Opinion: Asia is dethroning US as hub of cryptocurrency and blockchain innovation
The home of the cryptocurrency and blockchain industry has been a topic of debate ever since the bull market faded and the bear took its place. The cryptocurrency industry has been, and continues to be, one of the most innovative developments of the 21st century.Amid the technological advancement of the industry, countries and their regulators need to speed up the development of frameworks that will allow the industry to flourish. Recent regulatory developments within Asia – specifically in Hong Kong and Singapore – coupled with developer talent and an appetite for investment have positioned the region as a global hub for blockchain.
The United States has historically been the global leader in innovation. The country’s innovation ecosystem was unrivalled globally, but blockchain technology has bucked this trend.
In March, the Securities and Exchange Commission (SEC) sent an official warning to Coinbase, alleging violations of federal securities laws over the offering of unregistered securities. Days later, the Commodity Futures and Trading Commission filed a complaint against Binance, also over unregistered securities.
Across the industry, there is a need for clarity around cryptocurrency regulation. This is in large part because US government officials themselves seemingly cannot decide how the space should be regulated, leaving key players in a constant state of limbo.
The shifting regulatory landscape around cryptocurrency has frustrated developers, who are unsure what to expect from regulators. A proposed bill in the US House of Representatives seeks to create a centralised record of all off-chain cryptocurrency transactions where regulators can access all activity.This legislation could threaten the foundation that cryptocurrency was built on. By sending these mixed and sometimes hostile signals, the US government is limiting the innovative ecosystem the Web3 space needs to survive.
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Following the latest regulatory moves from US lawmakers and officials, some Web3 leaders, cryptocurrency companies and blockchain developers feel they have no choice but to establish operations elsewhere. As it stands, the US will miss out on being a leader in the blockchain space.
While the US has intensified its regulatory focus on the cryptocurrency space, Asia and Europe have taken steps to establish their own frameworks. The European Union’s Markets in Crypto-Assets Regulation (MiCA) has been approved by the European regulatory body. However, there is a significant barrier preventing this framework from going into effect in the immediate future.
MiCA will apply across 27 European countries, but before it is a fully active framework, the regulatory authorities and governments in each of these countries still have work to do. Therefore, the goal of the MiCA framework going into effect by mid-2024 could be out of reach.
Until the framework is fully fleshed out, cryptocurrency and blockchain companies must continue to err on the side of caution when setting up a base of operations within any European country.
Even with the addition of MiCA and Switzerland’s innovative leadership in Europe, it still feels as though Asia will be the pivotal region for cryptocurrency in the next bull cycle. More blockchain companies in progressive regulatory markets such as Switzerland are looking to set up in the East.The Web3 talent pool in Asia is deep, and it is only getting deeper as developers flee the US in search of a safe haven. The US has lost 2 per cent market share in blockchain developers per year in the past five years, according to a recent report by Electric Capital.The other factor is the capital and appetite to invest. Reports show tech investment last year hit US$103.9 billion across China, India and Southeast Asia, with seed-stage investments a focus point for investors. Seed-stage investments in Southeast Asia alone increased by 73 per cent last year. Other reports project the value of Asia’s Web3 sector into the trillions of dollars.
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As for the cryptocurrency landscape in the Asia-Pacific, regulatory moves and clear guidelines have made the region one of the fastest-growing cryptocurrency economy globally. For example, cryptocurrency firm Ripple recently secured an operating licence in Singapore, allowing its subsidiary to operate without transaction thresholds. The results of these moves speak for themselves, with Ripple saying that 90 per cent of the company’s business now comes from outside the US.
Coinbase has had a public dispute with the SEC. Despite being a company that was developed, deployed and based in the US, Coinbase established an international exchange earlier this year and recently received a Major Payment Institution licence from the Monetary Authority of Singapore.
Brian Armstrong, co-founder and chief executive officer of Coinbase Inc, chats with Sopnendu Mohanty, chief fintech officer of the Monetary Authority of Singapore, during the Singapore Fintech Festival, in Singapore, on November 4, 2022. Photo: BloombergIn addition to Singapore, Hong Kong has also established licensing for cryptocurrency exchanges to operate in the city. This licence will lead to an inflow of retail traders from Hong Kong and other global jurisdictions, thus growing the cryptocurrency ecosystem further in not just the Asia-Pacific but the world.
As the US continues to signal to the cryptocurrency space that it is not open for business, the choice for blockchain developers is increasingly to move operations into friendlier countries in the Asia-Pacific. Their progressive outlook has helped turn the region into one of the fastest-growing hubs for Web3 innovation, establishing Asian economies as the global leaders in the blockchain industry.
Dominic Williams is founder and chief scientist of the DFINITY Foundation
