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Decoding the diverse regulatory journeys in Southeast Asia

Decoding the diverse regulatory journeys in Southeast Asia

Insights

Which Southeast Asian country is considered one of the most crypto-friendly jurisdictions, and what regulatory framework governs crypto activities in that country?

Anndy Lian considers Singapore to be as one of the most crypto-friendly jurisdictions. The Payment Services Act, effective since January 2020, regulates crypto service providers as licensed payment institutions, ensuring compliance with anti-money laundering (AML) and consumer protection rules.

What are the main regulatory challenges and opportunities posed by the diverse crypto landscape in Southeast Asia?

Anndy Lian mentioned that the lack of uniformity in crypto regulations across Southeast Asian countries creates challenges such as regulatory uncertainty and inconsistency. However, it also presents opportunities for regulatory arbitrage, where the crypto industry seeks favorable regulatory environments for their activities.

In terms of crypto regulations, how does Indonesia differ from other Southeast Asian countries, and what has been the government's stance on crypto use?

Indonesia has a more restrictive and uncertain regulatory environment. While the government has banned the use of crypto as a means of payment, it has also recognized crypto as a tradable commodity on futures exchanges, authorizing exchanges like the Indonesia Commodity and Derivatives Exchange (ICDX) and the Jakarta Futures Exchange (JFX) to offer crypto futures contracts.

What potential trends are anticipated in Southeast Asia's crypto landscape in 2024, especially in countries like Indonesia and Vietnam?

Anndy Lian anticipated trends in 2024 include the evolution of regulatory frameworks, increased institutional engagement, the rise of Central Bank Digital Currencies (CBDCs), continued growth in DeFi and NFTs, discussions on interoperability and cross-border collaboration, educational initiatives, technological advancements, and market consolidation and maturation. These trends provide a framework for potential developments in the Southeast Asian crypto space.

 

Southeast Asia (SEA), a region with a population of nearly 700 million and a fast-growing digital economy, has become a hotbed for crypto innovation and adoption in recent years. However, the regulatory landscape for crypto in the region is diverse and dynamic, with different countries adopting different approaches and policies.

In this article, we will examine the current state of crypto regulations in Southeast Asia, the challenges and opportunities they pose for the crypto industry and users, and regulatory trends anticipated to gain momentum in 2024 in the region.

The state of crypto regulations in SEA

More than 600 crypto or blockchain companies are now headquartered in SEA, and the region has seen almost $1 billion in funding for crypto, blockchain and web3 startups in 2023 to date. The report also shows that crypto adoption rates in SEA averaged 3.56% in 2021, but Singapore stood out with nearly 10% of its population owning crypto, ahead of the U.S. at 8.3%.

However, the regulatory environment for crypto in SEA is not uniform or stable. Different countries have different levels of openness and maturity in regulating crypto, and some have changed their policies over time. Here is a brief overview of the crypto regulations in some of the major Southeast Asian countries:

  • Singapore: Singapore is widely regarded as one of the most crypto-friendly jurisdictions in the world, with a clear and comprehensive regulatory framework for crypto activities. The Payment Services Act, which came into effect in January 2020, regulates crypto service providers as licensed payment institutions, and requires them to comply with anti-money laundering (AML), counter-terrorism financing (CTF), and consumer protection rules. The Monetary Authority of Singapore (MAS) also oversees the offering and trading of crypto assets that are deemed as securities or derivatives under the Securities and Futures Act. Singapore has also introduced tax guidelines and sandbox schemes for crypto businesses and investors, and has fostered a vibrant crypto ecosystem with the support of industry associations, research institutes, and innovation hubs.
  • Thailand: Thailand is another country that has adopted a proactive and progressive approach to crypto regulation, with the aim of promoting innovation and protecting investors. The Thai Securities and Exchange Commission (SEC) is the main regulator of crypto activities in the country, and has issued licenses for crypto exchanges, brokers, dealers, and fund managers since 2018/19. The SEC also regulates the issuance and trading of digital tokens that are classified as securities or investment contracts under the Digital Asset Businesses Decree. The SEC has also issued guidelines and rules for initial coin offerings (ICOs), security token offerings (STOs), decentralised finance (DeFi), non-fungible tokens (NFTs), and stablecoins, and has collaborated with other regulators and stakeholders to develop the crypto industry and market.
  • Malaysia: Malaysia has a similar regulatory framework to Thailand, with the Securities Commission (SC) as the main regulator of crypto activities in the country. The SC requires crypto service providers to obtain licenses as recognised market operators, and regulates the offering and trading of digital tokens that are considered as securities or investment contracts under the Capital Markets and Services Act. The SC has also issued guidelines and rules for ICOs, STOs, DeFi, NFTs, and stablecoins, and has established a regulatory sandbox for crypto innovation. The SC works closely with the Central Bank of Malaysia (BNM) to ensure the stability and integrity of the crypto market and the financial system.
  • Indonesia: Indonesia has a more restrictive and uncertain regulatory environment for crypto, with the government and the regulators sending mixed signals to the crypto industry and users. The BNM has banned the use of crypto as a means of payment and has warned the public of the risks and legal consequences of using crypto. However, the BNM has also acknowledged that crypto is a commodity that can be traded on futures exchanges, and has authorised the Indonesia Commodity and Derivatives Exchange (ICDX) and the Jakarta Futures Exchange (JFX) to offer crypto futures contracts since 2019. The Indonesian Trade Ministry has also issued regulations for crypto asset trading, and requires crypto service providers to register with the Commodity Futures Trading Regulatory Agency (Bappebti) and comply with AML, CTF, and consumer protection rules.
  • Philippines: The Philippines has a more balanced and pragmatic regulatory approach to crypto, with the government and the regulators recognising the potential and challenges of crypto. The Bangko Sentral ng Pilipinas (BSP) regulates crypto service providers as remittance and transfer companies, and requires them to obtain licenses and comply with AML, CTF, and consumer protection rules. The BSP has also issued guidelines for the issuance and exchange of digital tokens that are considered as securities or investment contracts under the Securities Regulation Code. The BSP collaborates with the Securities and Exchange Commission (SEC) and the Cagayan Economic Zone Authority (CEZA) to oversee and develop the crypto industry and market.
  • Vietnam: Vietnam has a more hostile and ambiguous regulatory stance on crypto, with the government and the regulators banning and discouraging the use and trading of crypto. The State Bank of Vietnam (SBV) has prohibited the use of crypto as a means of payment since 2017, and has declared that crypto is not a legal tender or a recognised asset in the country . The SBV has also warned the public of the risks and legal consequences of using and trading crypto, and has instructed financial institutions and service providers to refrain from engaging in crypto activities. However, the SBV has also indicated that it is studying and researching the possibility of issuing a central bank digital currency (CBDC) in the future.

The challenges and opportunities of crypto regulations in SEA

The diverse and dynamic regulatory landscape for crypto in SEA poses both challenges and opportunities for the crypto industry and users in the region. Some of the main challenges and opportunities are:

  • Regulatory uncertainty and inconsistency: The lack of clarity and coherence in crypto regulations across different countries and jurisdictions in SEA creates confusion and uncertainty for the crypto industry and users, and hinders the cross-border integration and interoperability of crypto services and products.
  • Regulatory arbitrage and competition: The variation and disparity in crypto regulations across different countries and jurisdictions in SEA also creates opportunities and incentives for the crypto industry and users to seek and exploit the most favorable and advantageous regulatory environments for their crypto activities.
  • Regulatory collaboration and coordination: The complexity and diversity of crypto regulations in SEA also requires and encourages the collaboration and coordination among different regulators and stakeholders within and across different countries and jurisdictions in the region.

8 regulatory trends in SEA in 2024

Predicting trends for 2024 in SEA’s crypto landscape involves several considerations based on the existing regulatory environment, market trends, and technological advancements. Here are potential trends to look out for:

