Digital wallet and crypto trading platform Kyrrex researched and shared this report intending to describe the investment landscape of the Asian countries
Asia has been lauded as the home region of advanced technology and software development for various sectors, from medicine, education, entertainment, to tourism.
The same applies to the cryptocurrency sector. According to the report released by Kyrrex on the state of cryptocurrency investment in the Asian market with the regulatory policies taking place, the condition suggests that the regulatory framework of Asian countries is more open to cryptocurrencies and blockchain than in the West, but at an overall very low level.
The problem
To date, cryptocurrency is not recognised as legal tender in any Asian country, and investment projects are fully or partially regulated only in Japan, Thailand, and Singapore. The report further noted that the regulation of some countries is in the “gray zone”, which means that the cryptocurrency business is regulated by separate legislative acts, rules or not regulated at all.
The report assesses that until a strong, effective legislative framework is developed, many projects based on cryptocurrencies and the blockchain are likely to have problems and will not be able to gain momentum.
According to CoinMarketCap, the active actions of the regulatory authorities of some countries of the Asian region aimed at tightening regulatory measures for individuals and companies working in the cryptocurrency market, and the ban on investment projects using blockchain technology, the total capitalisation of the cryptocurrency market reportedly has decreased by 87 per cent in the period from 2018 to 2019.
To protect their interests and the outflow of capital to the west, global investors may lose interest in the cryptocurrency market, as new projects run the risk of not getting approval from the authorities due to the closedness of the Asian market to foreign business.
The study
The study conducted by Kyrrex revealed the essence of the regulation of the Asian cryptocurrency market using systemic and structural methods. The information base of the study is then constituted by legislative and regulatory acts, statistical, and analytical materials.
As a result of this research, a methodology was developed for calculating the country’s investment attractiveness index for blockchain projects, which includes indicators of the economic situation in the country and a risk component for doing business and investment activities.
Also, the result notes the coefficient of openness of the economic and legal system, which includes several indicators reflecting the country’s readiness to accept cryptocurrencies and blockchain technology.
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e27 publishes the results of the countries in Southeast Asia that the study covered, which are Singapore and the Philippines.
Singapore
The results share for the record that the government bodies and organisations involved in the regulation of the cryptocurrency market are:
Singapore does not prohibit the use of cryptocurrencies but also does not yet take active regulatory measures to fully control the digital asset market.
Financial and economic relations in Singapore have always supported the principles of a free market, so companies can work with relative ease in this country.
When it comes to the country’s take on doing business in cryptocurrencies, many investors often point to Singapore due to the legislative framework of this country. Although still needs some groundwork, the regulations are deemed more or less balanced and favorable for companies working in the field of virtual assets.
So far, the government authorities of Singapore have amended legislation to require cryptocurrency exchanges and cryptocurrency financial services providers to register with local authorities.
The government of Singapore has a positive attitude towards blockchain and fintech related businesses. The MAS has developed the Regulatory “sandbox” that allows financial institutions to experiment with innovative financial products in the real sector.
Depending on the purpose and the project itself, the regulator can provide appropriate regulatory support, weakening particular regulatory requirements individually.
In July 2019, the IRAS introduced the “Electronic Tax Guide” (the e-Tax Guide), which explains the procedure for taxing cryptocurrency transactions.
According to this document, Bitcoin and other cryptocurrencies do not have the status of an official means of payment and are considered as a digital payment asset that can be used to pay for goods and services.
However, although Singapore is rather convenient and flexible in the area of legislation governing operations with digital assets, all cryptocurrency projects are required to be balanced and reasonable in this country. Anti-money laundering and Counter-terrorism financing laws are uncompromising and very tough.
In an event of making a change in cryptocurrency exchange transactions, the parties of the operation must be prepared for the fact that a bank has the right to block the account in fiat currency. It will require the provision of clarifications and necessary documents confirming the legitimacy of such transactions.
Philippines
For the Philippines, the government bodies and organisations involved in the regulation of the cryptocurrency market are:
- Cagayan Economic Zone Authority (CEZA)
- Asian Blockchain and Crypto Association (ABACA)
- The Philippines Central Bank – (Bangko Sentral ng Pilipinas – BSP)
- The Securities and Exchange Commission (SEC)
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The main cryptocurrency and blockchain regulatory authorities in the Philippines are the Philippines Central Bank and the Securities and Exchange Commission.
In 2017, the BSP issued the Circular, which outlined the main provisions regarding virtual currencies. According to this document, digital currencies are not an official means of payment, the emission and circulation of which is not recognised or supported by the State.
