For blockchain communities, 2021 has been a thrilling and sometimes heartbreaking rollercoaster ride of a year, as governments throughout Asia took action to crack down on — or support — the emerging financial innovations of blockchain technology. From China’s crypto crackdown to Australia’s attempt to regulate itself into a global leader for the crypto industry, governments have taken widely different positions. Here is a short roundup of Forkast.News’ five biggest regulatory stories of the year.
1. China bans cryptocurrency and soft launches the e-CNY
China’s ban on cryptocurrency-related transactions and activities, including those made via exchanges based outside of the country, shook the industry.
The country intensified its crackdown on crypto mining activities as the great exodus from China to Eastern Europe and the U.S. continued. Some of the world’s biggest cryptocurrency exchanges, including Huobi, OKEx, and Binance, were blocked by the country’s internet search engines and social media platforms. Citing a responsibility to “safeguard people’s properties and maintain economic, financial and social order,” Chinese authorities took action against over 380 criminal groups allegedly engaged in misleading promotions and virtual currency money-laundering in the first half of 2021, China’s National Anti-Fraud Center’s data shows.
Despite the authority’s crackdown on crypto, China’s central bank — the People’s Bank of China — has been actively developing its central bank digital currency (CBDC), the e-CNY, for what is expected to be broader adoption at the Beijing Winter Olympics in February.
“China’s CBDC will give users large and small access to a digital ecosystem for global trade, making transacting with China as easy as buying on Amazon or Alibaba,” Richard Turrin, a Shanghai-based fintech consultant who recently published “Cashless: China’s Digital Currency Revolution,” told Forkast.News. “This is a killer feature, a counterplay in a world that is actively looking at ‘decoupling’ from China.”
2. India’s cryptocurrency market on tenterhooks as parliament’s new bill signals a full ban
India’s crypto community has been on tenterhooks as a crypto bill expected to be introduced in the winter session of Parliament has been delayed. According to the description in the parliamentary session’s agenda, the bill aimed to lay the framework for a central bank digital currency while banning all private cryptocurrencies. The news sparked panic selling of cryptocurrencies that tanked Bitcoin and Ethereum prices by nearly 24% the first day after the announcement on Nov. 23. As crypto investors eagerly sought information about the elusive bill, media reported that violators of the crypto ban could face jail and fines up to US$2.65 million.
Some crypto experts believe the fears are overblown and India will not ban all private cryptocurrency, especially after soliciting input from the crypto community. “First, the Parliamentary Standing Committee invited a public consultation, and then our prime minister himself came forward to call for crypto regulations in India,” Nischal Shetty, CEO of crypto exchange WazirX, told Forkast.News in an email in November. “That being said, let’s respectfully wait to find out more about the draft bill to be tabled in the Parliament.”
3. K-pop catches NFT and metaverse fever in South Korea while some crypto exchanges go extinct
Of all the assets developed on the blockchain, none has captured the imagination of the creator class — artists, musicians, influencers, and even athletes and celebrities — as non-fungible tokens (NFTs) have in 2021. Particularly in South Korea, stars of the massively popular K-pop music scene — with an estimated US$10 billion impact on the country’s GDP annually — have led the way into NFTs and the metaverse.
In July, K-pop entertainment agency JYP, which manages TWICE and 2PM, partnered with blockchain company Dunamu to build NFTs using JYP’s content. A top K-pop agency, Cube Entertainment, which manages popular artists and bands such as Jo Kwon, BTOB, PENTAGON, CLC, and (G)I-DLE, formed a joint venture with Animoca Brands in November dedicated to building a music metaverse and issuing NFTs, furthering this enthusiasm in the intersection of emerging technology and pop art.
Amid this wave of creative investment in NFTs, the government has focused regulatory efforts on cryptocurrency. Upon a September deadline of new crypto requirements, half of the country’s 63 crypto exchanges were eliminated for noncompliance. But in a sign of the government’s stamp of approval of sorts, South Korea legislators are debating how to protect investors as well as tax cryptocurrency and NFTs.
