Asia As The Gateway for Institutional Crypto Adoption

Crypto adoption challenged by exclusions and regulatory uncertainties

In recent months, numerous markets have been excluding crypto as a viable and regulated asset class, with announcements of exchanges such as Binance being pulled out of certain markets covering China, UK, Canada and Australia.

The lack of non-clarity towards regulatory and compliance framework around the regions posed yet another challenge for market participation. For instance, the crypto regulation in the US is subjected to ambiguities, with a lack of clear rules formulated around crypto.

Ambiguities around a clearer definition of security and continued debate between the SEC and the CFTC has resulted in exchanges struggling to operate with possible risks and risks of facing regulatory action. This was illustrated by the recent crypto crackdown against Coinbase and Binance and Crypto.com suspending its US institutional services from late June, where limited demand among institutional clients were cited.

Conservative approach against markets deters crypto acceleration

On the other hand, markets are also exercising caution and taking a conservative approach towards crypto. The UK users are subjected to Know Your Customer (KYC) and measures around Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT). UK lawmakers have stated that crypto does not possess intrinsic value and should be regulated as gambling. In addition, half of the UK’s major banks do not support crypto, or allow transfers or card purchases involving crypto exchanges.

Institutional investors’ confidence and trust impacted

With the display of regulatory demands and non-acceptance by some markets, investors are becoming more cautious towards this volatile and uncertain asset class, particularly when presented with news-breaking incidences of FTX and other several contagion exposures resulting in liquidity woes in 2022.

Positive outlook still lies ahead with vast untapped opportunities

More corporations are taking a positive outlook towards crypto. To name a few, top consulting firm Deloitte has tapped on Polkadot’s kilt protocol to improve verification processes, and big firms such as Microsoft, S&P Global, Goldman Sachs,Mastercard, Google Cloud and Visa have joined the ecosystem as well.

Rising interest among financial institutions were also observed, including Blackrock, Fidelity Investments, JP Morgan, Goldman Sachs, Morgan Stanley. Banks namely Deutsche Bank, Citigroup, Standard Chartered and UBS also joined the game, in owning crypto assets in recent years.

In fact, institutional adoption of crypto is still relatively low, no doubt there is an increasing momentum, opportunities lie ahead to bridge the gap between traditional finance and digital assets. Financial institutions hold stringent requirements and bear higher expectations on engaging a credible provider for ease of adoption. A need for adequate clarity, transparency, education and compliance around crypto participation is paramount and essentially, operating in crypto-friendly markets.

Coupled with the recent SEC legal stand towards recognising over 60 tokens as securities, there is an interesting observation that institutional adoption of crypto remains unaffected, and in turn, accelerates the activity outside of the US.

Singapore and Hong Kong emerged as Asia’s Crypto Hub

Hong Kong announced recently in June its regulatory clarity and transparency towards operating crypto in its city. With the Hong Kong Securities and Futures Commission allowing licensed exchanges to trade cryptocurrencies with large market capitalization and liquidity, Hong Kong is naturally positioned as a financial hub.

In my recent conversation with the senior correspondent, Biman Mukherji of South China Morning Post, I have shared some thought leadership views of Hong Kong approaching crypto as a financial asset and have observed more companies moving their operations to cities including Singapore because of its legal certainty set by the Monetary Authority of Singapore (MAS). Singapore is amongst one of the first markets to emerge as a crypto-friendly country with a stringent and clear set of regulations in place. It is approaching crypto as a new technology to establish a robust decentralized web ecosystem built on blockchains for data ownership and retention.

Adding on to my views of market readiness in Hong Kong, I had the opportunity to engage with CNA Hong Kong’s correspondent, Deborah Wong on views relating to the untapped opportunities in Hong Kong. The city is never short of sophisticated funds and investors and there is a great inflow into the crypto space. With the passing of the license, the previously inefficient on-ramp and off-ramp services globally are now more well supported by banks.

Singapore aims to be a blockchain financial services hub

As an early adopter pursuing crypto in Singapore, the city-state has illustrated its support by participating in blockchain application projects such as the Project Ubin, by experimenting the use of blockchain to clear and settle payments and securities. The leading national bank of Singapore, the DBS bank also recently piloted Project Guardian, together with financial institutions including JP Morgan and SBI Digital Assets Holdings for the conduct of transactions in tokenized foreign exchange and government bonds.

Connecting institutions with secure blockchain access

With this, I am confident of RockX’s full suite of services in delivering a secure, hassle-free and efficient experience for our institutional clients. As a fully-complied and responsible blockchain technology leader in Asia, we understand the struggles, pain-points and stringent requirements and demands among institutions. Our innovative solutions are designed to help support institutions coming onboard quicker and in a cost efficient manner, while maintaining a robust security infrastructure in its highest standards.

Visit www.rockx.com to find out more about our one-stop integrated solutions