Leading traders like GCR And Arthur Hayes have long discussed the prolonged impact Asia will have on crypto, with some arguing that investors in the region will be the driving force of the current cycle.
With a brutal regulatory environment in the United States and increasingly positive developments in Hong Kong and China, Asia's case for leadership in the crypto sector continues to strengthen.
Hong Kong's Bitcoin and Ethereum spot ETFs have gone live as Chinese investors significantly increase their stake in offshore assets. The lack of confidence in the internal market has prompted record sales of shares in domestic qualified institutional investor funds – a state-granted vehicle for investing in foreign securities – to the point that Chinese funds are imposing caps or pauses on investments. Despite China's notorious Bitcoin bans, Hong Kong's clear new crypto regulations and political ties to the mainland suggest indirect support from China, positioning Hong Kong as a controlled crypto hub. Recent Hong Kong crypto ETF approvals further support this view.
On the other hand, the United States presents a different scenario with recent SEC Actions Against Metamask and warnings from Uniswap and the FBI describing a regulatory attack on crypto. These actions reflect growing scrutiny in the United States over crypto operations, which could drive our overseas expansion into the more favorable environment of Asia and bring the industry's epicenter with it .
I think China (and Asia in general) will fuel the next wave
It will take some time to dispel Western cynicism about this space, but the East is on the rise and yearning to flex.
You should spend time on WeChat
Many future pumps will be on parts that no one you know knows about– GCR (@GCRClassic) January 9, 2023
🇭🇰 Hong Kong + 🇨🇳 China
Hong Kong and China are poised to become the center of Asia's positive crypto impact thanks to Hong Kong's favorable regulations, China's history with crypto, and the interaction between these two territories.
Beyond ETF approvals and transparent regulations, Hong Kong has many other qualities that make it a hotbed for Eastern crypto. A a recent report ranked Hong Kong as the leading locale for crypto adoption due to:
- Zero percent tax rate about crypto gains that attract traders and investors.
- Dense network of crypto ATMs facilitating easy fiat-to-crypto conversion.
- Strong presence in the industrywith leading companies like Consensys, OKXAnd Animoca Brands whose head office or offices are located in Hong Kong.
- Its historic position as a commercial and financial center position Hong Kong well to become a nexus for crypto activity in Asia.
These recent developments have not occurred in a vacuum. Greater China, including Hong Kong, has a rich history in crypto, pioneering for many commercial innovations and technical prowess like stablecoins.
These innovations have driven the growth of the crypto market in Hong Kong. Although mainland China has publicly shifted its focus to crypto, Hong Kong has still managed to chart a distinct regulatory path that could lead it to becoming a global crypto hub. To claim that this happened without China's consent would be ignorant, given the National Security Law in Hong Kong (adopted in 2020), giving mainland China significant legal control over Hong Kong, as well as the Ordinance on Safeguarding National Security (adopted in Hong Kong this year), which further aligns Hong Kong's security practices with those of mainland China. Given the mainland's restrictions on crypto, Hong Kong's recent adoption of crypto implies that the CCP believes it is in its interest to have a firm foothold in the industry. The CCP's serious approach to blockchains is also reflected in the development of its own blockchains. Central bank digital currency (CBDC). This official digital currency raises significant privacy concerns due to potential government surveillance. Nonetheless, this shows the CCP's cautious acceptance of blockchain, understanding its power and potential.
Additionally, another aspect of Hong Kong and China that makes the region ripe for adoption comes from capital trends, such as the desire to invest outside of China, as previously mentioned. Hong Kong has long attracted the wealthy Chinese spending on luxury goods like jewelry and high-end brands. This trend, coupled with the enthusiastic desire to invest in non-domestic assets, positions Hong Kong as an outlet for mainlanders looking to invest in alternative assets, such as spot ETFs. Although not equivalent to cryptography, luxury spending reflects a financial trend among the wealthy to invest and engage in offshore markets. While this does not directly influence ETF flows, it does expose a wealthy sub-sector of mainland China to ETFs and their advertisements across the city.
China has actively reduced its dependence on the dollar for more than a decade, reducing its cash holdings of approximately 40%. Yet, given the dominance of the dollar in trade, they continue to collect a constant supply of dollars, which they find difficult to get rid of. Placing these dollars in crypto would help them reduce their US dollar holdings and provide a globally decentralized asset, independent of any government – an attractive quality for a country with strained Western relations.
In conclusion, Hong Kong's adoption of crypto, its ties to mainland China, and Greater China's innovation position the region as an industrial powerhouse, poised to drive growth this cycle.
Other examples of Asian adoption
Beyond Hong Kong and China, the broader Asian region presents a kaleidoscope of regulatory approaches and adoption levels, contrasting with US hostility and demonstrating Asia's desire to 'engage in cryptography.
🇮🇳 India
Despite strict regulations and high taxes, India is leading global crypto adoption.
According to On-Chain Analysis, India ranks first globally in crypto adoption and second in transaction volume, surpassing many wealthier countries in different uses of crypto, including decentralized and centralized exchanges, DeFi and NFTs . India's crypto market is thriving despite a harsh 30% capital gains tax favoring international platforms. This resilience underscores the continued strong demand for cryptocurrency in the world's second-largest country, affirming its significant global crypto influence.
🇸🇬 Singapore
Singapore is competing with Hong Kong to become Asia's Web3 hub.
Already one of the world's leading financial centers, the country has adopted a sophisticated and deliberate approach to crypto. It provides a favorable environment for new businesses, including a $150 million Singapore dollar fund to support fintech like Web3 and a regulatory sandbox for experimentation. The country balances this with strict consumer-focused transaction monitoring, ensuring the safety of its citizens.
🇵🇭 The Philippines
Finally, the Philippines, Ranked Sixth in Chainalysis Adoption Reportis one of the nations most motivated by its socio-economic context when adopting crypto.
With a significant portion of the population unbanked, the country viscerally understands the potential of blockchains to be used not only for financial transactions, but also as a comprehensive tool for socio-economic improvement. As a country facing constant inflationary pressures, cryptocurrencies, particularly stablecoins, have become essential for remittances and payments, providing security, low transaction fees and fast processing times.
From India's adoption to Singapore's frameworks to the Philippines' resilience, Asia's diverse crypto engagement positions it as a global heavyweight while showcasing the benefits of blockchain for developing countries.
As U.S. regulations become increasingly hostile to our industry, Asia's emerging crypto hubs are poised to attract significant future investment and innovation, potentially shifting the industry's economic and technological epicenter from the West to the east.
Proactive measures in Hong Kong and broad adoption across Asia could make the region a formidable force this cycle. As the SEC drags its feet and overextends its reach in the United States, Asia continues to embrace the crypto industry, not only fueling its local economies but potentially steering the global market into a new era dominated by Asian technological leadership.
Although it may be premature to say that the United States' position in the industry has deteriorated, the tide continues to blow increasingly in Asia's favor.