The Need for Cryptocurrency Adoption in Southeast Asian Countries Despite Access to Digital Financial Services

Cryptocurrencies are growing increasingly popular all over the world. As a result, individuals and corporations are paying attention to the new technology and participating in it. Recently, BusinessWire published a report discussing cryptocurrency adoption among countries, with five Asian countries being among the Top 20, i.e., China, Vietnam, India, Thailand, Pakistan.

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The growing interest in Asia is becoming a global sensation due to the large population on the continent. There’s also the increasing adoption of digital wallets amongst locals, with Alipay & WeChat Pay estimated to have 1.2 billion & 1.15 billion users, respectively. So, it’s interesting to look at both systems and consider the pros, cons, and challenges associated with them. Although some other Southeast Asian countries like Vietnam and Thailand are among the world’s top 20 countries in cryptocurrency adoption, that would not be our focus. In this article, our focus would be on three Southeast Asian countries, i.e., Singapore, Indonesia, and Malaysia. We would be discussing the following;

• Challenges concerning regulating cryptocurrency-related activities in each country;
• Cryptocurrency Use Cases in each country;
• How to Convert Fiat to Cryptocurrency; &
• Comparison Between Digital Wallets and Cryptocurrency in Southeast Asia.

Challenges Concerning Regulation of Cryptocurrency-related Activities in Singapore

As a country well-known for its strict laws and regulations, especially economic activities, Singapore has embraced cryptocurrency and blockchain technology. The Monetary Authority of Singapore has, over the years, taken active steps in regulating the new technology. The reason for this is to curb the excesses and possibilities of money laundering and terrorist financing. Occasionally, the MAS issues warnings to investors and the general public concerning the risks attached to investing in crypto projects. However, the legal framework is designed such that it doesn’t stifle innovation. Interestingly, crypto gains cannot be taxed.

In January 2020, the Payment Services Act came up as a legal framework for regulating cryptocurrency-related activities. The Act provides guidelines for cryptocurrency businesses on securing a license to operate within the country and specific monetary guidelines concerning money laundering to follow. One of such guidelines is the compulsory requirement of a Know-Your-Customer process for customers. So, Singapore mandates all licensed crypto-companies to verify its customers’ identities and monitor their transactions and report any suspicious case of money laundering to the appropriate authorities. Notable cryptocurrencies recognized by the Act include Bitcoin and Ethereum.

The introduction of the Payment Services Act has solved some challenges cryptocurrency businesses face in Singapore. For instance, Banks closed accounts belonging to cryptocurrency companies due to concerns of laundering activities and the increased number of initial coin offerings. However, with the PSA, licensed cryptocurrency exchanges & companies are allowed to operate without restrictions. However, another challenge is that overseas crypto-companies with interests in working in the country would have to comply with local regulations before operating due to the Act. A typical example of this is one of the world’s most popular cryptocurrency exchanges, Binance. For Binance to operate in Singapore, it had to create a separate entity from Binance Global. For this reason, the website and identity for Binance Singapore are different from the global version.

Challenges Concerning Regulation of Cryptocurrency-related Activities in Indonesia

The Reserve Bank of India recently released a circular highlighting that the Crypto-Banking Ban imposed years ago is no longer valid. It is coming on the heels of several commercial bank’s excuses for limiting trade accounts of individuals and companies participating in cryptocurrency-related activities. So, it’s no hoax that the world is paying attention to the new technology. In the same vein, Indonesia, i.e., India’s neighboring country, is embracing the technology. However, certain restrictions in place pose challenges to the growth of the ecosystem in the country.

Cryptocurrency activities within the country are heavily regulated by Indonesia’s Commodity Futures Trading Supervisory Body (also known as Bappebti). In 2020, the body, via the Bappebti Regulation №7 of 2020, compiled 229 crypto assets that people could trade in the crypto asset physical market. Although this list was made public in mid-January 2021, it has been in effect since December 17, 2020. The list consists of popular cryptocurrency assets such as Bitcoin, Ethereum, USD Tether, Binance coin, etc. Check the comprehensive list here.

