Asia’s crypto industry remains confident despite Chinese regulatory restrictions

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TOKYO / HONG KONG – After a period of explosive growth, the tide seems to be turning for bitcoin and other cryptocurrencies as financial authorities step up oversight of the digital asset market.

An order by the People’s Bank of China, the central bank, last week, asking major financial institutions to stop cryptocurrency transactions, lowered the price of bitcoin, which peaked at $ 64,289 in April, below $ 30,000 for the first time since January. And in late June, the UK banned Binance, the world’s largest cryptocurrency exchange in terms of trading volume, from offering regulated services, including trading in crypto derivatives.

Meanwhile, in South Korea, exchanges are taking it upon themselves to stop trading alternative cryptocurrencies known as “kimchi coins” as new financial rules come into effect.

But some exchanges and traders welcome stricter regulations to eliminate bad actors, fraud and money laundering, and to help bring crypto assets into the mainstream. Others are skeptical that the move signals a broader crackdown: “It’s hard to believe that this entire global asset class is at the mercy of a single government intervention,” analysts wrote Tuesday. Arca, an investment specialist in digital assets, in a note from China. action.

Indeed, the two Asian jurisdictions considered to be the most progressive on digital currencies have not changed their position. Despite a warning last week that Binance was allowing Japanese customers to use its exchange without a local license, the Financial Services Agency of Japan has not tightened the rules on crypto assets.

Neither does Singapore, whose central bank chairman warned in April that cryptocurrencies “are not suitable for retail investors” due to their volatility.

“I would be very surprised if Japan changed their tone. They are generally in favor of crypto because Japan has lost its crown in Asia as the undisputed financial capital and wants to regain its status,” said Adam Farthing, chief risk officer for B2C2 Japan. , an over-the-counter trader. Such competition can prevent blanket bans on cryptocurrencies, as a bill under consideration by the Indian parliament seeks to do.

“As we begin to see the integration of cryptocurrencies into the larger classical financial infrastructure, we are going to reach a point where governments feel there has to be some sort of symbiotic relationship,” said Scott Stornetta, one of the inventors of blockchain technology.

“There has to be a long-term trend towards cooperation and proper regulation,” Stornetta added.

Many countries, including Japan and Singapore, are still trying to favor digital currencies. Even as it tackles “mining,” the power-hungry digital code cracking that produces new bitcoins, China has distributed around 200 million digital yuan under pilot programs.

“It’s not that easy to unplug and get rid of it,” said John Kirch, senior vice president of Uppsala Security, which helps investigate cybercrimes involving cryptocurrencies. “If you don’t have a digital currency, how are you going to be competitive in the world of tomorrow? “

Binance says the UK ban has no impact on its global strategy. “What we can say is that we are taking a collaborative approach in working with regulators around the world, and we take our compliance obligations very seriously,” Binance said in a statement.

A spokesperson added that the company’s platform facilitated cybercrime investigations, blocked users in restricted areas with know-your-customer and anti-money laundering tools, and built its team. International Compliance Officer and its Advisory Board.

Compliance has also become a major cost for some market players. Babel Finance, a Hong Kong-based crypto financial services company, said it would invest $ 40 million – almost all the funds it got in a recent fundraiser – in improving internal controls and legal expertise.

“Crypto companies that recognize the importance and role of compliance, while being able to take the necessary actions in accordance with regional regulations, will have the best chance of long-term success,” said Flex Yang, CEO of Babel Finance.

China’s closure of at least 26 bitcoin mining centers in hydropower-rich Sichuan province last month could generate positive returns for the industry, Arca suggested.

“Most market participants agree that the long-term results of the potential exodus from China are in fact positive, from a redistribution of chopping power globally to more eco-friendly mining facilities. ESG, “the analysts wrote, referring to the computing power of a mining operation.

In Hong Kong, lawmakers will consider a bill in the next legislative session that would require all exchanges operating in the city to be licensed. The government has suggested that only wealthy professional investors who have a portfolio of at least HK $ 8 million ($ 1 million) will be allowed to trade cryptocurrencies.

FTX, a Hong Kong-based crypto derivatives exchange, said if the city’s ban on retail investors also applied to citizens of other jurisdictions, the company would leave Hong Kong.

“What’s important is that we’re in the right place for the business,” FTX founder Sam Bankman-Fried told Nikkei Asia in a recent interview. He said he had not yet decided to move.

Additional reporting by Jack Stone Truitt in New York

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