Play2Live is a startup company, setting up a blockchain-based streaming platform for gaming and eSports. As part of the rollout of its roadmap, it is considering expanding into Asia.
In Part 1 of this series, which looked at major trends in gaming and eSports in Asia, it was concluded that Play2Live was well suited to the Asian environment. Part 2 provided a more in-depth look at gaming in 12 countries in Asia. It suggested that Japan, Taiwan, South Korea, Singapore, Indonesia and India might be the countries to consider.
However, an important part of the success of the Play2Live platform will be the utilization of the internal cryptocurrency, the LUC, as the medium for payment for all transactions on the platform. This means attracting gamers who are cryptocurrency-friendly and developing new crypto-users from the gaming audience. As a general statement, it can be said that Play2Live is likely to succeed in this. You can read the rationale for this here.
Nonetheless, before expanding into a new area, Play2Live will want to test the waters in specific countries to assess how likely they will be to adopt the Play2Live business model.
This part of the 4-part series will analyze the regulatory approaches to cryptocurrencies in 12 countries in Asia.
Cryptocurrency profiles of 12 Asian countries
Around the world, countries are trying to decide how they are going to treat cryptocurrencies. 2018 seems to be the year for the introduction of more regulation, including in countries in Asia.
Most of the world’s trading happens in tech-savvy Asia, but the rules seem to be changing. In particular, China and South Korea have created a somewhat hostile/uncertain environment for cryptocurrencies. Japan and Singapore are more friendly but are increasingly regulated.
- China
Despite China having more than half of the world’s bitcoin miners and the highest cryptocurrency adoption rate in the world, the government has now imposed stringent regulations. It has outlawed digital-asset exchanges and ICOs blocked online access to overseas trading platforms and cut off power to bitcoin miners. These measures are focused on stemming capital outflows and corruption, and on avoiding financial instability.
While just about everything crypto has been banned, the Chinese Ministry of Industry and Information Technology has made statements about the promise of the technology and has just released the first of what it says will be ongoing cryptocurrency ratings. The criteria for rating are technology, applicability and innovation. This seems to be an attempt by China to track and promote blockchain technology.
- South Korea
South Koreans are said to be obsessed with cryptocurrencies. At the height of the speculation fever in 2017, South Koreans were paying prices 50% higher than those in America. The won was the second most-used currency to trade for cryptocurrencies, after the American dollar.
The cryptocurrency world is watching what is happening in South Korea. The price of Bitcoin dropped 12% in January following an announcement from the Korean Justice Department regarding the possible closure of all exchanges.
The government is moving away from its previous support for cryptocurrencies, stating fears of money laundering, tax evasion and excessive speculation. Exchanges can still operate, but there is increased vigilance, and minors, foreigners and financial institutions are banned from using them. From January 2018, anonymous accounts are no longer allowed to trade. Upbeat, one of the world’s largest exchanges, was raided by authorities in May. Following hacks to the Coinrail and Bithumb exchanges in June 2018, the government has announced that it is to amend legislation to subject “virtual currency handling businesses” to the same reporting regulations as banks. The Fair Trade Commission in April made recommendations to exchanges about their terms of use. South Korea has also been asked by the New York State Department of Financial Services for details of cryptocurrency trading among six Korean commercial banks with branches in New York.
So there is a fair degree of uncertainty about cryptocurrencies in South Korea.
- Japan
Japan has been more welcoming and has positioned itself to attract the best of the industry. Japan became the first country to legalize cryptocurrencies last year. The Payment Services Act designates cryptocurrencies or virtual currencies as a form of payment.
According to an April 2018 survey reported by Nekkei Newspaper, 17.2% of Japanese had invested in cryptocurrency. Most of them were millennials, and more than half had invested less than $45 500. Following the hype at the end of 2017 and the subsequent crash in 2018, more than sixty percent of these investors had lost money. Nearly half are reluctant to try it again.
Following the infamous hit on the Mt Gox exchange in 2014, Japan has been working on creating a template for cryptocurrency regulation around exchanges and ICOs. Exchanges are subject to strict registration and financial controls.
A hack of its Coincheck exchange early in 2018 has made it a bit more cautious, and several exchanges were closed for a period to allow for security checks. A self-regulating body, the Japan Virtual Currency Exchange, has been set up to oversee virtual currency exchanges.
The next area for attention is ICOs. Focus will be on how projects will use investors’ funds and will properly disclose risk.
Japan has created a lot more clarity around the cryptocurrency industry, and its templates may become the example for others to follow.
Singapore
Singapore has been relatively lax on cryptocurrency or “crypto token” regulation while expecting tokens to obey the same securities laws as fiat currencies. The Monetary Authority of Singapore (MAS), noted in March 2018 that it is monitoring the key risks of financial stability, money laundering, investor protection and market functioning. At the same time, it noted that it was not cryptocurrencies per se that they were concerned about. Rather it was “the enchantment with these tokens as a way to make a quick buck and their abuse for illicit activities”.Taiwan
Taiwan is currently taking a wait-and-see, neutral approach. Recent reports, however, indicate that Taiwan may be moving towards liberalization rather than strict regulation for cryptocurrencies. This is seen as an attempt to bolster the domestic financial technology sector. The opinion of a lawmaker pushing for the adoption of a clearer “playbook” is that “There needs to be a whole new set of frameworks and narratives to position crypto and its underlying technology blockchain as the strength that Taiwan can develop.”Thailand
In June 2018, the Thai Securities and Exchange Commission released details of new cryptocurrency and ICO regulations. Seven cryptocurrencies have been legalized — Bitcoin, Ethereum, Bitcoin cash, Ethereum classic, Litecoin, Ripple, and Stellar. They can be traded on licensed exchanges in the country or through licensed dealers and brokers. Strict rules and financial limits have been imposed. Taxation laws have also been passed, including that funds raised through ICOs will be taxed. The earlier legislation prohibits the use of credit cards to buy cryptocurrencies.
