Who Will Win the Race to be the “Crypto Valley of Asia”?

Phuong Nguyen is Co-Founder and CTO of Remitano, a peer to peer crypto exchange which aims to create an open financial system to the emerging and developing markets. Phuong has years of experience in the cryptocurrency field and his current projects focus on blockchain and cryptocurrencies in the Asian markets.

Operators within Asian crypto-economies are at a crossroads. It’s a time where some firms are largely staying away from the cryptocurrency sector, which they perceive lacks investor protections, while others are pumping investment into blockchain hubs, with the hopes of becoming the “Crypto Valley of Asia.”

Despite this love-hate relationship with crypto, South East Asia in particular has seen a flurry of crypto activity. Regulators and policymakers in this region are easing up on rules, and a series of new projects to lure fintech investment have just been unveiled.

The race to claim the title of Asia’s crypto valley is gaining momentum, with new entrants such as the Philippines and Thailand clipping at the heels of crypto-friendly nations: Japan, Vietnam and Singapore. It’s time to place your bets.

A top-down approach

The latest country sprinting out of the blocks is The Philippines. In August, the government announced the launch of a new $100 million blockchain and crypto hub set to be built at Philippines’ Cagayan Special Economic Zone and Freeport in the North of the country. The crypto hub is sought to model Zug in Switzerland, the birthplace of Ethereum, and has already secured commitments from 25 tech companies.

The Filipino government’s initiative reflects a top-down approach that perhaps offers the quickest route towards mass adoption among consumers in the near future. Not only will it spread awareness and help educate the public, but it also facilitates and integrates deeper participation from dominant players in the corporate world by providing a dedicated space with infrastructure support for fintech and blockchain development.

South Korea has similar hopes for a blockchain crypto hub on Jeju island. The island’s governor, Won Hee-ryong, expressed a desire earlier this year to designate the area as a “special zone for cryptocurrencies and blockchain businesses.” The South Korean government have set plans to invest roughly $4 billion in 2019 to develop pilot projects and a platform economy built on data analytics.

The Singapore government has also been delving into crypto advancements. In October, the island-city brought in Binance, one of the largest cryptocurrency exchanges in the world.

Cracking the regulation code

As one of the early adopters of bitcoin, Japan is out in front of its South East Asian neighbours in terms of easing regulations and becoming a crypto haven for companies. Cryptocurrencies are legal tender in Japan, and the country also holds one of the world’s first self-regulatory body for crypto exchanges.

Sensible regulations are a necessary ingredient for the quickest and safest adoption of cryptocurrencies. It creates a healthier environment for businesses to thrive while discouraging illegitimate entities to profit maliciously. Regulations are likely to succeed if they are loose at first, to encourage innovation, but over time tightened to reduce risks. Therefore, countries who are quick to crack this will have a clear shot at winning the race.

To close the gap with Japan, a number of countries in South East Asia have been busy easing regulations to attract fintech firms from abroad.

Since August, local banks in Thailand are allowed to invest in crypto, run crypto-related businesses, and issue digital tokens through subsidiaries. This is something of an about-face, as just in February, the Bank of Thailand ordered all of the country’s local banks to cease all crypto-related dealings.

Just last month, Malaysia’s finance minister stated that any entity wishing to issue cryptocurrency must defer to the country's central bank. And India’s financial committee is reportedly set to present a long-awaited draft bill on crypto regulation in December.

What will set these countries apart in the race to establish itself as the crypto valley of Asia will be finding the balance in the roll out of these regulations. Having clear regulations, such as in Singapore, means governments can pave the path to collecting taxes from cryptocurrency activity.

And yet finding the line between “supporting” and “suppressing” is proving difficult.

If regulation barriers are high, then only established institutions are able to conform. This reduces innovation, but at the same time, it guarantees a safeguard for those using or investing in cryptocurrencies. If the barrier is low, innovation is stymied, but the risk in using crypto currencies is higher. Countries who find this balance will be able to position themselves at the forefront of crypto performance in Asia.

