An Outlook on Cryptocurrency Adoption in Asia

Asian countries – China, Singapore and others – are in the middle of a tech arms race. At this point, no one doubts that digital payments are the future and the pandemic, which caused a major economical crisis across the world, has once again proven the importance of digital payments, including cryptocurrencies. To maintain their status as leaders in the tech and finance markets, some Asian countries are implementing measures that will effectively legalize cryptocurrency. That includes China, which, after being overly restrictive just a few years ago, now constantly generates news regarding the possible introduction of its own digital yuan.

Interestingly, not all Asian countries are on the frontiers of welcoming crypto to their finances. Japan, for example, despite recognizing them as money, has made its laws quite strict, with the regulators tightening their policies further every now and then. It resulted in many companies, including ourselves, having to pull out of the country, until they find a workable structure to serve Japanese residents.

In addition, national governments want to move away from dependence on the dollar. Right now, the majority of international payments are made in U.S. dollars, which gives Washington a few levers to pull, and the international community is tired of depending on the mood in the White House. Back in Davos, at the international economic forum, the oil-producing countries raised the issue of developing an alternative payment method. Bitcoin was also considered for that role, but without the corresponding laws, it can’t be used for international transactions.

Just a few years ago, in 2017, the year of the crypto boom, government agencies basically didn’t control token and cryptocurrency circulation, simply because they didn’t know how to. In the last three years, however, the approaches taken by national leadership toward cryptocurrencies have changed, and the corresponding amendments were made to active laws. Now it is impossible to simply sell tokens, without adhering to the laws of the country where the project is registered or where the prospective buyers of the tokens reside.

In general, the crypto industry’s main draw for bad actors is that many of its parts still remain outside of the watchdogs' oversight. So establishing certain requirements for crypto projects and token sales is to some extent designed to protect the interests of investors themselves.

Africa and India are Becoming More Prominent Participants in The Cryptomarket

Cryptocurrencies hold an important place in the economy of African countries. For example, Bitcoin could become a godsend for Nigeria’s population, given the country’s catastrophic dollar shortage. The country has recently issued regulations for digital currencies, which will certainly help drive the industry forward. Furthermore, new data from Chainalysis shows that many African people and businesses are increasingly turning to crypto over fiat as a means of exchange. So I’m certain that African countries could definitely become the new cryptocurrencies devotees.

In India, the situation is ambiguous, as cryptocurrencies had been banned there for a long time. The Indian Central Bank only lifted the restriction in may 2020, which resulted in a major upswing in crypto exchange activity. But now there is word again that the country is moving toward banning cryptocurrency trading. There is, of course, a great amount of potential in a country with a population of over 1.3 billion people and a GDP comparable to the U.K. But it is unclear whether India’s leadership will create the correct conditions to develop this potential. We shall have to wait and see how events unfold.

For both India and Africa, it is reasonable that cryptocurrencies hold many opportunities for people, since a large proportion of the population is unbanked. This is amplified by the fact that the costs of participating in the local financial system are higher compared to the costs of using  cryptocurrency solutions.

What Can Be Expected Regarding The Legalization of Cryptocurrencies in the Future?

I believe that by mid-2021 most sizable markets will have a legal framework in place for cryptocurrencies, especially when it comes to transmitting and storing crypto. There are still issues that need to be resolved. Passporting in the Eurozone is a good example. Another example is that many regulators expect cryptocurrency exchanges to adhere to the travel rule, but don’t provide precise practical requirements for compliance.

Another issue that will remain is how cryptocurrencies are categorised. In some countries, they are considered a commodity, in others - property, in others still - goods. What all those categories mean and how transactions with them are to be taxed – for many countries there will be a lot of inconsistencies in solving this matter.

Nevertheless, we are seeing national governments become more active in developing crypto legislation. Our exchange is already filing the appropriate applications to be licensed in Germany, Austria, the Netherlands, Canada, Singapore, and France.

The laws in some countries require cryptocurrency exchanges to have local directors and a MLRO (money-laundering reporting officer) on staff, and sometimes to have a physical office. These are all extra expenses for the company, which will only be affordable to the larger players in the market and will make market participation for the new incumbents much harder.