  1. Evolution of Regulatory Frameworks: Expect continued evolution and refinement of crypto regulations in SEA. Some countries might amend or introduce new legislation to provide more clarity and structure, aiming to balance innovation with investor protection and financial stability. Watch for updates on licensing requirements, compliance standards, and tax guidelines, especially in countries like Indonesia and Vietnam, which have shown mixed signals and could undergo significant regulatory changes.
  2. Increased Institutional Engagement: Anticipate greater involvement from institutional investors and traditional financial institutions in the Southeast Asian crypto space. As regulatory clarity improves and crypto markets mature, institutions might explore avenues for investment and integration of digital assets into their portfolios or services.
  3. Rise of CBDCs: Several Southeast Asian countries, including Indonesia and Vietnam, have shown interest in exploring CBDCs. Keep an eye on potential pilot projects or announcements regarding the development and implementation of digital versions of national currencies, which could impact the broader crypto ecosystem in the region.
  4. DeFi and NFTs: Continued growth and innovation within the DeFi and NFT sectors are expected. Countries like Thailand and the Philippines have shown interest in regulating and fostering these segments. Look for initiatives promoting responsible DeFi practices and guidelines for NFT markets, possibly indicating a more structured approach by regulatory bodies.
  5. Interoperability and Cross-Border Collaboration: With varying regulations across Southeast Asian countries, expect discussions on interoperability and cross-border collaboration to gain momentum. Efforts to harmonise certain aspects of regulations or establish frameworks for smoother cross-border crypto transactions might begin to surface.
  6. Education and Awareness Campaigns: Governments and regulatory bodies may intensify efforts to educate the public about the risks and benefits of crypto. Initiatives aimed at increasing financial literacy and awareness about safe crypto practices could emerge, especially in countries where regulatory stances are less clear.
  7. Technological Advancements and Innovation: Keep an eye on technological advancements, such as Layer 2 scaling solutions, privacy enhancements, and sustainable blockchain developments. SEA might witness increased adoption of eco-friendly crypto solutions and technologies focused on scalability and user privacy.
  8. Market Consolidation and Maturation: The crypto market in SEA may undergo consolidation as stronger regulations prompt weaker or non-compliant entities to exit. This could lead to a more mature and stable market environment, attracting serious players and fostering investor trust.

These trends are speculative and subject to changes influenced by geopolitical factors, technological breakthroughs, global market trends, and regulatory shifts. In my humble opinion, they provide a framework for potential developments in the Southeast Asian crypto space in 2024.

Conclusion

SEA is a good crypto breeding ground, with a large and growing crypto market and industry, and a diverse and dynamic regulatory landscape. While Singapore leads with a robust and transparent regulatory framework, others like Indonesia and Vietnam grapple with uncertainty, fostering a complex environment for industry players and users.

Navigating this intricate regulatory landscape requires a proactive stance from crypto stakeholders. Compliance with evolving regulations, obtaining requisite licenses, and aligning with diverse jurisdictional standards are crucial. Simultaneously, refraining from unlawful activities and staying updated with accurate information become paramount. Collaborative efforts among regulators and stakeholders across borders could streamline regulations and foster a more coherent environment for the burgeoning crypto industry.

Looking ahead to 2024, several potential trends loom on the horizon, including regulatory evolution, increased institutional engagement, the rise of CBDCs, emphasis on DeFi and NFTs, interoperability discussions, educational initiatives, technological advancements, and market maturation. These anticipated trends offer a roadmap for potential developments. Their realisation depends on multifaceted factors such as global market dynamics, technological progressions, geopolitical shifts, and regulatory reforms. Despite uncertainties, these projections serve as guiding principles for stakeholders navigating the complex terrain of SEA’s crypto journey in the upcoming years.

 

Source: https://ciosea.economictimes.indiatimes.com/blog/a-tale-of-two-technologies-the-intricacies-of-data-and-ai/106511920

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Regulatory Caution Among Asian Nations Amid Reports of Illicit Financing

Regulatory Caution Among Asian Nations Amid Reports of Illicit Financing

With a plethora of reports of crypto-related terrorist financing having been published in recent weeks, it’s understood that Asian nations may be looking to exercise caution when it comes to the current ongoing process of establishing regulatory guidelines for crypto.

That’s according to a report published by the South China Morning Post (SCMP) on Thursday. The use of cryptocurrency by Hamas to fund its attack on Israel is being seen as the catalyst that may drive authorities in various Asian nations to take a more cautious approach to regulating digital currencies, according to analysts cited by the publication.

Raj Kapoor, the founder of India Blockchain Alliance (IBA), commented on these recent developments, stating:

”It is a kick on the backside for most governments. All regulatory bodies will take a closer look at crypto regulation. Governments will need to start implementing new rules and regulations.”

At the recent G20 summit held in New Delhi, a joint declaration called for the regulation, supervision, and oversight of crypto assets, among other measures. The declaration emphasized the importance of supporting “a coordinated and comprehensive policy and regulatory framework.”

Kapoor stressed the importance of revisiting the declaration and developing solutions to implement its objectives.

