Regulatory clarity has always been a cornerstone of increased activity in the crypto market. But with every country free to pursue its form of crypto regulation, adoption, and general market activity have been distorted worldwide.
Interestingly, we appear to be nearing what could be the first regional crypto adoption scheme. The Asian continent has been a focal point for the crypto market in recent years, and things could get even better.
The Sleeping Giant Awakens
According to a Chainalysis report showing adoption levels worldwide, the Asian markets accounted for an impressive 43 percent of all crypto activity between June 2020 and June 2021. The region created $296 billion in crypto trading activity, matching some of the other biggest markets in the developed world.
Crypto activity in the Central and Southern Asia and Oceania markets increased by a staggering 706 percent within the same time period. The Chainalysis report highlighted three countries with the highest crypto adoption levels: Vietnam, India, and Pakistan.
There are many reasons Asia is now leading the charge for crypto adoption, one of the most critical being an increase in regulatory clarity. In November 2021, Rama Sridhar, Mastercard's executive vice president for the Asia-Pacific region, explained in an interview that the friendlier approaches to crypto regulation of Asian markets generate better adoption rates for emerging payments. People are freer to engage in crypto activity.
Of course, there's a significant holdout in this regard - China. Preparing to launch its digital yuan central bank digital currency (CBDC), the country is pushing against digital assets. And China's hardline stance against cryptocurrencies isn't new. But the consensus is that the industry can still survive and thrive globally without help from Beijing.
Big Money Flows Into Crypto
A considerable attraction for India is its huge liquidity depth. A report from Messari showed that leading Asian nations like Singapore, Japan, and South Korea hold massive amounts of money that tend to find a way into crypto.
Asia is a top crypto spot for traders, with over 90 percent of Bitcoin and Ether futures trading volumes coming from the region. More people are moving into crypto due to capital controls from Asian governments and would prefer to trade cryptocurrencies in the long term.
Even in countries where regulations aren't necessarily clear, crypto activity continues to grow. India's crypto market grew by 541 percent from July 2020 to 2021, according to an analysis from The Economic Times. A report from the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) showed that Pakistanis grew their crypto holdings by about $20 billion between 2020 and 2021.
Everyone Wants a Piece
With Asian countries becoming hot spots for crypto adoption, companies have been quick to move into the region. The rationale is simple - by expanding into Asia, these companies can take the gospel of crypto to the far reaches of the world while boosting their bottom lines.
Coinbase made a big splash in Asia last year when it officially launched in Japan. Following a partnership with local banking giant Mitsubishi UFJ Financial Group, Coinbase grew its presence in the country - and, by extension, across South East Asia. The exchange also got an operating license in Japan, making the country its full-time base of operations in the region.
Coinbase is now looking to conquer the Indian market. In July, the exchange confirmed it plans to invest heavily in India - including setting up an office and hiring hundreds of employees. Despite India's murky regulatory stance around crypto, Coinbase believes the country holds a lot of opportunity.
Coinbase isn't the only company moving into Asia. Kraken currently operates services across 45 Asian countries and is now one of the leading Western-based exchanges to hold a presence in the region.
Last year, Binance, the world's largest crypto exchange, acquired an 18 percent stake in Hg Exchange - the official securities exchange for Singapore. While it had issues with regulators for a while, the company is still operating in different countries - including Thailand, where it holds a massive investment thanks to its partnership with Gulf Energy Development PCL.
Across the board, crypto companies are expanding their presence in Asia. It will be interesting to see how the market grows in coming years as more companies focus their attention there while still keeping things running in the West.