High-rise buildings are seen near Victoria Harbour in Hong Kong, China, July 24, 2023. (Photo by Costfoto/NurPhoto via Getty Images)
Costfoto | Nurphoto | Getty Images
Asia is promoting crypto clarity amid regulatory uncertainty within the U.S., and this might make the region more attractive to investors, in response to industry observers.
“Cryptocurrency regulations in Asia have moved along faster and with more clarity — green light or red light — than within the U.S.,” said Ben Charoenwong, assistant professor in finance on the National University of Singapore Business School.
“This has made Asia the premiere location for much of fintech innovation,” said Charoenwong.
Earlier this month, Hong Kong officially opened crypto trading to retail investors and upgraded licenses of two exchanges. HashKey and OSL can now expand their business beyond skilled investors to now include retail investors.
“It shows that virtual assets have gotten a recognized asset class with the same regulatory status as traditional asset classes,” said Lennix Lai, global chief business officer at crypto exchange OKX.
“This can further boost investor confidence, making Hong Kong more attractive as a possible global virtual asset hub,” said Lai. OKX is applying for a virtual assets trading license in Hong Kong.
Hong Kong and Singapore are each similar by way of the approach to maintaining very high regulatory standards.
Ong Chengyi
Head of APAC policy, Chainalysis
Last 12 months, Hong Kong said it recognizes “the potential of distributed ledger technologies and Web 3.0 to develop into the long run of finance and commerce” and expects to reinforce efficiency and transparency with proper regulation.
Rival regional financial hub Singapore has also been a frontrunner in crypto regulation. The Monetary Authority of Singapore granted Blockchain.com a license in August, an upgrade to the in-principle approval it got in October. One other player Ripple received in-principle approval in June. Which means that Blockchain.com and Ripple can provide regulated crypto services in Singapore.
Meanwhile, Thailand and Indonesia have banned using crypto for payments, but allows it to be traded as a commodity.
Hong Kong had the chance and hindsight to undergo the crypto winter and take a look at what other regulators have done to reinforce and roll out its regime.
Janice Goh
Partner at Cavenagh Law
In contrast, Coinbase and Ripple are embroiled in lawsuits with the U.S. Securities and Exchange Commission, which has accused them of securities laws violations. Each Coinbase and Ripple, in addition to other crypto firms, have threatened to depart the U.S. in response to the SEC’s crackdown.
Turmoil within the U.S.
To be certain, the sector has been embroiled in scandal and high drama over the past 12 months. In November, FTX filed for bankruptcy while Terraform and its CEO Do Kwon were charged in February for defrauding investors.
Bitcoin has dropped to trade near $28,373, far below its all-time high of greater than $65,000 in 2021.
Crypto leaders have slammed the U.S. and its approach to regulation, particularly for an absence of clarity.
In 2020, the SEC accused Ripple and its co-founders of breaching securities laws by selling its native cryptocurrency XRP without first registering it with the SEC. But in July, a landmark ruling determined the token was not, in itself, necessarily a security.
Meanwhile, the SEC sued Coinbase in June, alleging it was operating an unregistered exchange and broker. In the identical month, Binance was charged for several securities law violations.
“I believe it’s fair to say the U.S. has made it as confusing as possible as to what the foundations of the road are for the crypto industry. The SEC has really been on the forefront of that confusion,” Ripple CEO Brad Garlinghouse said in an interview with CNBC in May. He concluded some crypto firms could leave the U.S. for more progressive jurisdictions consequently.
Asia’s regulatory clarity
Across the Pacific, Singapore and Hong Kong offer way more operational clarity for a lot of industry players
“Singapore has the primary mover advantage within the Asia Pacific region, including being ahead of Hong Kong. There have been no other countries that were to date ahead in having quite a sophisticated licensing regime,” Janice Goh, partner at Cavenagh Law, told CNBC.
In November, Ravi Menon, managing director of MAS, made it clear that Singapore desires to be a hub for digital assets, but not one for speculating on crypto.
“Hong Kong and Singapore are each similar by way of the approach to maintaining very high regulatory standards, in addition to being very proactive in creating an enabling environment for digital asset businesses,” said Ong Chengyi, head of APAC policy at blockchain analytics firm Chainalysis.
Ong expects Hong Kong to issue more licenses and for more crypto firms to flock to Asia.
In June, Gemini said it would increase its headcount in Singapore and that the city-state will function its regional hub, joining Coinbase and Ripple in expanding their Asia operations.