New regulations in July 2018 impose strict conditions for ICOs. A somewhat surprising part of the regulation seems to be that “honest ICOs” will be allowed. This seems to apply to ICOs which have tokens that have utility value on day one of their offerings.
- Indonesia
A significant recent decision from Indonesia’s Futures Exchange Supervisory Board is that cryptocurrencies should be regarded as commodities. This means that they can be traded on traditional exchanges. This decision is expected to be followed by a regulatory framework to cover the operation of crypto-exchanges, wallet service providers and crypto miners. It will also cover issues around taxation, money laundering and the financing of terrorism.
These moves to legalize crypto come just a few months after the central bank of Indonesia banned the use of any cryptocurrency as a method of payment in Indonesia. This ban had affected tourism to places like Bali, which had been accepting payments in both fiat and crypto.
One of South Korea’s leading crypto exchanges, Coinone, has just expanded to Jakarta in Indonesia. Both Indonesians and foreigners will be able to trade on this exchange.
- India
India was previously regarded as a friendly environment for cryptocurrencies, but 2018 has seen a tougher stance being taken, particularly to prevent abuse, illegal activity and tax evasion. Indian authorities are monitoring exchanges to pick up on tax evasion.
Many believe that it is unlikely that India will be able to ban cryptocurrencies in the way that China has. One of the reasons is that India has been so cash-reliant, and crypto wallets and transactions provide a solution for this. Millions of Indians have turned to digital assets like bitcoin as a means to save and transfer money despite the lack of clarity on the regulatory front.
However, the Reserve Bank of India has recently imposed a complete ban on all crypto-based activity in India, with effect from 6 July 2018. A Supreme Court ruling on this decision is expected by the end of July. In the meantime, many are hopeful that rather than a complete ban, India will put in place checks and balances and allow the growth of this young industry.
Hong Kong
Hong Kong regulators maintain a fairly hands-off approach, although permission is required for trading anything that qualifies as a security. Digital tokens are generally regarded as “virtual commodities” rather than currencies. A recent fraud report shows that in Hong Kong there is a less financial crime being experienced with crypto-related transactions than there are with “Stored Value Facilities” such as PayPal or Alipay.Philippines
The Philippines central bank has not endorsed the use of any cryptocurrencies, as they believe it is open to misuse. They are also due to issue new regulations about ICOs. However there are five licensed crypto exchanges, and while there are some minimum liquidity requirements, the central bank seems to want to keep the registration process as simple as possible.
However, the Cagayan Special Economic Zone and Freeport have just issued licenses to ten companies to undertake crypto operations in the Zone. According to some reports, this is likely to grow to 25, as soon as some regulations for cryptocurrencies have been drafted. These can include exchanges, mining and ICOs. The Cagayan regulator also aims to open a university to train students and future workers in blockchain and financial technology.
Vietnam
The status of cryptocurrencies in Vietnam is unclear. What is clear is that they are not a legal means of payment in Vietnam, and attempting to use bitcoin or other digital currencies as payment will lead to heavy fines. However, there is no clarity about whether cryptocurrencies should be regarded as “money” or “commodities”. Commodities can be traded, as in bartering agreements. Several exchanges have continued trading, based on this distinction in definition, and the daily bitcoin trading volume in the country is estimated at $100 million.Malaysia
According to the head of the central bank of Malaysia, cryptocurrencies would be neither banned nor recognized. Instead, the public could decide on its own whether they wanted to invest in cryptocurrencies.
Exchanges continue to operate, with some reports showing that an average of $17 million is traded per month. There is increased oversight of this sector, however, and strict KYC adherence is required. This is primarily aimed at preventing money laundering and terrorism funding.
Play2Live in Asia — considering regulations on cryptocurrencies
It is clear that more and more regulations about cryptocurrencies are being introduced by Asian governments. However, in general, they are not closing the door on coins and associated products. And the appetite for cryptocurrencies is fairly high in many of these countries.
As Play2Live considers where it should place its efforts to expand into the Asian market, regulations about cryptocurrency usage must be taken into account.
The analysis in this article suggests that Japan, Taiwan, Singapore, Indonesia, Thailand, Hong Kong and Malaysia are the most crypto-friendly. Play2Live could probably operate quite easily in these countries, not least because the Play2Live token, the LUC, has such high utility value. Regulations in South Korea and India have created uncertainty, but the appetite for cryptocurrencies in these countries is particularly high.
So far, in this series, we have considered the Asian market in terms of major trends, attitudes and regulations to gaming and the use of cryptocurrencies. The final article in the series, Part 4, will consider attitudes and regulations to gambling and betting, and how successfully Play2Live could introduce the betting component of its streaming platform into these countries.
Stay tuned!