This new regulation restricts cryptocurrency exchange operations within the country. Therefore, any physical trader or exchange operating within the country cannot transact any other cryptocurrency asides from the 229 listed. The Bappebti Regulation №5 of 2019 states that all traders are required to undergo a Know-Your-Customer (KYC) process before initiating trading activities. Otherwise, it is deemed illegal. It is to guide against money laundering, terrorist financing, etc. In an ecosystem of over 10,000 crypto assets, as seen on CoinMarketCap, this new regulation limits the growth of a majority in the space. Sequel to this new regulation, Binance has been declared illegal as it’s not been registered with the Bappebti. According to them, only 13 companies are included in the list of crypto-asset trading companies in Indonesia, and Binance is not among them. With a significant exchange as Binance blacklisted in the country, it is harder for traders to transact effectively across different asset classes. However, with increased scams perpetrated via crypto projects, it’s clear that the government is making a significant effort to create a haven for investors in cryptocurrency projects.

Challenges Concerning Regulation of Cryptocurrency-related Activities in Malaysia

The cryptocurrency climate in Malaysia is growing. However, like other countries, as mentioned above, government regulations are in place to monitor the activities of the ecosystem. Cryptocurrency is not illegal in Malaysia. Although it’s not identified as a legal tender or a means of payment, it is regarded as a security and commodity. Following a civil suit between Luno Malaysia and an individual, a Malaysian court held that cryptocurrency is a commodity with an attached value. This ruling marks an essential step in the recognition of cryptocurrencies in the country.

Concerning regulation, the Securities Commission Malaysia has created a framework for crypto companies that wish to raise funds via ICO. This way, companies would go through the Initial Exchange Offerings platform before carrying out any public sale. Also, for crypto brokerages, Bank Negara Malaysia in 2018 released a policy document to curb the excesses of cryptocurrency activities in the country. The crux of the policy centers around the need for brokerage platforms to conduct KYC for every one of their customers to monitor money laundering operations and report any known suspicion to the appropriate authority. However, despite regulatory procedures, crypto adoption has been on the rise in Malaysia also with the recent price surge. During an interview with Luno Malaysia Country Manager, she mentioned that since January 2021, there had been an increase in the number of signups on the platform.

Cryptocurrency Use Case in Singapore

Both the government and individuals in Singapore are free to use cryptocurrency in Singapore. However, the usage is restricted only to a few definitions. Cryptocurrency is not admissible as a legal tender. However, it’s recognized as a property.

In December 2020, DBS Bank launched a blockchain-based digital exchange that allows investors to trade in cryptocurrencies and allows firms to raise funds. Also, Singapore’s Sovereign Wealth Fund, i.e., Temasek Holdings, has been purchasing Bitcoin from miners. Therefore, that shows active participation in the industry. Lastly, several local merchants accept cryptocurrency in Singapore. Examples are Kopitiam, Epic Gear, Oyster Bar, etc.

Also, the Singaporean government is taking advantage of the new tech by implementing blockchain technology for its airline industry. Other industry using this technology includes Education, Real Estate, Healthcare, Energy, Supply Chain, etc.

Cryptocurrency Use Case in Indonesia

Although Indonesian authorities have warned about the risks involved with investing in cryptocurrencies, it’s seeking ways to implement blockchain technology into its system. Possible use cases include;

• Fighting Fraud & Corruption: This is a potential use case for cryptocurrency in the country. With several banks servicing loans across the country to individuals, not all banks have access to credit rating systems for every individual. So, if an individual takes multiple loans across different banks, it becomes difficult to detect these occurrences. However, with the blockchain, they could integrate a node operating across all banks such that every individual information is translated into a unique hash, and it would prevent such occurrence. Also, the blockchain could provide a way for companies to interact excellently, sending secure messages/documents to each other without any alteration.
• Central Bank Backed Cryptocurrency: You could use blockchain technology to design an e-currency or digital payment backed by the government, making the cashless policy more pronounced.