Renewed scrutiny

Events in Palestine in recent weeks have led to renewed scrutiny when it comes to monitoring illicit financing activity via cryptocurrency. Only days following the recent Hamas attack, Israeli authorities moved to freeze specified crypto accounts.
That scrutiny has continued in recent days, with more accounts having been frozen on crypto platforms such as Binance, while more still have been identified as suspicious, with requests for further information having been submitted in respect of over 200 additional accounts.
On Wednesday it emerged that the United States Treasury’s Office of Foreign Assets Control (OFAC) had sanctioned a Gaza-based crypto platform.

Potential over-reaction

While crypto-related terrorist financing has been widely publicized, blockchain analytics firm Chainalysis warned on Wednesday that crypto’s role in this illicit activity has likely been overstated. In its blog post on the subject, the firm stated:
“Although terrorism financing is a very small portion of the already very small portion of cryptocurrency transaction volume that is illicit, some terrorist organizations raise, store, and transfer funds using cryptocurrency.”
Additionally, Chainalysis stated that it had seen “overstated metrics and flawed analyses of these terrorist groups’ use of cryptocurrency.” Peter Van Valkenburgh, Director of Research at non-profit crypto advocacy group Coin Center, also believes that reporting on the matter is not balanced. Taking to X, he stated:

“Sensational early reporting on the scale of Hamas crypto fundraising significantly misstated the amounts involved.”

Coin Center’s Director of Communications, Neeraj Agrawal, highlighted an article which claimed that crypto “fueled Hamas’ terror attack on Israel” in its title, only to reveal within the body of the article that “cryptocurrency is still far from the largest funding source for terrorism.”

Anndy Lian, a Singapore-based author and inter-governmental blockchain adviser, noted that while some countries may consider banning cryptocurrencies as a solution, this could merely drive illicit financing underground and make it more challenging to trace and halt. Lian argued that cryptocurrencies are traceable and trackable, unlike traditional fiat currencies like US dollars.

Source: https://coinmarketcap.com/community/articles/6531dbf64a59da6222691216/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Anndy Lian: The Rise of Crypto ETFs and Regulatory Considerations

Anndy Lian: The Rise of Crypto ETFs and Regulatory Considerations

Crypto assets have been gaining popularity and legitimacy in recent years, attracting the attention of investors, regulators, and policymakers worldwide.

One of the most significant developments in the crypto space is the emergence of crypto exchange-traded funds (ETFs), which are investment vehicles that track the performance of a basket of crypto assets or related products.

Crypto ETFs offer several advantages for investors who want to gain exposure to the crypto market without dealing with the technical and operational challenges of buying, storing, and securing crypto assets directly. They also provide more liquidity, transparency, diversification, and tax efficiency than other forms of crypto investment.

However, several regulatory challenges and uncertainties may limit their growth potential and market acceptance. I will explore the rise of crypto ETFs, their mechanics, regulatory hurdles, and their potential to reshape the investment landscape.

What is a Crypto ETF and How Does It Work?

An ETF is a type of fund that trades on a stock exchange like a regular stock. It typically holds a portfolio of assets that track an underlying index or benchmark, such as a stock index, a commodity, a currency, or a sector. Investors can buy and sell shares of an ETF through a broker or an online platform, just like any other stock.

A crypto ETF is a type of ETF that tracks the performance of a basket of crypto assets or related products. There are different types, depending on how they obtain exposure to the crypto market. Some examples are:

  • Physical-backed crypto ETFs: They hold actual crypto assets in custody and issue shares that represent a proportional ownership of the underlying assets. For example, a Bitcoin ETF would hold Bitcoin (BTC) in a secure vault and issue shares that reflect the value of Bitcoin.
  • Futures-based crypto ETFs: They use futures contracts or other derivatives to gain exposure to the price movements of crypto assets without holding them directly. For example, a Bitcoin futures ETF would buy and sell Bitcoin futures contracts on a regulated exchange and issue shares that reflect the value of the contracts.
  • Synthetic crypto ETFs: They use swaps or other complex financial instruments to replicate the performance of crypto assets without holding them directly or indirectly. For example, a Bitcoin synthetic ETF would enter into an agreement with a counterparty to exchange the returns of Bitcoin for another asset or index.
  • Crypto-related ETFs: They invest in companies or sectors that are involved in or benefit from the development and adoption of crypto assets and technologies. For example, a blockchain ETF would invest in companies that provide blockchain solutions or services.

Why are Crypto ETFs Popular?

