How Asian Countries Are Regulating Crypto

they were responsible for. But that doesn't mean they all take the same approach to managing and preventing crises though. Consider crypto so many different vintages of debacle, so many different countries involved. In late Hong Kong updated its crypto regulations in a way that signal a goal of increasing retail access to the asset class US. Just days later, f t X filed for bankruptcy in nearby Singapore, which

has been tightening regulations after big losses this year. For retail investors, the attitude seems to still be a little bit stricter. Korea, which is still dealing with the aftermath of the collapse of the Terra Luna tokens, is currently focusing on enforcement, and India somewhat uniquely in the region, is using tax policy to attempt to drive behavior. Here with me to talk about how different Asian countries are approaching crypto regulation in the shadow of the ft X

collapse is Bloomberg Senior editor for Crypto, snel Jagtiani. It's going to be less about what's the taxonomyw tokens and how do they operate and how do we figure that out? And it's going to be more about the traditional things. Here's a crypto outfit, Okay, what do we know about it? Where the assets are? They say? Yeah, Neil, welcome back

to the podcast. Thank you, Stacy Murray. You are a senior editor for Crypto based in Sydney and have lived and worked in Asia for a decently long time at this point and have this sort of unique vantage point of being able to see in real time, as it were, how different jurisdictions are trying to figure out what the hell they should do about this crypto asset class. Can you talk a little bit about the differences of opinion. Shall we say that they're emerging between two of the

biggest players in the region on this subject? Sure? Yeah, Currently I'm in Singapore. UM and Singapore a few years ago was an early, if you like, adoptor of the idea that there's something to be said for trying to develop a crypto hub. So they were at the forefront of trying to create an environment that attracts investment and would yield a collection of companies and an investor landscape that gives them a chance to be a hub for Asia.

So they began to pursue that. And then of course we've seen over the past year the route in cryptocurrencies and the way in which investors like the three Hours hedge Funds has blown up. Crypto hedge fund Three Arrows Capital has been ordered into liquidation by importing the British Virgin Islands. We saw the collapse of the terror USD in the lunar ecosystem. Terror u s D and its sister token Luna lost their head to the dollar in

the last few weeks. They had a spectacular meltdowns. And these things buffeted Singapore because three three Hours Capital, the terror USD Lunar ecosystem, they both had links into Singapore, So that huge wipeout and the large numbers of investors who were affected by it lead single bare to become much more cautious about retail speculation and the retail part of the crypto industry. So they've pivoted towards becoming much

harsher in their approach to retail investment. They split between high net worth investors who are given more liberty and the remainder and they're doing this, they say, because they want to ensure that people are appropriately protected from the risk that we've seen through crypto this year. So Singapore, if you like, still wants to become a hub, but a hub that is focused on the productive uses of blockchain technology, which, to be fair, haven't really emerged to

the scale that we might have expected so far. It's still a work in progress, and they don't want the speculative avatars that come along with crypto and cause all kinds of problems. So that's where Singapore is right now. Hong Kong, interestingly, is if you like, going the other way.

That's overly simplistic in some ways, but it's it's pivoting towards an environment where they want to allow retail trading, and it's pivoting towards where they wanted to allow things like exchange traded funds, that retail investors have access to UM. They're even looking at the legal status of smart chain contracts, and they're even looking at tokenized assets and how a regulatory framework would work for tokenized assets. So and all of this came through UM at the end of October.

So all of a sudden, Hong Kong is moved from a voluntary licensing regime that some people viewed as signaling are not very welcoming environment. They moved from that all of a sudden to trying to promote themselves as the pre eminent hub for Asia. So you have these two jurisdictions going on very different tracks right now. And the question is what kind of what kind of a reordering that's going to yield in Asia, And we don't have

the answer yet because it's all happening right now. And in the midst of that, f t X blew up. To add to add to the complications, here's the thing. Before FTX was domiciled in the Bahamas, it was domiciled in Hong Kong, and they left because you know, in the aftermath of the AUS, countries in Asia, notably China, taking this much harsher stance on all things crypto various other jurisdictions, i e. Places like the US, the Bahamas.

