaders agree on what they want and how they want to achieve their goals. Regulators rarely force banks to open accounts for digital asset businesses.

Last year, for example, Hong Kong regulators made headlines when they began allowing licensed exchanges to offer trading services to retail investors.

Currently, they are showing a positive attitude toward approving a Bitcoin ETF. Hong Kong’s economy needs a big boost beyond real estate, manufacturing or traditional financial services. Authorities are taking the crypto industry seriously as a sector that boosts the economy.

The world is watching closely to see how effective this will be for Hong Kong. Hong Kong shows great potential to become a true “crypto asset hub” from 2024 onwards, and if its crypto efforts show enough promise, it could prompt the Chinese government to threaten their regime or attract capital flight. It may be possible to ensure a certain level of security and safety without amplifying concerns about the situation.

Hong Kong’s success could lead to a gradual softening of mainland China’s current hardline stance on crypto assets. And even a relatively small weakness in China could lead to big changes in the crypto space.

After all, companies of all sizes in China are still innovating with blockchain and investing in the technology. In other words, they haven’t turned a blind eye to the “developer” side of the digital world.

Meanwhile, countries like Singapore maintain a pragmatic approach to crypto assets, which continues to attract investment and talent to Singapore.

Other major Asian economies, such as Japan, South Korea, and Taiwan, are also developing and implementing regulations in their own ways, which will help create a foundation for investor confidence and crypto growth. In India, people are embracing crypto assets despite an uncertain regulatory environment.

In each case, Asian countries are blazing their own paths to greater financial inclusion, and other countries can learn from and put into practice.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Hong Kong (Ruslan Bardash/Unsplash)
｜Original text: Crypto Has an Unrealized Opportunity in Asia