- The U.S. regulatory landscape is becoming more and more complicated
- Asia provides support and certainty
- The number of exchanges in Asia increases
After the U.S. Security and Exchange Commission (SEC) has pulled a trigger on Binance and Coinbase, two biggest crypto exchanges, Asia has great potential for developing in the spheres of blockchain and digital assets. Although the U.S. accounts for a large share of the global economy, the Commission’s actions will likely force crypto companies to move abroad, as Asian countries offer more incentives and regulatory clarity for them to operate and flourish.
The U.S. regulatory landscape is becoming more and more complicated
Several months earlier, it seemed that U.S. regulatory authorities were still unsure about their attitude to crypto. However, by now, it has become obvious that they would more likely destroy crypto companies than risk undermining investor protection.
This can be seen from the comments of Gary Gensler, SEC Chair who said, “The crypto markets are undermining that trust, and I would say this: It undermines our overall capital markets.” He also commented, “Look, we don’t need more digital currency. We already have digital currency. It’s called the U.S. dollar. It’s called the euro, or it’s called the yen; they’re all digital right now. We already have digital investments.”
The competition between different regulatory authorities only adds fuel to the fire. As the Congress is still in the process of preparing its new legislation, it gets more and more difficult for crypto companies to operate in the United States due to the lack of unambiguous rules, as emphasized by Brian Armstrong, the CEO of cryptocurrency platform Coinbase.
The SEC’s actions will inevitably result in crypto companies running away to crypto-friendly jurisdictions. Over a 24-hour-period after the SEC filed a lawsuit against Coinbase, its net outflows totaled 600 million U.S. dollars. Coinbase has also announced that it has received a license to operate in Bermuda and plans to set up a crypto trading platform targeting regions outside of the United States. While the exchange said that it will continue to focus its efforts on U.S. markets, it is already exploring opportunities overseas.
Such an enforcement approach prevents traditional firms from joining the industry until the regulation becomes clearer. As a result, this hinders mass adoption of crypto. Because of that crypto companies are looking for other places to conduct their business.
Asia provides support and certainty
Unlike the United States, some Asian countries recognize the advantages of crypto and its potential from the point of view of economic competitiveness. For example, Hong Kong has supported crypto and intends to use its potential to promote economic growth. This year, Hong Kong stated that it would start accepting license applications from crypto companies and exchanges from June 1. By March, over 80 crypto companies expressed their wish to set up an office in Hong Kong.
Asian regulatory authorities do not simply welcome crypto but also support the industry by promoting improved integration with traditional finances. The Hong Kong Securities and Futures Commission (SFC) has allowed retail trading of cryptocurrencies. Now, retail investors can trade Bitcoin and Ethereum. The Hong Kong Monetary Authority even pressures the largest banks to provide services to crypto clients. In a circular to banks on April 27, the HKMA wrote, “The extent of CDD [customer due diligence] measures should not create undue burden on customers… particularly for those setting up an office in Hong Kong to look for the opportunities here.”
The number of exchanges in Asia increases
The crypto share of the United States is already starting to decrease after the recent SEC’s moves. It means that the American market is not the only option for the crypto community. Startups will soon start moving to other jurisdictions in order to achieve balance. So far, the country still dominates the market in terms of its share, but it decreased from 85% in the beginning of 2023 to 70% on the next day after the SEC’s lawsuits.
Here are several examples of how users start shifting to Asian crypto markets.
- After the collapse of FTX in November 2022, Thai investors moved to local crypto exchanges, including Bitkub, which currently amounts to 75% of crypto trade in the country as other exchange simply cannot keep up.
- Recently, Binance and Gulf Innova, its partner in Thailand, have obtained digital asset operator licenses in the country to set up a new exchange.
- Circle, the stablecoin issuer, also obtained a major payment institution license in Singapore.
According to Glassnode on-chain data provided by BeInCrypto, the supply of Bitcoin held by U.S. companies has decreased by 11% over the past year. At the same time, Asian entities hold almost 10% more Bitcoin than a year ago.
