The Secret behind Asia’s Global Blockchain Leadership
The dramatic rise of awareness and adoption of cryptocurrencies caused the finance industry to sit up and take notice. Initially, regulators and industry bodies were slow to take action and set guidelines, with their view being that the industry was too immature for them to truly know their stance. Examining different nations’ approaches to regulating this industry unsurprisingly gives you an insight into which countries are leading in the space and which see the most potential.
Across Europe, we’ve seen a widespread fear of risk and little in the way of concrete regulation. The Basel Committee on Banking Supervision, which describes itself as the primary global standard-setter for the regulation of banks, said in a statement just last week that cryptoassets and the trading platforms offering them could “increase risks” for lenders. The UK too has been slow to share any concrete comments on the crypto industry, the FCA’s recent consumer survey did “not suggest a large impact on wider society”. A step in the right direction, but still comes a years after large US and UK banks decided to take regulation into their own hands and ban customers from using their credit cards to buy Bitcoin.
Lloyd’s' decision to stop the use of credit cards to buy Bitcoin in February 2018 set a new precedent in banking. Before this, there were only two things you couldn't use a credit card for - paying off debt - such as making a mortgage payment - or anything illegal. You can use a credit card to gamble - although that will be treated as a cash loan, with interest charges of up to 30% a year, and additional fees on top. But Lloyd's had decided that Bitcoin and other cryptocurrencies represent a bigger risk than gambling, and were choosing to make these decisions while the banking trade organisation UK Finance had not released any guidance on the matter.
In countries in the east such as Japan and Singapore, the regulators had taken a different approach. Towards the end of the summer, the Yen accounted for 47 percent of the total bitcoin market, beating out the U.S. dollar which maintained approximately 44 percent of the market share. This volume proved attractive to hackers, and on September 14th, a security breach meant that $59 million worth of cryptocurrencies were reportedly stolen from Japanese cryptocurrency exchange Zaif. Instead of choosing to block Japan’s burgeoning cryptocurrency industry due to fears around risk, the regulators chose to take action and provide new legislation aiming to pave the way for a more supportive and secure regulatory backdrop to ensure that consumers are protected from exchange hacks.
While news of government intervention made headlines, private companies in Japan were also working hard with regulators to improve the crypto market. Thanks to the regulatory framework provided, a growing number of Japanese businesses now accept cryptocurrencies as payment, and with many startups in Japan’s thriving tech scene, it’s fair to guess that continued investment will inspire continued innovation.
I first visited Japan in the Summer of 2018, when enthusiasm for the cryptocurrency industry was at its peak; industry leaders were being flown halfway across the world to attend events, and new companies were being created every day. During my latest visit last month, it is clear to see that the mood there is different now; the noise around crypto is reduced, attendees at events are cut by four. The leading companies here see this shakedown as an opportunity - thanks to the supportive regulatory system they see longevity in these markets. And this is the cryptocurrency industry’s greatest challenge - time. Clarity on the future of the industry is hidden, while we wait for the market to evolve.
Bill Gates famously said: “Most people overestimate what they can do in one year and underestimate what they can do in ten years.” 2017 was the year when the industry overestimated what could be done, we are seeing certain markets underestimating the true potential of the crypto economy over the longer term. Asia was already a leader in this space, and its ability to see the potential in the industry will mean that it will not only keep, but dramatically increase its market share in the years to come.