Will Southeast Asia become a dominant force in the digital currency space?
In mid-March 2020, Bitcoin price shot up beyond US$61,000. Just when the world thought the US$50,000 was the highest point the digital currency could breach, it zoomed past an unprecedented number and stunned many.
Based on research by Japan-based exchange bitFlyer, there is compelling enough reason to believe that “the last run-up in price was mainly driven by US investors.” The US still accounts for the overwhelming majority of activities and interest in Bitcoin.
According to the bitFlyer study, 30 per cent of people in the US consider Bitcoin and other cryptocurrencies as attractive investments in 2021. Stocks remain the most preferred investment option among Americans, but Bitcoin and crypto are already considered as the fourth most popular investment. These assets are twice more popular than gold.
Moreover, around a fifth of Americans say that they are currently using or have already used cryptocurrencies in the past. Also, more than three-quarters of people in the US say that they know about cryptocurrencies and have a positive perception of these assets as investments.
Digital currency interest in Southeast Asia
In contrast to the US situation, Bitcoin and other cryptocurrencies did not immediately get a warm welcome in Southeast Asia. In 2017, Singapore issued a warning and expressed uneasiness with the rise of Bitcoin. In the same year, Vietnam banned the use of bitcoin and other cryptocurrencies as methods of payment. Also in 2017, Indonesia declared Bitcoin payment as illegal.
Things have changed over the years, though. Many countries in the ASEAN bloc have already enacted policies and legislation that somehow legitimise the use of digital currencies. Most countries still do not consider Bitcoin and crypto as legal tender, but they have adopted rules that legalise digital currency in other forms of financial transactions.
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Notably, in a Statista survey, two ASEAN countries rank second and third among countries with the highest rates of cryptocurrency adoption. These are Vietnam and the Philippines, which have 21 per cent and 20 per cent of their respective populations saying that they have used or owned digital assets in the past year. The survey polled 1,000 to 4,000 respondents in each country.
These numbers for Vietnam and the Philippines, two of the most promising economies in Southeast Asia, compared to the 20 per cent of respondents in the US who say that they have used or are currently using cryptocurrencies according to bitFlyer’s study. “Seventy-six percent of people in the US that have heard about crypto have a positive perception about cryptocurrencies as an investment … Our research shows that the current (crypto) market sentiment amongst American investors is very bullish,” writes the bitFlyer study.
Other Southeast Asian countries also rank relatively high on the list. Thailand is fifth (17.6 per cent), while Indonesia, Malaysia, and Singapore are tenth (13 per cent), twelfth (12.3 per cent), and twenty-third (9.6 per cent) respectively.
With these many people admitting to having some experience in owning and using digital currency, it is not a stretch to think that Southeast Asia will soon have a significant impact on digital currency similar to what the US has.
The potential Southeast Asian impact
With a population of 655 million, the impact of the ASEAN bloc on digital currencies cannot be understated. The region has a massive digital economy estimated to be worth US$100 billion in 2020 and is expected to surge to US$300 billion by 2025. Countries in the ASEAN bloc also have some of the biggest internet-connected populations in the world. A report from Google approximates Southeast Asia’s number of internet users at around 400 million.
The question is this: Will a good portion of these 400 million adopt digital currency use? The answer is likely affirmative. According to bitFlyer’s study, the reasons for people’s interest in crypto assets are the same for almost everyone.
In its comparison between the US (where there is high interest in crypto) and Japan (with relatively low interest), the study noted similar answers to the question “what drives people’s positive perception about cryptos?”
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The reasons include the growing value of crypto assets, positive news about them, asset decentralisation and democratisation, and most notably the high-profile expression of interest or support by large institutions in these assets. These reasons are similar to what any Southeast Asian would likely say if asked why they want to obtain or use digital currencies.
“When you look at this Bitcoin rally that we’ve been seeing over the last couple of weeks and months, really there are two elements driving it. One is the continuous entry of institutional players,” says PwC’s Global Crypto Leader Henri Arslanian.
The growing and well-publicised interest of large corporations and organisations facilitates a bandwagon effect that convinces many to get involved with digital currencies.
By now, Bitcoin prices are gradually dropping after peaking at US$61,283 on March 13, 2021. There have been no steep decreases yet, but the trend points to a slow fall with some occasional marginal increases. According to Cryptocurrencies and Financial Market Strategist Aayush Jindal, “there is a key bearish trend line forming with resistance near US$57,500 on the hourly chart of the BTC/USD pair.”
This could indicate the moderation of interest in bitcoins for now, mostly in the United States. The same trend can be observed in ether price.
If Southeast Asian businesses, investors, and individuals were to start showing significant activity in support of digital currencies, they can easily make up for the diminishing interest in the United States. They can easily influence the perceived value of bitcoin, ether, and various other digital currencies.
Biting into American dominance
In a piece for CoinTelegraph, former SEC Legal Specialist and Florida International University School of Law Adjunct Professor Marc Powers expressed his worries over the possibility of other countries overtaking the US when it comes to digital currencies.
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“What most politicians and regulators in the US fail to appreciate is that while we stifle blockchain advancement and the use of cryptocurrencies for capital formation, there are other countries and jurisdictions which welcome and embrace it. In failing to adapt, the US faces the real risk that this new technology will be ‘owned’ by other countries,” Powers wrote.
This point makes a lot of sense, as Southeast Asia is quickly becoming one of the major players in the blockchain and digital currency markets. As early as 2017, Singapore already gained the renown of being one of the world’s biggest ICO capitals. With tweaked policies and laws on dealing with digital assets, Singapore has been attracting more ICOs and crypto investments. Indonesia is already in the process of creating legal frameworks to facilitate blockchain and crypto innovations.
Additionally, Thailand passed cryptocurrency laws in 2018 to take advantage of blockchain-powered solutions for cross-border transactions. The Philippines is also making headways into digital currency adoption as it pioneered the use of blockchain for treasury bond distribution.
Meanwhile, Vietnam passed Resolution No. 17/NQ-CP to facilitate the country’s development of its e-government system while establishing a legal framework for blockchain use.
Slow but steady progress
Digital currency dominance may be a tall order for Southeast Asia, but it is not an impossibility. The openness and dynamism of the Southeast Asian market make it an agile player in modern technological and economical developments.
At the very least, the region is expected to become a formidable force in the decentralised digital currency market, especially with the perceived Asian digital currency leader making it clear that its state-backed digital currency does not intend to follow the footsteps of bitcoin and other decentralised and largely unregulated digital assets.
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