Bermuda popped up and we're like, hey, we have great weather over here, Miami fantastic, and they do Nasau beaches outstanding and you know, sort of rolled out the red carpet, although the carpets don't work well in sand, but you get the analogy, rolled out the red carpet for these folks. And you know, sbf FTX, etcetera. Up Sticks moved to

the Bahamas. What does that say about what the regime was in Hong Kong before, right, And it's kind of the same question for Singapore because Three Arrows Capital was also domiciled in Singapore. So you have these two places that had historically different paths now being beset by very similar types of blow ups. Yes, so Sam back when Freed set up in Hong Kong, but then Hong Kong began to introduce a voluntary licensing regime and that's what

they have in place right now. And it's somewhat restrictive if you opt to become licensed, because you cannot offer your service just to retail investors unless they have more than a million dollars of assets to invest so it's it's restricting you to high net worth investors who you would assume have a better understanding of the risks they're taking.

So that, together with the fact that China has imposed basically a year long bound on all things pretty much all things crypto, those two things together gave you the signal. You know, if you if you were a crypto player, you would look at them and think, well, those two things together suggest that Hong Kong isn't the place to be. There was, also, at the same time, so pretty harsh COVID restrictions that lingered in Hong Kong longer than in other places. And you also had um a degree of

political unrest in Hong Kong. So all of those things conspired to not just in crypto, but they conspired to create a brain drain. People wanted to leave Hong Kong. Its status as a for angel center came into question. And it's all of those things that Hong Kong is

now trying to reverse. So yes, f TX set up there and and and left, but in a way they're trying to create a regime that could encourage what FD because it's not past, but other companies of that sort to come back in and and invest and set up in in Hong Kong. And you know, we can talk about this if you like, but it looks like even after fd X that the upper levels of government are still going to stick with this plan. Korea, for you know, several years now, has been a place where there's a

significant retail crypto presence, interest, activity, volumes. It's been the place that you know, various types of DFI protocols sprung up. There is a pretty active developer community among you know, Korean developers who are interested in crypto. What is the

regime there as it relates to regulation. The president who took power in May UM he came in on a platform that was pro crypto UM and that was in the wake of UM, the huge boom in crypto and in Korea, before the before the recent blow up and the recent route in in crypto currencies in Korea, you saw a whole bunch of people create huge bounds of wealth and become billionaires. And they were well known and

famous UM in Korea. And so when you came in, his idea was to bring in a comprehensive framework to regulate the industry, and he was adopting a pro crypto stance. But then of course he came into power and that was in May, and pretty much straight afterwards, Terror Luna blew up. So so so the crypto change, the regime change in in career installed, and we have to work through the fallout of the Kwan situation. Tokuan was the pro genital of the terror Lunar ecosystem. He is apparently

the subject of an Interpol red notice. We're not sure where he is, and there's an arrestaurant for him that's been issued by by the Koreans, So that is we have to resolve all that, and as they're pursuing do Quan and they're also trying to figure out what kind of crypto regime they want, so it's incredibly difficult and complicated, and lawmakers are arguing out exactly how that framework should look like, and it doesn't look like it's going to

be in place anytime soon. So Korea is um to say the least, very vexed by crypto and what to do now. Vexed is truly one of my favorite words. I want to also ask you. We've had our colleagues at Stuggler on the podcast talking about the Indian approach to crypto regulation, which is not exactly to regulated, but use taxes and taxation as a way to either incentivize

or disincentivize certain types of behavior. They've also taken steps to make it more difficult for entities like coin base to use, you know, Indian banks or have access to Indian banks, and what that means in practices. If you are a person in India trying to fund a coin based wallet, the number of hoops you would have to jump through is sufficiently exhausting that you kind of give up halfway through, even if there's nothing technically saying you're

not allowed to do that. Do you think if we were having this conversation sort of six months from now, that we live in a world in which some version of all of these approaches, there's like a middle ground, right, There's like a little sprinkling of tax policy, there's a little sprinkling of different types of registration regimes, there's some consumer protection or are we staring into everybody's going to do completely their own thing, and you know which is

a nightmare for the company's involved. Right, You're you know, how you get regulated in India versus how you get regulated in Korea versus Singapore, versus Hong Kong versus China. What are you gonna do? UM. If we look at India first, I would hesitate to extrapolate very much from India to the rest of the world. One because India historically has struggled with a very low tax take. They have lots of rules and lots of taxes, and you know,

