Over the last year, we have seen a continuous crackdown on cryptocurrencies in Asia. Despite the massive popularity and adoption of cryptocurrencies, China and India have taken major steps to ban or restrict crypto activities in their respective countries. Last week, Thailand authorities also announced the ban of cryptocurrencies as a means of payment.
The crackdown on cryptocurrencies in Asia is not surprising, given the region’s history with asset bubbles. For example, the 1997 Asian financial crisis was partly caused by the collapse of the Thai baht.
Asian regulators are also concerned about the potential impact of digital assets on their economies. For example, China is worried about the outflow of capital from the country, and authorities are concerned about the potential risks posed by digital assets. Crypto assets are also often used for money laundering and other criminal activities. In addition, the volatile nature of cryptocurrencies makes them a risky investment.
India, meanwhile, is concerned about the potential impact of cryptocurrency trading on its currency, the rupee. Authorities are looking at levying tax on crypto income and releasing their digital rupee despite the lack of a bill that regulates crypto activities.
Interestingly, not all Asian countries are taking a hard line on cryptocurrencies. Japan, for example, has been encouraging crypto listings. Singapore has recently been dubbed as the world’s most crypto-friendly country. Last year, the Vietnamese government issued Decision 942, hinting at their openness towards digital currencies.
So, what does the future hold for digital assets in Asia? It is difficult to say. However, one thing is certain: the Asian market will be a key player in the development of the cryptocurrency industry.
Regulators now have the difficult task of understanding this asset class and how it fits into their existing regulatory frameworks. They also need to find the right balance between protecting investors and allowing innovation to flourish.
According to the Tony Blair Institute for Global Change, three fundamental principles should guide regulators when it comes to digital assets:
- Regulators should take a risk-based approach to regulation;
- Regulation should be principles-based;
- Regulators should embrace innovation.
The first principle, taking a risk-based approach, is crucial. This means that regulators should focus on the risks posed by digital assets rather than trying to ban or restrict them.
The second principle that regulation should be principles-based is also important. This means that regulators should set out parameters and guardrails rather than seeking to control the industry.
The third principle, embracing innovation, means that regulators should be open to new ideas and technologies.