Predictions

Despite the recent attention that the Philippines, Thailand, and South Korea have been receiving in the cryptocurrency space, if one had to place a bet on the first “Crypto Valley of Asia” it would have to be Japan.

The yen boasts the second largest share of global bitcoin trading (after USD), with the yen at one time representing 58% of the market.

And, while China has imposed hostile regulations, the door is open for investors and traders to enter Japan’s considerably welcoming crypto nation.

Two things that could hold Japan back are its inclusive nature, as well as its language barriers.

Countries that are able to quickly regulate crypto in a sensible way and legally recognize cryptos as valid currency may well usurp Japan’s head start to become the de facto “Crypto Valley of Asia.”

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BitMEX Slammed as Roubini Raises the Stakes in War Against Crypto

Neil Dennis

Every new concept has its critics and there's none so vehemently opposed to cryptocurrencies as New York University academic Nouriel Roubini, who has just taken his most vicious swipe yet at the emerging asset class.

In an essay entitled "The Great Crypto Heist", published this week on the website Project Syndicate, the NYU Stern Business School professor accuses financial regulators of "being asleep at the wheel" while an army of unregulated exchanges, propagandists and scammers commit "rampant fraud and abuse".

He singles out crypto-derivatives exchange BitMEX as being a particular threat to retail investors. Roubini clashed earlier this month with Arthur Hayes, the chief executive of BitMEX.

Regulation

But first, the professor explains why the sector needs to be more closely monitored. The broader financial sector came under increased regulatory scrutiny following the 2008 financial crisis, to protect investors and society. 

The regulatory regime does not capture cryptocurrencies, however, which are launched and traded outside the domain of official financial oversight, he says.

The result is that crypto land has become an unregulated casino, where unchecked criminality runs riot.

BitMEX

He rounds on BitMEX, registered in the Seychelles, which offers highly-leveraged bets on the rises and falls of cryptoassets: products more broadly known as derivatives.

These investment products have come under the microscope of regulators in many countries. The UK's Financial Conduct Authority would like to ban the sale of cryptoasset derivatives and exchange-traded notes to retail customers, saying they are too difficult to value and are prone to extreme price movements due to the volatile moves of the underlying cryptoassets.

Other global regulators have made moves to reduce the amount of leverage offered by crypto-derivatives exchanges. Roubini points out that with a 100-1 leverage, even a 1% price move in the underlying assets could trigger a margin call that wipes out the investor's entire account and leave them owing the exchange.

Hayes, boasted openly that the BitMEX business model involves peddling to 'degenerate gamblers' (meaning clueless retail investors) crypto derivatives with 100-to-one leverage.

BitMEX aslo runs a proprietary trading desk - an internal, for-profit desk that trades cryptocurrencies with its own money - that has been accused of front-running its own clients, Roubini asserts. He adds:

Hayes has denied this, but because BitMEX is totally unregulated, there are no independent audits of its accounts, and thus no way of knowing what happens behind the scenes.

Perhaps his most grand accusation in the essay, however, is that exchange is being used for criminal activity:

BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions.

Tiff in Taipei

Roubini accused Hayes this month of holding back the broadcast of a video recorded of their clash at conference in Taipei - to which Hayes had secured exclusive right to.

In the essay, he continues this accusation, saying:

I suppose this is par for the course among crypto scammers, but it is ironic that someone who claims to represent the 'resistance' against censorship has become the father of all censors now that his con has been exposed.

Crypto Cancer Metastasized

In his final dig at the industry, Roubini says crypto trading has created a multi-billion dollar industry that does not just include the exchanges, but also "propagandists posing as journalists, opportunists talking up their own books and lobbyists seeking regulatory exemptions.

It is time global regulatory bodies stepped in, he concludes:

So far, regulators have been asleep at the wheel as the crypto cancer has metastasized. At a minimum, Hayes and all the others overseeing similar rackets from offshore safe havens should be investigated, before millions more retail investors get scammed into financial ruin.

So far, Hayes appears to have remained silent following the article's publication. No activity on his Twitter account. But the ball is now firmly in his court as the war of words heats up.