tax evasions the national sport UM. So you have to look at the imposition of the levy on crypto transactions in India, both from the perspective of trying to control the industry, which they are skeptical of, but also because India struggles to raise money UM, and India has this kind of reflexive concern about UM, you know, nefarious uses of technology, and they're always worried about what they call black money, which is money under the table that could

be used for all kinds of things, including for example, terrorist activity. So India is a unique situation country and I'm not sure you can extrapolate too much from what they're doing to the rest of the world. However, we have seen the International Monetary Fund, We've seen European officials who are if you like a bit further ahead and regulations of crypto that both those bodies have talked about, how do you have a globally coordinated approach to regulating crypto?

But that's no difference to other topics. How do you have a globally coordinated approach to taxation? How do you have a globally coordinated approach to corporate taxation for example? These things are very hard, and they're hard in crypto

as well. So I think if I had to bet, I would say it's almost impossible to have the kind of coordination you were talking about across jurisdictions, and instead you're can have companies playing arbitrage, trying to figure out where the best places for them to set up and

how many people they can serve from that location. And that's why we're seeing places like Hong Kong do what they're doing with their policy shift, which to your point, is exactly what we saw with taxation for a while, right Like, why did everybody have an Ireland HQ if not to take advantage of those extremely preferential tax treatments that weren't available to them in other places. We'll be right back with Bloomberg Senior editor for cryptos In Neil

Jack Tianni with more on crypto regulations in Asia. We focused a lot on like the institutional side of the house, weather from the regulatory perspective of the companies themselves. But I'm going to say three letters, and I just want your reaction to it, which is a VPN. Yes, UM,

understand what you're saying. You're what what you're saying is that technology can make a laughing stock of any kind of regulatory approach, right UM, And to an extent, I agree, But I feel like what we're seeing now with the ft X collapse is going to really concentrate the minds

of regulators. I think they're gonna look really really closely at things like disclosure, making sure that UM exchanges really are very clear that client assets are safe, disclosing very clearly where leaveradge is disclosing very clearly, how they manage. I think all of these things are going to shoot up and be front of set, know, front of house for regulators. It's going to be less about what's the taxonomy your tokens and how do they operate and how

do we figure that out? And it's going to be more about the traditional things. Here's a crypto outfit. Okay, what do we know about it? Where the assets are they safe? How much the lead which if they really got um, have they got the right kind of risk management practices. I think it's going to be a lot of that that we see coming through over the next few years. But it's not going to happen quickly, so there's lots of time for more things to blow up

while they try and put that into place. The perpetual struggle of regulators, it's like you're always fighting not the last war, but like the one before that. Yeah, exactly. I don't envy them. It's a very hard task. It's hard enough for regular finance. Can you imagine how haw

they must be for for for crypto. Somebody was talking the other day about not stable coins, but what they call flat coins, things that would go up and value along with inflation while retaining their essential value beyond that. So you can see from the point to be a regulator. Okay, we're trying to get our head around stable coins, and now people talking about flat coins at the time, I would go up with inflation. How's that going to work? So it's it's almost it's like a Gordian knot right.

It's almost impossible to untangle um. But that's what they've paid the small or big bucks to do. Mostly small, mostly small. Thank you, big headaches, yeah, small box, big headaches. Well, thank you very much for that tour of crypto regulation in Asia pac Where can folks find you if they want to see more of your coverage or at least know what you're up to. You know, you can probably find my byeline here here or there on on the

Bloombloo terminal or on the Bloomberg website as well. And if you have any complaints please send them to stay sy Marie. Thank you very much, fair enough, fair enough, Thank you so much to they. I'll take care. This is Bloomberg Crypto, a daily podcast from Bloomberg and I Heeart Radio. For more shows from I Heeart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Send us your comments, questions or suggestions

for the show to Crypto at Bloomberg dot net. The supervising producer of Bloomberg Crypto is Vicky Verglina. Our senior producer is Janet Babin. Our producers are Mohammed Faruk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer. Original music by Leo Sidrin. I'm Stacy Marie Schmal We'll be back tomorrow.