As one of the world's largest economies and population centers, Asia is increasingly important to global finance and the cryptocurrency space. Although China has released stringent new regulations in the past year, other Asian countries have taken a friendlier regulatory stance toward crypto. Whereas China seems to believe in the "blockchain not cryptocurrency" mantra, other governments in the region want to establish a regulatory environment that protects investors and users from fraud and other criminal activities while allowing startups to flourish.
South Korea, a major hub of crypto enthusiasm, has been a source of consternation for investors, as it considers how to regulate cryptocurrency. But South Korea is attempting a common-sense approach that legitimizes the crypto sector. The Financial Services Commission (FSC) recently published new regulatory guidelines. First, the FSC authorized the government to investigate three major banks that have banking relationships with cryptocurrency exchanges. Second, regulations require exchanges to conduct due diligence background checks on customers to ensure that foreigners are not trading on local exchanges and that criminals are not laundering money. The aims of the new regulations are to eliminate the South Korean premium on crypto prices and push crypto exchanges to become more compliant with anti-money laundering and know-your-customer policies.
A renowned crypto haven, Japan is also reconsidering its regulatory framework. Long praised by the crypto community for its classification of crypto as electronic money, the Financial Services Agency (FSA) is reevaluating whether crypto should be regulated as money or a financial product. If the FSA decides to reclassify crypto as a financial product, then exchanges and fintech firms will need to provide stronger consumer protections. Crypto companies will also need to manage customer funds and corporate assets separately. On the positive side, the move will likely open the door to crypto exchange traded funds and derivatives, bringing more institutional funds into the sector. The reconsideration is part of Japan's move to streamline financial regulations for cryptocurrency.
Thailand has avoided the question of whether crypto is a security altogether. The Thai government recently created a new law, the Digital Asset Business Decree, that defines cryptocurrency and digital tokens. Under the decree, cryptocurrencies are a medium of exchange like money, and digital tokens are rights to participate in investments like securities. The new law also establishes a regulatory framework for broker-dealers, exchanges, and ICOs, including audited financial statements. ICOs and trading must also be paired with a selection of seven specific liquid cryptos. However, the law applies a 15 percent tax on crypto profits and retains a 7 percent value-added tax on digital asset trades. Though not all Thai crypto enthusiasts are happy about the decree, the innovative legal approach will hopefully remind regulators that answering the securities question once and for all is not paramount.
China's crypto sector will remain turbulent under President Xi's regime, and the Indian government continues to act hostile toward crypto exchanges. As the regulatory frameworks of South Korea, Japan, and Thailand add legitimacy and enable their crypto industry to thrive, perhaps other Asian and world governments will adopt similar regulatory outlooks.
- 1. https://www.ccn.com/exclusive-south-korea-reveals-new-positive-crypto-regulatory-guidelines/
- 2. https://cointelegraph.com/news/japanese-financial-services-agency-to-change-crypto-exchange-regulations
- 3. https://www.bloomberg.com/view/articles/2018-07-01/thailand-leads-in-crypto-by-skipping-the-big-debate
- 4. https://qz.com/1319985/rbi-ban-on-indias-cryptocurrency-exchanges-will-remain-top-court-rules/