Cryptocurrency Use Case in Malaysia

At the moment, there are no much pronounced existing use cases of cryptocurrency in Malaysia except that it’s recognized as a store of value and used for trading activities among individuals and crypto companies. Also, the government is creating a robust legal framework for its activities and, hopefully, in the nearest future, starts implementing this technology into various industries.

How to Convert Fiat to Cryptocurrency

Singapore

In July 2019, Binance Singapore was launched to cater to local users of cryptocurrency. It provides an easy-to-use solution to converting fiat currencies, in particular, the Singaporean Dollar to Crypto. The exchange offers fiat-to-crypto transaction services in multiple crypto assets, including Bitcoin, Ethereum, Litecoin, etc. To get started,

1. Visit the Binance Singapore Website.
2. Create an account and fill in the accurate information on the registration form.
3. Link your Xfers account to your Binance.
4. Top up the Xfers account by following the instructions.
5. Click Buy on your profile to buy cryptocurrency with the funds in your wallet.

Indonesia & Malaysia

As one of the registered exchanges in Indonesia, Luno provides a myriad of options for users to buy cryptocurrency on the platform. One such option is the bank deposit feature. So, register an account on Luno. Then, select the trade you wish to make on the platform. After that, choose the payment method. There are multiple options to use to make payments on Luno. You can select the one that best fits your situation. However, in a general case, you can pay via the bank deposit feature. This way, you deposit Indonesian Rupiah or Malaysian Ringgit into the bank account. Usually, the wait time for bank transfer is between 24–48 hours. After payment is confirmed, the cryptocurrency asset would be deposited in your wallet.

Digital Wallets Vs. Cryptocurrency; Similarities, Differences, and Benefits

The reason for the popularity of digital wallets in Southeast Asia is not far-fetched. It is because technology has been integrated into the market. Most buyer-seller transactions on popular eCommerce platforms like Alibaba, etc., are made easy with the integration of the digital wallet feature. Hence, the increased number of digital wallet users. However, the challenge with a digital wallet is that while it eases currency transactions, it’s only fiat currencies in a digital state. In the next section, we discuss the similarities and differences between digital wallets and cryptocurrencies.

Similarities

• Digital Wallets and Cryptocurrency are both operated electronically.
• They can both be used and integrated into eCommerce stores as a mode of payment.

Differences

• Digital Wallet offers the ability to make eCommerce trades and transfers effectively. However, cryptocurrency does this but cannot be used to trade against other assets for gain. Therefore, the digital wallet doesn’t offer its users investment options. Rather, it’s only used to make payments across stores and purchase goods and services. However, cryptocurrency allows you to participate in a trillion-dollar global market thereby making profits with your money.
• Digital Wallet operates fiat currencies in digital form while cryptocurrency is a different asset class.
• Digital Wallet transacts centralized fiat currencies, while cryptocurrencies are mainly decentralized.
• Digital Wallet uses fiat currencies that suffer from inflation, while cryptocurrencies don’t suffer from inflation.
• Digital Wallet has a limited number of currencies attached to the wallet while multiple cryptocurrencies are available (both stable and fluctuating assets).

Conclusion

In 1997, the Asian Financial Crisis rocked the continent, and the aftermath was the devaluation of currencies, stock markets, and a rise in private debts. Some Southeast Asian countries were affected by this crisis as well. It includes Indonesia and Thailand. In 2008, the economic crisis that affected America and the majority of Europe gave birth to cryptocurrencies.

This article explains how digital wallets are still fiat currencies, howbeit in digital form. So, when a financial crisis hits, especially with the rising inflation due to the coronavirus pandemic, the value of money attached to digital wallets would also be devalued. However, cryptocurrency was designed to create a system that could avoid this. Does this mean that the cryptocurrencies do not fluctuate in value? Of course not. However, with stable crypto assets like USD Tether, you can preserve the value of your money without having to worry about any inflation or currency challenge whatsoever. Today, the Zimbabwean Dollar is almost worthless, and it’s due to hyperinflation. Therefore, using cryptocurrency provides a hedge against it. Within the last ten years, the price of a Bitcoin has gone from less than a dollar to $60,000+ due to its fundamentals and intrinsic characteristic. Cryptocurrency is the future. Embrace it NOW.