Hong Kong Leads Asia’s Changing Crypto Regulatory Landscape

Beyond the enthusiasm portrayed by the community in anticipating approval of spot Bitcoin exchange-traded funds (ETFs) in the US, Asia realised a significant milestone in the crypto regulatory landscape. Among the notable changes was the crypto-friendly stance as various jurisdictions eye regulatory clarity.

Hong Kong Rise to a Global Web3 Hub

Hong Kong is leading in delivering a crypto-friendly attribute in Asia facilitated by the crypto-licensing regime unveiled in mid-2023. The licensing regime targeted providing clarity for the parties executing retail trading services, which was allowed only for the licensed exchanges, then HashKey and OSL. 

The administrative region saw the Securities and Futures Commission (SFC) update its policy on virtual asset-based activities targeting intermediaries. The October update saw SFC broaden the investor range to engage in crypto ETF. 

SFC published a circular last month to ease the city’s oversight of the digital asset tokenisation projects. Also, the recent circular in December affirmed SFC’s openness for bids from parties seeking spot crypto ETFs.  

Financial Services and Treasury Secretary Christopher Hui reiterated the government’s devotion to accelerating Web3 growth during the Fintech Week held in November. 

The Treasury Secretary downplayed the crackdowns imposed towards the JPEX crypto exchange, slowing the march to expand the Web3 market. Hui termed the actions as deserving of the fraudulent scheme. 

Crypto platform VDX chief operating executive Donald Day termed the regulatory regime deployed in Hong Kong as a competitive advantage. He labelled the framework stable and reliable, thus a catalyst to run a compliant crypto asset business. 

Adrian Wang, who heads the crypto asset management firm Metalpha, indicated that Hong Kong surprised investors with its fast catch up to match the balanced regulatory regime in Singapore. He noted that Hong Kong devoted itself to implementing suitable policies to support digital assets operations from October 2022. 

Singapore Affirms Crypto-Friendliness, Attracting Global Crypto Operators

Singapore remains an attractive destination for global companies, mainly drawing established crypto and Web3 space firms. A review of 2023 shows that the city-state shook off the restrictive chains of failed Vault, Holdnaut and Three Arrows Capital Over the last year.

The Monetary Authority of Singapore (MAS) is signalling a proactive input towards regulating crypto firms, particularly by granting Coinbase and Circle licences. The entry of the US-based duo joining Gemini in June affirmed its preparedness for Asia’s untapped growth by expanding Singapore’s workforce above 100 employees.

The preparedness for opportunities in Southeast Asia extends beyond the mainstream companies. Grab behind the rise super-app confirmed integrating Web3 services featuring nonfungible token (NFT) wallets. 

Grab agreed to feature in the pilot study with the Monetary Authority of Singapore, involving testing the usage of tokenised bank deposits, stablecoins, and the central bank’s digital currencies. 

Japan, South Korea and Taiwan Realise Critical Milestone in Crypto Regulation

Asia’s emergence as a titan in the crypto industry hardly relies on Hong Kong and Singapore. Instead, other jurisdictions, including Taiwan, South Korea and Japan, have formulated the relevant regulations crafted by the high-profile crypto hubs. 

In mid-2023, Japan amended the Payment Services Act to factor in stablecoin-specific regulations. The initiative arose from the need to safeguard stablecoin investors learning from the huge loss suffered following TerraUSD’s sudden implosion.  

The pro-stablecoin stance attracted USDC stablecoin issuer Circle to partner with the banking titan SBI Holdings as it eyes an expanded presence in the Asian country. 

South Korea is making pro-crypto moves, with Busan attracting companies to run its digital asset exchange starting mid-2024. The country’s National Pension Service took a bullish investment in acquiring Coinbase shares COIN that cost $19.9 million. The move by the third-ranked fund by assets managed lauded the investment executed in the previous quarter, given the wild rally by Coinbase stock.  

Taiwan has portrayed a progressive trend in formulating crypto-specific regulations mandating permit applications for all crypto platforms. The draft bill empowers regulators to issue cease-to-operate orders for noncompliant crypto companies. 

Taiwan’s financial regulator has repeatedly informed crypto trading platforms to prioritise compliance with the anti-money laundering laws unveiled in July 2021. Recently, the regulator introduced guidelines to help the crypto sector establish self-supervisory rules possible by forming an association.