With the recent approval and launch of spot cryptocurrency exchange traded funds (ETFs) in both North America and Hong Kong, it seems that traditional finance in both the west and east are eager to accept blockchain as a potential new financial growth vector. While governments and financial institutions around the world have historically been quite hesitant to embrace crypto, once one dam breaks the rest often soon follow. This is evidenced by the fact that leading funds like BlackRock and Fidelity have applied for Ethereum spot ETFs following the success and earnings of their Bitcoin spot ETFs. Canada was actually the first country to approve spot Bitcoin ETFs, leading to greater activity in North America. Much fanfare was also roused from Hong Kong Bitcoin spot ETFs, although total capital inflows were just a fraction of the U.S.-based ETFs. Therefore, the most logical question to ask is what countries may be next to demonstrate significant regulatory shifts or cryptocurrency developments such as approving the next substantial ETF.
Singapore - The Crypto Hub of Asia
The cryptocurrency market in Singapore is expected to grow by 8.79% from 2024 to 2028, which would result in a market volume of $479.5 million by 2028 within just the small city-state. Crypto is already being introduced to a variety of industries.
In the finance and banking sector, Singapore has been at the forefront of adopting blockchain technology, leading to significant transformations in areas such as cross-border payments, trade finance, digital identity verification, and regulatory compliance. For example, blockchain-based platforms like RippleNet have revolutionized cross-border transactions by offering a fast and cost-effective alternative, eliminating the need for intermediaries and thereby reducing transaction times. In trade finance, blockchain solutions like TradeTrust enhance transparency and security. They provide secure documentation and reduce fraud risks through immutable records.
The real estate sector in Singapore is integrating blockchain technology to streamline processes and enhance transparency. By automating tasks and ensuring accurate property ownership records, blockchain simplifies property transactions. For example, Averspace utilizes blockchain to facilitate the smooth renting and selling of properties. Similarly, Fraxtor serves as a digital platform connecting investors with real estate investment opportunities. The use of blockchain in land registries boosts transparency and reduces the risk of fraud in property transactions.
Source: Webisoft
Recent Crypto Regulations
As of May 2024, Singapore has seen several significant developments and regulatory changes in the cryptocurrency sector:
- Licensing Requirements for Custodial Services: The Monetary Authority of Singapore (MAS) has expanded its regulatory scope to include custodial services, requiring these services to meet new licensing requirements. This move is part of a broader effort to ensure that cryptocurrency-related activities, particularly those involving the storage of digital assets, adhere to high standards of security and transparency.
- Tighter Rules for Retail Customers: New rules are being introduced to restrict crypto service providers from accepting payments through locally issued credit cards. The MAS is also focused on preventing speculative investments by retail customers and has proposed additional safeguards and disclosures to protect them.
- International Cooperation and Oversight: The proposed Financial Institutions (Miscellaneous Amendments) Bill 2024 aims to grant the MAS expanded powers to regulate unregulated business activities, such as Bitcoin futures and payment token derivatives. This includes the authority to issue directives and enforce standards to mitigate risks associated with these products.
Australia - Crypto Curious and Rising
Australians have shown significant interest in cryptocurrencies, with Roy Morgan research indicating that over one million Australians now own at least one cryptocurrency. Additionally, the Australian Taxation Office (ATO) has noted that approximately 600,000 Australians have reported crypto holdings in their tax returns. Exchange Swyftx estimates that one in four Australians invest in digital assets.
A 2022 survey by the Australian Securities and Investments Commission (ASIC) revealed that crypto was the second most common product type held by Australians, following Australian shares. However, only 20% of cryptocurrency owners considered their investment approach to be "risk-taking," suggesting a lack of awareness about the inherent risks of this asset class. The largely unregulated and volatile crypto market presents risks to consumers and the future of crypto. The collapse of the exchange FTX and the prevalence of scammers in the decentralized ecosystem have intensified calls for stricter regulations and safeguards.
Source: Cointree
Regulating cryptocurrency has been a long-standing priority for the federal government, but progress has been slow as regulators strive to understand the market and implement controls without hindering innovation. In recent months, Australia has made progress on the regulatory front concerning cryptocurrencies. The federal government has expressed its intention to proceed with legislation to regulate the crypto sector. This effort began in 2023 with the initiation of a 'token mapping' exercise, which is considered a world-first. Token mapping involves categorizing digital assets to determine the appropriate regulatory measures for various types of crypto tokens and NFTs, given their wide range of applications.