A November Financial Services Commission (FSC) report outlined a series of crypto regulatory proposals for the national assembly’s consideration, including mandating virtual asset businesses disclose white paper, token evaluation, legal and business reports, and suggested the virtual asset industry set up a legal association for self-regulation and dispute settlement.
And what to make of reports that a few South Korean officials have left prestigious government jobs to bet their careers on the crypto market? A South Korean news outlet reported an FSC deputy director tendered his resignation in December to work for cryptocurrency exchange Bithumb. Park Sung-jun, head of the blockchain research center at Dongguk University, told Forkast.News that “officials at the FSC have opportunities to attain insight on the current situation and the future of the virtual asset industry, so they are taking their chances by making the move.”
See related article: NFTs and the music industry: Token gesture or transformative technology? | Part 1
4. Australia seeks payment sector transformation
In Australia, the government seeks to lead the way and encourages industry to follow. Its October, the Australia as a Technology and Financial Centre report aimed to improve the nation’s competitiveness in the global crypto industry with 12 regulatory recommendations. Following that report, in December the country’s treasurer Josh Frydenberg said the treasury is considering requiring domestic crypto exchanges to hold digital assets for local clients on-shore, introduce licensing regimes for exchanges, and reveal further details on the development of a central bank digital currency (CBDC) in the country. Frydenberg said these are the most significant financial regulatory reforms in 25 years.
“The call for regulation from the [Senate] report has set some wheels in motion, and it seems the treasury team are the ones that are going to be picking it up,” Jonathon Miller, Australian managing director of crypto exchange Kraken, told Forkast.News. “My hope here is that the way they look at this is as an emerging industry, not as an established one. Whether or not the custody regime maps to an existing asset class or not, it’s impossible to tell. But I would say that crypto remains a very unique asset class and needs probably its own unique treatment.”
5. In the wake of China’s crypto crackdown, Singapore licenses a crypto exchange
As one of the world’s major financial centers, Singapore has walked a fine line to encourage the fintech sector. Following China’s crackdown on cryptocurrency this year, many crypto enthusiasts and businesses turned their attention to the island city-state.
“We will see an increasing exodus of Chinese crypto entrepreneurs, and I believe it will lead to a diffusion of crypto technology in Southeast Asia and accelerate the rise of Southeast Asia as a hotbed of crypto innovation,” Lily Z. King, COO of a Singapore-based crypto custody and asset management platform, wrote in a Forkast.News September op-ed.
The same month, Singapore-based fintech company FOMO Pay became the first of 170 applicants to be approved for a license from the Monetary Authority of Singapore (MAS) to provide digital payment token service, which applies to transactions involving cryptocurrencies. The company says the license helps expand its suite of payment services for its clients in both Singapore and in the region.
In a Q&A interview with Forkast.News, FOMO CEO Louis Liu said: “The regulator has taken a practical risk-based approach to clearly break down the activities that need to be regulated and compliance is a top priority. But the [Monetary Authority of Singapore] will guide you. They are open to discussion and were like a partner or collaboration.”
Just last month, Singapore-based cryptocurrency trading platform Coinhako received in-principle approval from the MAS for a digital payment token service license, making it the first local native cryptocurrency exchange to announce that it is close to being granted the license. In the meanwhile, Huobi Group, the operator of China’s largest cryptocurrency exchange, has decided to set up a regional hub in Singapore, marking another moving forward step that Singapore conducts aimed to create a friendly crypto market.
Meanwhile, the Singapore arm of Binance, the world’s largest crypto exchange, withdrew its application to the MAS for a license in December, and will wind down operations by February 2022. “We always put our users first, so our decision to close Binance.sg was not taken lightly,” Richard Teng, CEO of Binance Singapore (Binance.sg), said in a statement.
Binance had already ceased support for crypto trading on its main platform for Singapore users after MAS in September added Binance.com to its Investor Alert List, flagging entities that may have given the public the impression they were licensed.
Given that the regulatory environment is still unclear in most of Asia, expect more attempts by governments in 2022 to get clarity on their fintech policies.