Chainalysis's 2023 global crypto adoption index ranks Southeast Asia as a global leader in crypto, Web3, and AI adoption. This region boasts an impressive five countries in the top 10.
Leading Web2 giants like Sony, Square Enix, and Riot Asia are actively participating in the Web3 landscape, particularly in gaming, and their efforts have been instrumental in creating a crypto-friendly environment in Southeast Asia. Despite the region's openness to fintech innovations, over 70% of adults still lack access to financial services. Kim firmly believes that crypto can bridge these gaps, thus paving the way for economic empowerment and comprehensive financial accessibility.
The crypto and blockchain industries have made remarkable progress in becoming fully functional and established sectors worldwide. However, it is evident that some regions, particularly Southeast Asia, have displayed a greater propensity to embrace these financial and technological advancements. With countries such as Vietnam, the Philippines, and Thailand leading the crypto revolution, Southeast Asia is significant in Chainalysis's global crypto adoption index. In fact, five countries in South and Southeast Asia are among the top 10 worldwide for crypto adoption. To gain more insights into the region's increasing prominence and favorable disposition towards the industry, Cointelegraph interviewed Nathan Kim, the marketing director at Unopnd, who is spearheading Southeast Asia Blockchain Week.
Asian Countries at the forefront
Thailand is indisputably leading blockchain adoption across various industries and supporting blockchain-based projects. Its commitment to fostering innovation has become a key player in the regional blockchain scene. Thailand and Singapore are leading the way in the blockchain scene, with Thailand's unwavering commitment to innovation and Singapore's investment of $112 million in local fintech solutions.
Even during the last year, Singapore saw many of the world's major crypto platforms apply for licenses to operate in the country. In June 2023, Japanese and Singaporean regulators joined forces on the regulation and pilot testing of cryptocurrency projects following the latter's Project Guardian initiative. However, it's worth noting that countries in the region remain fragmented in their regulatory approach to the industry. This regulatory diversity underscores the challenges and opportunities in the region's journey toward adopting and regulating Web3 technologies. As leading Southeast Asian countries mature in Web3 adoption, the region can create more synergy for the Southeast Asian region. A collaborative spirit in Southeast Asia could be an essential piece to the puzzle of the region's ability to realize the potential and benefits of ongoing Web3 adoption fully.
Web2 Facilitating the Adoption of Web3
Kim emphasized the crucial role of legacy Web2 giants in the region in advancing Web3 adoption, particularly in the intersection of Web3 and gaming. Major Web2 companies have shown significant interest in the emerging Web3 landscape, especially in the gaming sector, which is the perfect gateway for many.
For instance, Sony, Square Enix, and Riot Asia are among the large Web2 companies actively participating in the region and promoting local Web3 gaming initiatives. Sony has demonstrated its dedication to integrating blockchain technology into the gaming experience by filing a patent for NFT transfers between games and consoles. Square Enix is another major player making strides in Web3 with its gamified collectible experience, Symbiogenesis. Meanwhile, the former CEO of Riot Asia is contributing to the Web3 ecosystem by developing a blockchain-powered MOBA game.
These strategic partnerships and initiatives have significantly contributed to creating crypto-friendly ecosystems in South America and Southeast Asia.
Empowerment through Economic Growth and Forward-thinking Regulations
Even though many Southeast Asian countries have shown interest in the fintech space, over 70% of adults in the region still lack access to adequate financial services. Millions of small and medium-sized businesses in the area face significant funding gaps. In this context, crypto has emerged as a solution to bridge these gaps and promote economic empowerment for these groups, ushering in a "new era of comprehensive financial accessibility."
It is important to note that several Southeast Asian countries have already recognized the potential benefits of crypto for their populations and have implemented policies that reflect this. These frameworks are designed to provide clarity, encourage innovation, and protect consumers rather than adopt a restrictive approach. However, while this technology has been a game-changer for the region, there has also been a rise in illicit activity using cryptocurrencies.
According to a United Nations report, Southeast Asia's "gray" casino industry exploits crypto and other modern technologies.
Incoming AI dominance
The emergence of artificial intelligence (AI) has been a significant theme in Southeast Asia, with countries like Singapore leading the charge in developing technology suitable for local communities. The synergy between Southeast Asia's AI, crypto, and blockchain sectors holds immense potential for advancing the area into a global tech hub. Adopting and integrating AI technologies can drive innovation, improve efficiency across various sectors, and position Southeast Asia as a key player in the global tech-driven economy.
