Asian regulators are leading the way in clarifying cryptocurrency rules, with Hong Kong recently granting licenses for trading platforms under the city’s new digital-asset framework. This move underscores Hong Kong’s ambitions to become a global hub for virtual assets.
Hong Kong implemented its mandatory crypto framework in June, aligning itself with other Asian jurisdictions such as Japan and South Korea, which have also established regulatory frameworks for digital assets. These regulators are striving to strike a balance between protecting investors and creating an attractive environment for crypto firms, learning from the lessons of previous market crashes and bankruptcies.
While Asian regulators are forging ahead, the United States is grappling with a lack of clarity and a turf war between regulatory agencies. In contrast, countries in the European Union and Dubai have already established comprehensive crypto rulebooks, further highlighting the growing divergence in regulatory approaches.
Hong Kong’s digital-asset framework allows licensed crypto exchanges to offer trading services to individual and institutional investors. However, retail investors are restricted to larger coins like Bitcoin and Ether. The framework emphasizes the importance of risk assessment, insurance coverage, and asset custody. Virtual-asset companies have cautiously welcomed the rulebook but have not yet committed significant investments.
Japan, one of the first major economies to introduce stablecoin regulations, expanded its digital-asset rulebook this year with the implementation of its stablecoin law. This move has opened up discussions about issuing stablecoins tied to foreign currencies, such as the US dollar, for global use.
South Korea, on the other hand, approved its first standalone digital-asset bill following a series of scandals that led to a market rout. The legislation defines virtual assets and imposes penalties for various transgressions, including market manipulation and the use of nonpublic information. It grants regulatory oversight to the Financial Services Commission and enables the Bank of Korea to investigate crypto platforms. Insurance coverage, reserve funds, and proper record-keeping are required, with existing capital-markets law applying to tokens classified as securities.
Singapore aims to develop itself as a hub for blockchain applications, particularly the tokenization of traditionally illiquid assets. However, officials in the city-state are also implementing measures to curb retail investor participation in crypto-related activities due to the historical volatility of digital assets. Singapore plans to require crypto exchanges to keep customer assets in a trust and may ban lending and staking for retail investors.
Australia, following a private bill to regulate the digital-asset industry, has signaled its intention to begin consultations on licensing and custody requirements for cryptoasset service providers. Meanwhile, Australian banks have limited access to crypto platforms to mitigate risks associated with scams.
In Indonesia, the collapse of FTX has prompted regulators to revamp their crypto trading framework. As part of the plan, a state-backed crypto exchange will be operational in August, modelled after traditional stock markets. This exchange will separate trading, clearing, and custody while operating under official oversight.
Asian regulators are committed to creating well-governed and productive crypto ecosystems by collaborating with industry players and transparently defining fit-for-purpose rules. These efforts are driven by a desire to protect investors and attract companies while learning from the mistakes of the past. Meanwhile, the US and other jurisdictions are faced with regulatory uncertainties and challenges, highlighting the growing divergence in the global crypto landscape.
