If the first half of this year was characterized by the U.S. Securities and Exchange Commission (SEC) imposing fines on cryptocurrency exchanges, warning of legal action, and then taking action, the second half began in Asia with a slew of jurisdictions introducing new rules for exchanges – without lawsuits.
Some Asian countries, such as Singapore and Thailand, appear to be taking a similar stance to the SEC in regards to certain products offered by exchanges, but the approach in Asia thus far seems to be about creating clarity, in contrast to North America.
John Rizzo, Senior Vice President of Public Affairs at Clyde Group, a Washington-based public relations firm, noted in email comments that the U.S. is in a state of political and regulatory battle over how to manage the crypto industry. He added, “Congress appears to be making progress on regulatory frameworks for stablecoins and crypto market structure, but the SEC seems to be determined to essentially ban crypto.”
Zennon Kapron, Founder of Asia-based fintech consultancy Kapronasia, concurred that crypto was “always on shaky ground in the U.S.” due to the lack of clear regulations. Kapron added, “For this reason, many firms have focused on overseas markets to begin with.” Nick Ruck, Chief Operations Officer at blockchain infrastructure platform ContentFi Labs, shared the same view, saying that “The largest issue with the crypto industry in the US stems from regulators trying to apply a century-old framework to new innovations in financial technology.”
Countries in Asia are drawing in crypto companies by providing clarity in their rules and being open to innovation, according to Ruck. South Korea is one of them; on the final day of June, its National Assembly approved a bill focusing on protecting the interests of cryptocurrency investors.
Singapore and Thailand then followed with rules that included forbidding crypto staking services, though Singapore authorities added that the product is still being studied. Hong Kong also introduced stricter crypto trading regulations on June 1 and is one of the jurisdictions in Asia vying to become a leading digital asset center.
The new crypto rules in Asia are tough, come with penalties for violations, and will require restructuring by some crypto businesses. However, Lasanka Perera, Chief Executive of crypto exchange Independent Reserve Singapore, welcomes the new regulations, saying that “This not only underscores the regulator’s conviction to protect investors but will also undoubtedly inspire greater confidence from the corporate and institutional sectors.” South Korea’s Virtual Asset User Protection Act won’t come into effect as law for a year, but it is the country’s first step to build a digital asset legal framework.
John Cahill, an attorney at the law firm Wilson Elser’s New York office, wrote in a Forkast commentary this month that Congress has conducted extensive discussions on digital assets. Cahill noted that recent hearings with the chairs of the SEC and the Commodity Futures Trading Commission have exposed the diverse opinions on cryptocurrencies and the legislative gridlock. He added, “More than 30 proposed bills related to digital assets have been filed to Congress, but to date, none has advanced and Congress has yet to pass any substantial legislation in this area.”
Blockstation CEO Jai Waterman stated that the SEC is simply doing its job in protecting investors. He pointed out that when the crypto market reached a market cap of around a trillion dollars, regulators reacted with enforcement measures, adding, “Regulators are against unlicensed brokers dealing in securities, and they are against unregistered securities being offered to the public. What the industry calls cryptocurrency, is mostly securities, and it’s the regulator’s fiduciary responsibility to protect investors.”
Waterman went on to say that if investors were asked if they would rather send money to Binance to trade bitcoin or to Merrill Lynch to do the same, most would choose the latter because established brokerages have the credibility, governance, and proven infrastructure.
A spokesperson for Circle, the issuer of the USDC stablecoin, noted that the SEC’s lawsuits are “long-expected actions” and Congress is now “very seriously considering stablecoin and digital asset market regulation.” The spokesperson added, “We now effectively have the three branches of the U.S. government clearly signaling that they want to see legislation.”
