Asia's Crypto: Regulation Tightens, Innovation Grows
Asian countries are tightening crypto regulations while promoting innovation, with significant changes in India, Japan, Hong Kong, Thailand, and Indonesia.
The cryptocurrency landscape in Asia is undergoing significant transformations as countries in the region implement stricter regulations while fostering innovation. Recent developments in India, Thailand, Japan, Hong Kong, and Indonesia reflect a collective effort to create a more structured approach to digital assets, with each country navigating its unique challenges and opportunities.
India's Directorate General of GST Intelligence (DCGI) has issued a notice demanding $86 million in Goods and Services Tax (GST) from Binance. The DCGI claims that Binance, identified as an online information database access or retrieval (OIDAR) service provider, failed to pay the required taxes. Reports indicate Binance earned at least $476 million in fees from Indian users trading digital assets, which were credited to Nest Services Limited, a Seychelles-based Binance Group Company.
Japan is adopting a cautious stance on approving crypto-linked exchange-traded funds (ETFs). Hideki Ito, the commissioner of Japan’s Financial Services Agency (FSA), highlights the importance of prioritizing investor protection over rapid market expansion. This approach could delay crypto ETFs' launch, even as major firms like SBI Holdings prepare for market entry. In late July, SBI Holdings partnered with Franklin Templeton, a U.S. investment firm, to establish a digital asset management company, aiming to launch crypto ETF products pending FSA approval. Sota Watanabe, CEO of Startale and Founder of Astar Foundation, believes that approving Bitcoin ETFs could prompt necessary discussions on crypto tax reform in Japan.
Hong Kong’s venture into crypto ETFs has seen mixed outcomes, with recent data showing both inflows and outflows. On August 9, the spot Bitcoin ETF in Hong Kong recorded an inflow of 69.94 BTC, the first since July 19. Despite this, the total net assets of these ETFs have dropped significantly from $342.16 million on July 29 to $271.21 million by August 9. Ethereum-based ETFs have shown similar volatility. Gary Tiu, Executive Director and Head of Regulatory Affairs at OSL, a leading Hong Kong crypto exchange, identified systemic issues within the market hindering ETF growth. Tiu pointed out the complex market structure, with many intermediaries like brokers and banks, as a factor challenging ETFs' growth as financial instruments.
Indonesia is taking a structured approach to regulating digital assets with a roadmap from 2024 to 2028, released by the Financial Services Authority (OJK). The plan outlines phased regulatory frameworks and industry standards aimed at strengthening Indonesia’s position in the crypto industry. The roadmap's initial phase focuses on establishing robust regulatory foundations, followed by industry growth and long-term sustainability. The OJK has introduced a regulatory sandbox to support innovation, allowing businesses to test new technologies in a controlled environment while ensuring compliance. Additionally, Indonesia is tightening controls on crypto marketing, particularly by influencers. New rules restrict promotions to official channels, sparking debate within the crypto community. Some influencers worry excessive regulation could stifle innovation, but the OJK argues these measures are necessary to protect investors and ensure market integrity.
Thailand is advancing in the crypto sector with its Digital Asset Regulatory Sandbox, led by the Securities and Exchange Commission of Thailand (SEC Thailand). This initiative provides a controlled environment for testing and developing digital asset services. By offering a structured framework, the sandbox allows businesses to innovate while adhering to regulatory guidelines, fostering a secure and dynamic market. Participants, including exchanges, brokers, and fund managers, must maintain transparency and robust operational systems.
The SEC Thailand has established a framework for continuous reporting and risk management, ensuring innovation does not compromise investor protection. The sandbox is expected to play a crucial role in expanding digital asset services available to investors in Thailand. Businesses can apply starting August 9, with SEC Thailand evaluating submissions within 60 days. Approved participants will have one year to conduct their tests, with the possibility of extending or concluding early, depending on the outcomes.
