Original article by Claire Ballentine
Original translation: Luffy, Foresight News
Even after the recent pullback, cryptocurrencies remain one of the best performing assets this year, and demand from retail investors in Asia Pacific has been the main driver of cryptocurrencies gains.
There’s a lot going on in the Asia-Pacific region. Hong Kong just listed a batch of cryptocurrency exchange-traded funds (ETFs), and Australia plans to bring these products to the country’s largest stock market. Meanwhile, Singapore is racing to become a cryptocurrency hub, and Web3 blockchain technology is rapidly gaining popularity elsewhere.
In January, U.S. regulators approved a Bitcoin ETF, boosting the credibility of cryptocurrencies around the world. The decision helped the crypto asset class recover after the winter of 2022, when a series of scandals and bankruptcies caused Bitcoin prices to fall 64%. However, the crypto market has not been without volatility this year. In March, the frenzy triggered by the U.S. Bitcoin ETF pushed Bitcoin to an all-time high of nearly $74,000, before Bitcoin fell nearly 16% in April.
Some investors in Asia are long-time crypto enthusiasts who have weathered the ups and downs, while others are more recent entrants. From South Korea to the Philippines and Australia, small traders have built unique ecosystems.
“The region has been an early adopter of Web3 technologies and has a strong sense of identity with them,” said Leah Callon-Butler, director of Emfarsis, a Web3 consultancy in the Philippines. “Outsiders tend to lump ‘Asia’ into one homogenous region, which is a very big mistake if you want to truly understand how and why cryptocurrencies took off here.”
Here are the cryptocurrency trends across Asia:
South Korea
South Korean traders are among the most enthusiastic cryptocurrency traders in the world. In fact, the country’s won just overtook the U.S. dollar as the most commonly used currency in cryptocurrency trading. Smaller-cap tokens, known as altcoins, are particularly popular, accounting for 80% of trading volume on South Korean exchanges, compared to about 50% on global platforms, according to CryptoQuant.
Retail investors are also known for their love of cryptocurrency-based e-sports, which reward players with cryptocurrency or non-fungible tokens (NFTs). This year, South Korean game companies such as Nexon Games Co. and NCSoft Corp. plan to launch new play-to-earn games, said Charles Pyo, founder and CEO of AI 3, a Seoul-based company dedicated to driving enterprise adoption of Web3 and artificial intelligence.
South Korean regulators have stepped up their scrutiny of the industry following the collapse of Luna and UST, cryptocurrencies created by Terraform Labs co-founder Do Kwon. Last year, the country’s parliament passed a bill to strengthen investor protection that would allow officials to oversee cryptocurrency operators and asset custodians.
the Philippines
Web3 games like Axie Infinity and Pixels have become popular in the Philippines in recent years. For example, “guilds,” or groups that play games together, can earn NFTs and other rewards. Internet cafes have also sprung up to allow these groups to meet in real life.
A gaming guild called Yield Guild Games has grown and is now building Web3 protocols and helping other guilds around the world.
“The Philippines is the epicenter of blockchain gaming adoption globally,” said Emfarsis’ Callon-Butler. “Guilds have become unique groups above all other games, and they transfer between games.”
The Philippines allows cryptocurrency trading but does not consider it legal tender. The Central Bank of the Philippines has established a sandbox mechanism to encourage innovation but to regulate it. The Central Bank of the Philippines is also piloting a central bank digital currency.
Hongkong
Patrick Pan, CEO of digital asset platform OSL, explained that retail traders in financial centers are keen to use leverage in their trading. They have a high risk appetite and a greater interest in alternative investment products, he said. They are also heavily influenced by KOLs on social media and in the cryptocurrency space.
Chun Ho Chow, a 23-year-old retail investor who also works at a Web3 startup, said he is comfortable with trades that others consider too risky.
“Many young people want to ‘get rich quick’ by making leveraged trades in volatile assets. Many become millionaires through such trades and post about it on social media,” he said, adding that although he knew there was survivorship bias, he believed he could do the same.
Hong Kong, which only began allowing retail investors to legally invest in cryptocurrencies last year, has been pushing for a regulatory regime for cryptocurrency exchanges and related entities. Regulators tout their approach as placing a heavy emphasis on consumer protection, but there are concerns that it could make the city less attractive to companies that can make bigger profits from activities such as staking and derivatives.
On April 30, Hong Kong allowed the listing of three ETFs that invest directly in cryptocurrencies. The level of demand for these funds will help judge whether Hong Kong’s efforts to become a strictly regulated digital asset hub are making progress.
In mainland China, all cryptocurrency activities are banned, including crypto-based financing, exchange trading, and Bitcoin mining. That being said, enforcement has been a question mark.