They are popular because they offer several benefits for investors who want to access the crypto market in a convenient and cost-effective way. Some of these benefits are:

  • Liquidity: Trade on regulated stock exchanges with high volumes and low spreads, which means investors can buy and sell them easily and quickly at any time during market hours. This contrasts with buying and selling crypto assets directly on unregulated or illiquid platforms, which may involve delays, fees, or risks.
  • Transparency: Disclose their holdings, fees, and performance on a regular basis, which means investors can monitor their investments and make informed decisions. This contrasts with buying and selling crypto assets directly on platforms that may lack adequate disclosure or oversight.
  • Diversification: Allow investors to diversify their portfolios across different types of crypto assets or related products, which may reduce their overall risk and volatility. This contrasts with buying and selling individual crypto assets directly, which may expose investors to high concentration risk.
  • Tax efficiency: May offer tax advantages for investors who hold them in certain jurisdictions or accounts. For example, in some countries, investors may defer capital gains taxes on crypto ETFs until they sell them, whereas they may have to pay taxes on every transaction involving direct ownership of crypto assets.
  • Accessibility: Allow investors to access the crypto market without having to deal with the technical and operational challenges of buying, storing, and securing crypto assets directly. For example, investors do not need to set up digital wallets, manage private keys, or worry about hacks or thefts.

What are the Regulatory Challenges for Crypto ETFs?

Despite their popularity and benefits, crypto ETFs also face several regulatory challenges and uncertainties that may limit their growth potential and market acceptance. Some of these challenges are:

  • Lack of global harmonization: Crypto assets and related products are subject to different and evolving regulatory frameworks across different jurisdictions, which may create inconsistencies, gaps, or conflicts for crypto ETFs. For example, some countries may allow or ban certain types of crypto ETFs, while others may have different definitions, classifications, or requirements for them.
  • Lack of clear guidance: Such products are often novel and complex, which may pose difficulties for regulators to understand, monitor, and supervise them. For example, regulators may have questions or concerns about the valuation, custody, liquidity, risk management, or governance of crypto ETFs.
  • Lack of investor protection: They are often volatile, speculative, and risky, which may expose investors to potential losses or frauds. For example, investors may face market manipulation, cyberattacks, operational failures, or counterparty defaults involving crypto ETFs or their underlying assets or products.
  • Lack of market infrastructure: It often relies on emerging or untested technologies, platforms, or services, which may lack adequate standards, safeguards, or interoperability for crypto ETFs. For example, crypto ETFs may face challenges or risks in accessing, verifying, or transferring crypto assets or products across different systems or networks.

What is the Potential Impact of Crypto ETFs?

They have the potential to reshape the investment landscape by creating new opportunities and challenges for investors, regulators, and policymakers. Some of the possible impacts are:

  • Increased adoption and innovation: May increase the adoption and innovation of crypto assets and technologies by making them more accessible and attractive to a wider range of investors, especially institutional and retail investors who may otherwise be reluctant or unable to enter the crypto market directly.
  • Increased competition and integration: May increase the competition and integration between the traditional and crypto financial systems by creating new products and services that bridge the gap between them. For example, crypto ETFs may enable investors to trade crypto assets on stock exchanges or use them as collateral for loans or derivatives.
  • Increased regulation and supervision: May increase the regulation and supervision of crypto assets and related products by bringing them under the purview of existing or new regulatory frameworks and authorities. For example, crypto ETFs may require registration, authorization, disclosure, reporting, auditing, or compliance with certain rules or standards.
  • Increased education and awareness: May increase the education and awareness of crypto assets and technologies by providing more information and resources for investors to learn about them. For example, crypto ETFs may offer educational materials, webinars, podcasts, or newsletters to explain their features, benefits, risks, or performance.

The Bottom Line

Crypto ETFs are a growing phenomenon in the crypto space that offer several advantages for investors who want to gain exposure to the crypto market in a convenient and cost-effective way.

However, it faces several regulatory challenges and uncertainties that may limit their growth potential and market acceptance. They have the potential to reshape the investment landscape by creating new opportunities and challenges for investors, regulators, and policymakers.

Many of my friends are looking forward to the regulated crypto ETFs together with the Bitcoin halving next year. They believe that the real bull run will start from there. Do you feel the same too?

 

Source: https://www.techopedia.com/anndy-lian-the-rise-of-crypto-etfs-and-regulatory-considerations

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j