All Great on the Eastern Front: Crypto Moves to Asia

Just like matter, currency (including crypto) never disappears – it just moves around and evolves. And in the case of blockchain tokens, this movement and evolution are even more trackable than in other financial markets. 

And this movement seems to be clearly headed for a specific geographical destination: Asia. As the European and American financial markets slowly recover from COVID-19 generated inflationary environments and a now pluriannual war in the near East, crypto’s expansion has been rendered stagnating by a combination of growing regulations, badly managed private capital and a general derisking attitude across portfolios. 

Sitting at the other hand of this financial exodus are Asian countries, which offer a patchwork of different legality and regulation status, but are still experiencing a dramatic growth. 

In fact, crypto transactions in the Asian continent soared by 706% during the core months of the 2020-2021 bull run, making up 14% of all global transactions and 43% of all crypto activity – essentially more than the U.S. and Europe combined. 

This is not where the encouraging numbers stop at all. As of 2022, six of the Top 10 most valuable crypto trading companies are located in Asia, including Binance and Liquid. In terms of market capitalisation, 40% of it for the Top 20 token projects as of 2021 were based in Asia, and the region accounted for 94% of BTC futures volume. 

A clear distinction is forming in terms of the type of trading and holding performed in the different continental blocks: North America appears increasingly focused on long term holding and staking, while East Asia dominates the whale and day trading market. In 2021, it performed 90% of all trades above $10k. 

This shifting paradigm seems to have already been recognised by macroeconomic patterns, with crypto trading volume and price being increasingly linked to Asian and Emerging Markets stocks than anything else (i.e. blue chip or US stocks). 

This is unlikely to be where the peak of this financial migration is: despite the shift, adoption at mainstream level for the use of crypto remains incredibly low compared to the U.S. and Europe. Adoption rates averaged just over 3.5% in 2021, with Singapore the only exception as the sole country to beat the U.S. (10% vs the 8.3% adoption rate in America). 

With Asia’s population remaining primarily unbanked (only 30% of the population of the continent has a current account) and yet being simultaneously the largest in the world (60% of the globe’s individuals live there) and the fastest growing to date – the potential for further growth remains stellar. 

But what is driving this phenomenon? 

Promising Regulatory Frameworks 

Given the size of the continent, it’s admittedly hard to paint it all in one stroke. But there is a definite sense of collective progress towards a more friendly environment throughout some of the key economies of the region.

For a start, Japan’s leading role has been confirmed in the crypto world too. Having been one of the pioneers countries of crypto as early as 2014, the country was thrown into a lot of scepticism and doubt by a series of major setbacks, some major enough that they remain pillars of crypto history: MtGox was based there when it nearly spelled the early death of crypto positivity, and one of the biggest platform hacks to date hit the Japanese Coincheck in early 2018. 

These troubles however only served to prepare the country’s political and legislative field for crypto’s explosion a few years later: when FTX collapsed in 2022, its Japanese branch remained unscathed due to stringent laws which require all exchanges to keep their assets separated from customer assets, as well as heavily promoting the use of cold wallets. 

Additionally, the recent SEC crackdowns on crypto across the US, forcing Kraken to stop its staking services, with additional rumours about Binance and Lido investigations among many others, don’t paint a rosy picture for those situated in the US.

Furthermore, despite TerraUSD’s recent adventures, the legislators in Japan are also wonderfully positioned to be early movers on stablecoin regularisation. That type of cryptocurrency had been essentially banned in the country up until 2022, but its introduction to Japanese customers in a world which has learned from previous debacles will only serve to create a safer system – rumoured to be based on mandatory underlying asset backing with Japanese bank control. 

In essence: being late can be just as good – if not better – than being the first out the door. 

In a similar situation is India, where the political leadership went from calling for a total ban on crypto-related activities to creating a framework for the distinction between fiat and blockchain assets, devised to protect consumers from fraudulent activity without limiting access beyond the necessary. 

Weirdly, one of the Asian countries who have been brought to rely on token trading the most for their activity is one of the most authoritarian. North Korea has been using crypto for its untraceable and decentralised characteristics, using tokens to evade Western sanctions and even fund military programs. And this is just what transpires from external observation of one of the world’s most secretive countries. 

Hong Kong, Singapore and Thailand all have relatively liberal laws on crypto itself, with the former currently exploring issuing a state-backed digital currency and introducing a capital gains tax dedicated to crypto. That said, digital assets are still seen with suspicion when it comes to money laundering and criminal uses. Places like Cambodia and Vietnam have embraced the practicality of digital assets and have even gone as far as introducing major pieces of blockchain technology to their public services. 

On the completely polar opposite end of the scale sits China. The Asian superpower by definition has rocked international markets several times with the introduction of a plethora of bans and anti-blockchain legislation, essentially leading to a total ban of crypto-related activities, which developed in stages. 

The first few changes were brought on in 2013 and 2017 respectively, but it was the 2021 ban on mining which changed the face of global crypto the most: at the time, 50% of all crypto was mined in China. The ban was carried out as part of a general shifting attitude from the Chinese leadership on emissions and pollution standards, and focused particularly on the impact of PoW based blockchains. 

Despite this, there is confidence an authoritarian juggernaut such as China would not pass up the opportunity to control this facet of the economy completely – with the government recently unveiling plans to create its own state-backed coin. 

A Journey Beyond Crypto? 

There are many who argue that the aforementioned leading position developed by the Asian continent on crypto might not remain limited to that domain.

After all, early adoption can provide industry advantages that last well beyond the early phases of said industry and Asia seems to have all the factors needed to become a pioneering continent: high population and economic growth, an infrastructure still to be built and a dynamic and flexible legislative apparatus. 

Once the Web3 revolution is truly and fully over, Asia and in particular the South East will find themselves leading the pack – and it’s likely this will trickle down into all sorts of financial and cultural influence on the West.

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