Asia can be considered a Bitcoin hotspot. Japan, South Korea, and Vietnam have been responsible for 80% of Bitcoin trading activity by the end of November. However, Asian regulators are becoming uneasy and worried over the popularity of Bitcoin.
Bank of Japan Governor Haruhiko Kuroda mentioned that the surge in the price of Bitcoin is “abnormal”. However, his opinion isn’t quite isolated. Major economies within the region from Australia to Singapore have expressed their concerns with the growing popularity of Bitcoin and other cryptocurrencies.
And this isn’t surprising considering that Japan, South Korea, and Vietnam has dominated Bitcoin activity in the last month as reported by the Wall Street Journal.
If you will look at cryptocurrencies, it isn’t just Bitcoin that has spiked by a large margin in 2017 alone. Bitcoin may have spiked by 1500% (and then dropped a significant amount shortly after), there are other altcoins that have even surpassed Bitcoin’s jump. There is always fear that a plunge may affect financial markets.
Despite the dangers presented by virtual currencies’ volatility, Goldman Sachs has shown interest in setting up a digital currency trading desk. On the other hand, you have CME Group and CBOE that has launched Bitcoin futures contracts.
Cryptocurrency Regulations in Asia
As for economies in the Asia Pacific region, many are less welcoming. China has banned Bitcoin trading along with initial coin offerings (ICOs) just this September. China’s central bank mentioned that unregulated market can be a financial risk to China’s economy.
However, Beijing is looking closely at the use of digital currencies. It is interested in having China’s own digital currency.
South Korea has banned financial institutions from dealing with virtual currencies. This means that financial institutions can’t possess, hold, and buy cryptocurrencies. It has also made ICOs illegal. And South Korea’s move isn’t really surprising. Cryptocurrencies are quite popular in the country. 20% of the entire Bitcoin trading worldwide came from South Korea.
Japan Legalized Bitcoin
Japan, on the other hand, favored Bitcoin as it is now legal to use the cryptocurrency along with other virtual currencies to make payments. So far, there are 11 recognized cryptocurrency exchange operators in Japan.
However, Bank of Japan expressed concerns on Bitcoin mainly due to the number of people that have been using the cryptocurrency for speculative purpose and not really just for payment of goods or services.
Southeast Asia and the 1997 Asian Crisis
During the 1997 Asian financial crisis, it was Southeast Asian countries that were most affected 20 years ago. Different Southeast Asian countries have issued warnings against the potential downsides of virtual currencies in the region. Indonesia already has plans to ban cryptocurrency transactions by 2018. The same with Vietnam, they are also looking to ban payments using virtual currencies by the following year.
Singapore warned that there is a chance that investors could actually lose their entire capital considering the highly volatile and speculative nature of cryptocurrency investment.
Since Asian regulators are becoming worried, could this mean that Bitcoin could lose its popularity soon considering that Asia is a large market for cryptocurrencies?