Australia
Australian retail investors are known to be interested in Ethereum, with some even ditching Bitcoin altogether in favor of its peers. According to a survey by cryptocurrency exchange Kraken, 59.4% of Australian wallets are in Ethereum and 17.7% in Bitcoin, compared to 34.5% of investor wallets worldwide in Ethereum and 29.9% in Bitcoin.
Kurtis Dawe, a 33-year-old Sydney trader, prefers Ethereum to Bitcoin because its price has not risen as much as Bitcoin and many alternative currencies use the Ethereum blockchain.
“I think it has more room to grow than bitcoin,” said Dawe, who recently sold all of his bitcoin positions. He is also optimistic that an ethereum exchange-traded fund will soon be launched, further boosting its price.
Japan
As part of a broad plan to strengthen the economy, the Japanese government is trying to develop Web3 companies. It has begun to relax cryptocurrency rules on listings, taxation, and allowing venture capital firms and other investment funds to hold cryptocurrencies directly. Nomura Holdings and other financial companies are also promoting the development of Japans security token market (a real-world asset token), turning corporate bonds, securitized real estate and other financial products into tokens.
But overall, regulations remain tight: For example, mutual funds cannot hold cryptocurrencies, including Bitcoin ETFs.
Japanese financial firms remain slow to engage in crypto activities such as custodial services as they tend to steer clear of any activity without explicit approval from regulatory officials, said Masamichi Matsushima, a crypto-asset analyst at Monex Group Inc.
India
Cryptocurrency investors in India are interested in U.S. Bitcoin ETFs. Through a Reserve Bank of India program called the Free Remittance Scheme, investors can remit up to $250,000 a year abroad and use the money to buy foreign securities. Meanwhile, startups are expanding their product offerings, seeing growing investor demand for cryptocurrency derivatives.
That’s a change from last year, when cryptocurrency trading dried up in India after an onerous tax regime was implemented in 2022. The government proposed this as a way to formalize crypto assets, but it had the side effect of making transactions too expensive.
Officials have also recently cracked down on offshore exchanges that are not registered locally, while also promoting their own central bank digital currency. Various pilots are currently underway.
Singapore
With a relatively small population, Singapore is largely an institutional market for cryptocurrency investors, in part because the central bank has repeatedly warned residents not to trade in cryptocurrencies. Singapore prohibits cryptocurrency companies from conducting public advertising, an important tool for such entities to promote their products.
But for institutions, Singapore encourages the use of blockchain for tokenization, cross-border remittances, digital bonds and similar initiatives, which generally speed up payments and reduce costs. The Guardian Program implemented by the Monetary Authority of Singapore is one of these initiatives.
Taiwan
In Taiwan, the new US Bitcoin ETF is a major topic of discussion. Cryptocurrency investors were initially able to purchase the Bitcoin ETF through sub-brokerage services provided by brokers, but then in January, Taiwan’s Financial Supervisory Commission instructed domestic brokers to stop accepting customer orders in order to “protect investors.”
Taiwan’s Financial Services Commission later added that it would consult with brokers and could reopen Bitcoin ETF services in April, but this has not yet happened.
Thailand
The 2022 cryptocurrency price crash hit retail investors in Thailand hard, especially with the collapse of local exchange Zipmex. This prompted regulators to tighten oversight. But the government of Prime Minister Srettha Thavisin, who took office late last year, has made a big push to make Thailand a Southeast Asian digital asset trading hub. He exempted some taxes on cryptocurrency and digital asset trading, and traders are now allowed to invest in overseas cryptocurrency ETFs.
In addition, competition in Thailand’s cryptocurrency trading business is heating up with the entry of Binance and Kasikorn Bank, one of the main local commercial banks. Binance has partnered with Gulf Energy Development Pcl, the country’s largest private power company controlled by Thailand’s second-richest man, to launch a new cryptocurrency exchange. Recently, regulators allowed mutual funds to invest directly in cryptocurrencies for the first time.
Vietnam
Many Web3 games are developed in Vietnam, including Sky Mavis, who developed Axie Infinity. Another game called Sipher also comes from Vietnamese developers.
Giap Van Dai, founder and CEO of Nami Foundation, which provides a cryptocurrency trading platform, said local investors are looking to cryptocurrencies for higher returns.
“Vietnam’s regulations related to cryptocurrencies and blockchain are yet to be established, providing a so-called sandbox for developers, investors and market growth,” he said.
Vietnamese law does not prohibit cryptocurrency-related businesses, but cryptocurrencies are not legal payment tools. Issuing cryptocurrencies and using them as payment tools technically violates the law. The central bank warned that there are risks in trading cryptocurrencies and that victims of scams will not be protected by law. Earlier this year, the government asked the Ministry of Finance to complete the legal framework for cryptocurrencies by May next year to combat money laundering.