Southeast Asia will be the worlds fourth-largest economy by 2030. Its 700 million population is young, educated, and increasingly online, and a growing middle class is attracting the world's attention. According to data from the US-ASEAN Business Council, AI has the potential to contribute nearly $1 trillion to Southeast Asia's gross domestic product by 2030, particularly for Indonesia, one of the region's largest economies.
The Adoption of Institutions in Asia is Growing
Asia is undoubtedly leading the way in crypto innovation and adoption, with remarkable progress in investment, user engagement, product expansion, and government action. For instance, Bhutan has recently invested a whopping $500 million to expand bitcoin mining facilities, while in Singapore, 75% of institutional investors plan to increase their allocations to digital assets in 2024. Harvest Funds and VSFG have also announced their intentions to submit applications for a spot bitcoin ETF in Hong Kong.
On the regulatory front, Singapore, Japan, Hong Kong and South Korea have all taken decisive steps towards clarifying rules around security token offerings, while financial institutions such as DBS Bank in Singapore, Hongkong and Shanghai Banking Corporation, and Hana Bank in South Korea have all taken bold pro-crypto actions.
Adoption and Everyday Utilization of Cryptocurrency in Asia
The crypto market in Central & Southern Asia and Oceania (CSAO) is rapidly growing and has become one of the most dynamic markets in the world. According to Chainalysis' "The 2023 Geography of Cryptocurrency Report," CSAO ranks third in raw transaction volume, just behind North America and Central, Northern & Western Europe (CNWE). Decentralized finance (DeFi) in Asia is a prime example, where CSAO accounted for 55.8% of transaction volume between July 2022 and June 2022, compared to 35.3% the previous year, marking a 20% jump. Moreover, CSAO dominates the purchasing power as six of the top 10 countries with high purchasing power are located in the Asian-Pacific region, including India, Vietnam, the Philippines, Indonesia, Pakistan, and Thailand.
The potential for crypto in the financial systems in Asia is enormous and should not be overlooked. With over 71 million people residing in Thailand alone, 16% are still unbanked, highlighting the need for alternative financial solutions. There is a growing demand for crypto. As more people adopt and interact with digital assets, this increased engagement can revolutionize the banking industry. The practical retail usage of crypto in developing markets in Asia will eventually converge with institutional adoption seen in more developed countries, and the impact on how world banks will be significant.
Progressive regulatory movement
Engaging with each country on its terms as it develops its own set of rules and regulations will be challenging. However, it is crucial to do so as it effectively opens up tremendous opportunities. Hong Kong authorities are relentlessly striving to establish their country as a pioneer in Web3. Interestingly, regulators, governmental officials, and industry leaders are in sync regarding their goals and how they want to achieve them. Notably, regulators are compelling banks to establish accounts for digital asset businesses.
Hong Kong's regulators are turning to the digital asset industry to boost its economy. The city now allows licensed exchanges to offer retail trading services, putting it on the map. Moreover, regulators are open to approving spot bitcoin ETFs. Hong Kong is taking the digital asset industry seriously as the sector that will provide the necessary stimulus to its economy, which cannot rely solely on real estate, manufacturing, or traditional financial services.
The success of Hong Kong in becoming a leading crypto hub in the coming years is being closely monitored by the world. If the region's digital asset engagement shows significant potential, it could provide the Chinese government with comfort and security without threatening their regime or concerns about capital flight. This could pave the way for Hong Kong to establish itself as a true crypto powerhouse by 2024 and beyond.
Hong Kong's success has the potential to set the stage for a gradual relaxation of mainland China's current hardline approach to cryptocurrency. Even a slight change in stance from China can considerably impact the digital asset sector. Despite the regulatory challenges, companies of all sizes in China are still actively investing in and innovating with blockchain technology. They have not abandoned the "builder" aspect of the digital world.
Asian countries are taking a practical and proactive approach towards digital assets like crypto. Singapore's approach has been particularly successful in attracting investment and talent into the country. Other major economies in the region, such as Japan, South Korea, and Taiwan, are also formulating and implementing regulations that will help to create a foundation for investor confidence and crypto growth. Despite the uncertain regulatory environment in India, people are still engaging with crypto. These Asian countries are setting a unique example for the world to follow in creating more financial inclusion for their citizens.
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