Additionally, the government plans to introduce a custody regime for digital assets and establish licensing requirements for crypto exchanges. The Australian federal government has provided clarity on the taxation of crypto assets. When El Salvador became the first country to accept Bitcoin as legal tender in mid-2021, the Australian government quickly clarified that crypto assets held by Australians would be excluded from foreign currency tax arrangements. In the Federal Budget for 2022-23, the government legislated that cryptocurrencies would be treated as investment assets, making them subject to capital gains tax (CGT). This means that investors must now track each transaction—whether they trade, make a purchase, gift, or sell crypto—to determine if they have made a capital gain or loss.
South Korea and Japan
In 2024, Japan has generally seen a progressive stance towards crypto. Prime Minister Fumio Kishida's administration has initiated measures to allow venture capital firms and investment funds to directly hold crypto assets. This move is part of a broader effort to amend Japan’s Industrial Competitiveness Enhancement Act, aimed at integrating digital assets into the investment ecosystem to foster innovation and economic growth. The government is considering regulations for decentralized autonomous organizations (DAOs) and non-fungible tokens (NFTs), and has revised some tax requirements to favor crypto entrepreneurs. These steps are intended to make it easier for Japanese exchanges to list tokens and encourage broader adoption of digital assets.
Similarly, South Korea also saw several notable developments in the blockchain industry. The Korean parliament is actively debating 17 crypto-related proposals aimed at shaping the Digital Asset Basic Act (DABA). This comprehensive legal framework is intended to provide regulatory guidelines for the burgeoning crypto industry in South Korea, focusing on investor protections and fair trading practices. The country is also set to launch a CBDC pilot involving 100,000 citizens in the fourth quarter of 2024. Lastly, South Korean financial institutions are contemplating the approval and launch of spot Bitcoin ETFs to be better aligned with global trends seen in the U.S. and Hong Kong.
European Union
European investors have emerged as key players in the crypto sphere, as evidenced by the fact that Europe ranks as the world's second-largest cryptocurrency market, contributing 17.6% of the global transaction volume. Central, Northern, and Western Europe (CNWE) is the second-largest cryptocurrency economy globally, trailing only North America. Between July 2022 and June 2023, the region accounted for 17.6% of the worldwide transaction volume, as reported by Chainalysis. The introduction of cash-settled Micro Euro-denominated Bitcoin and Ether futures contracts on March 18 is anticipated to further drive the institutionalization of the European crypto market. The euro is the second most traded fiat currency for spot crypto transactions, only behind USD, and is experiencing growing liquidity. This rise in transaction volume in Europe has been significantly influenced by a decline in trading activity in Asia, particularly due to China's ban on crypto trading and mining, as well as restrictions in other regions.
Source: CME Group
Thailand and Taiwan
In 2024, Thailand's SEC introduced new regulations to support the growth of the crypto market while ensuring investor protection. These regulations include the establishment of a framework for token offerings and the introduction of licensing requirements for digital asset businesses. Recent updates in cryptocurrency taxation reflect Thailand's strategic approach to integrating digital currencies into its financial system. Key changes include a 15% capital gains tax on cryptocurrency profits and exemptions from VAT for transactions on authorized exchanges. Additionally, the government offers tax incentives for crypto startups and plans to tax foreign income from crypto investments starting in 2024. Furthermore, the Thai government has classified digital asset businesses as financial institutions under its anti-money laundering laws. This requires these businesses to adhere to stringent reporting and customer screening requirements, aligning with global standards to prevent illicit activities.
Source: Medium
Likewise, Taiwan continues to refine its regulatory framework for crypto. While digital currencies like Bitcoin are not considered legal tender and are viewed as speculative digital commodities, the Financial Supervisory Commission (FSC) has defined security tokens as securities. The FSC issued guidelines requiring crypto exchanges to establish internal control and audit mechanisms, report suspicious transactions, and adhere to know-your-customer (KYC) procedures. Very recently, Binance and the Taiwanese Ministry of Justice have collaborated to address a money laundering case covering roughly $6.2 million. Following this cooperation, the Taiwanese government formally brought charges of money laundering against 9 individuals for fraud and organized crime. This shows that regulatory agencies in Taiwan are open to working closely with crypto platforms to enforce the law, and possibly to incentive economic growth in the future.
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