However, digital currencies are recognised as a virtual unit that has a decentralised database and is created by mathematical computer calculations. Such a unit has a certain value and can participate in storing digital assets and exchanging them for other digital assets, including fiat currencies, as well as for paying for goods and services, only within a certain platform.
The legislation provides and allows activities to create and maintain such platforms and provide exchange services in cryptocurrencies. But such services must receive permission for their activities and comply with the requirements of the Manual of Regulation for Non-Bank Financial Institutions.
In turn, at the beginning of 2018, the SEC issued instructions, guided by the provisions of the Securities Regulation Code. The instruction detailed that the virtual currency is classified as “securities” and “investment contracts”, which consecutively obliges market participants, working with virtual assets, to fully comply with the requirements and rules controlling the activities of entities that work in the stock market.
These rules provide for the registration and licensing of market participants, tight control of operations, and strict reporting on their operations. The Philippines regulators adopted the experience of their American colleagues regarding the regulation of virtual assets, and obliged market participants to consider these type of assets as “securities”, thus taking active steps to tighten the regulation of cryptocurrencies in the country.
The free economic zones of the Philippines support a soft policy of cryptocurrency regulation. The Cagayan Economic Zone Authority (CEZA) – an economic zone with a special economic status and tax regime, which is located in the north-east of the country, has a regulatory policy that allows companies to work with cryptocurrencies.
CEZA authorised ABACA, as a self-regulatory organization (SRO), to support the implementation and provision of regulatory and supervisory functions concerning participants of the cryptocurrency and ICO markets.
In 2018, CEZA announced its intention to license several cryptocurrency exchanges and funds. A prerequisite for obtaining a license in compliance with the requirements of AML and CFT.
To protect the interests of its citizens, CEZA requirements allowed companies to provide services related to virtual assets only to foreign customers. The license term is 25 years, after which the company is obliged to provide the necessary documents to obtain a new license. The regulators reserve the right to revoke a license on the grounds provided by law.
The Philippines government is closely monitoring the situation around the cryptocurrency market in the country and global fundamental trends regarding virtual assets. Even with the presence of free economic zones, with a more or less favorable environment for cryptocurrencies, it’s still not a reason to assert precisely that the position of regulators regarding this market can substantially change soon.
Conclusion
Even with many startups emerge and bring new technology and innovation to the financial world, the existing legal systems were not flexible enough, nor deep enough to keep up with the rapid development of new solutions in the digital world.
This is not in any way diminish the progress that the region has made. New technologies that the region has seen so far are based on financial liberalisation, avoiding centralised accounting and control systems, as well as the ability to develop very quickly and integrate with other new financial technologies.
Furthermore, the legislative bases have historically established traditions and principles that should take into account, not only individual aspects of the development of society but also their relationships and links with other legal, economic, financial and social areas. As a result, the legislative framework was not prepared for the fact that the rapidly growing cryptocurrency and blockchain markets would become, not only an innovation but a serious instrument that would compete with traditional financial markets.
Also Read: What does Southeast Asia hold for cryptocurrencies and ICOs
This situation was used, not only by market participants who earned money through speculation but also by fraudsters who turned an innovative idea into a means of personal enrichment. As a result, there is very high volatility of cryptocurrencies, huge currency risks, and mistrust of the authorities in this market.
Taking an example from Japan, which new legislative base seeks to create a basis for developing the value of cryptocurrencies, gradually replacing the speculative component with investments based on the modernisation of current business operations. Japan uses the help of new technologies necessary for the development of the country’s economy as a whole.
Despite the ambiguous attitude of other countries to cryptocurrencies and blockchains, the Financial Services Agency (FSA) in Japan has developed laws and regulations governing the business and areas related to virtual assets. This has allowed Japan to take a dominant position as the leading center of cryptocurrencies in Asia and improved the status of this country as one of the main financial centers in the world.
Singapore has created fairly convenient legislative conditions for doing business in Asia, since there is no bureaucracy in this country, and its legislation is based on the principles of an open economy. Therefore, Singapore ranks in second place in terms of the indicators in Kyrrex’s study.
It should also be noted that the free economic zones of the Philippines, are ready to open their cryptocurrency markets and use blockchain in the real sector.
In the end, it is worth highlighting that all legislative measures should be taken to create a solid legal basis for controlling business activity, the level of cybersecurity, security of customer funds, and the necessary market conditions, in particular to minimise market and currency risks, reduce volatility, and decrease the speculative variable in price in order to create stable financial and investment instruments.
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