How crypto adoption is transforming finance in Asia
Cryptocurrency is moving in on Asia, bringing with it new financial opportunities for everyday users.
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Cryptocurrency is on a path to ascension, dominating conversations the world over with its promises of decentralised finance and better opportunities in the age of the Internet.
Unsurprisingly, Asia is at the frontline of this new digital economy.
A Messari report shows that at the end of last year, 6 of the world’s top 10 crypto unicorns were located in Asia. Of the top 20 token projects, over 40% of global market capitalisation is based in this region today.
Asia accounts for 60% of the world’s population and has long been a hub for financial and technological industries, but the driving forces behind crypto’s rapid uptake are more complex.
Let’s take a look at some of the reasons crypto has gained its foothold in Asia, and how it’s transforming the local financial landscape in its wake.
A strong tech presence makes the region ripe for disruption
Asia has the largest number of Internet users in the world, with 51.8% of total worldwide usage. This has provided fertile ground for crypto adoption, propelled by a public sector that has identified this trend and has been busy building the infrastructure to foster digital innovation.
The region already has a strong technological pedigree to daily digital life. A young, tech-focused population that’s comfortable integrating all sorts of electronic devices.
Within this context, crypto disruption is a logical evolution. The trend is already well in motion, with Finder’s latest cryptocurrency adoption index showing that more than 15% of Singaporeans – and growing – now own crypto.
It led to initiatives such as Mastercard’s recent partnership with 3 leading crypto service providers from the Asia Pacific region to launch its own crypto-funded payment card.
Fintech is already front and centre
Singapore is ranked #10 in a report’s global rankings of fintech startup strength, with 5 other Asian markets also ranking in the top 20. This impressive fintech presence is laying the groundwork for new crypto startups to spring up, with many incumbents now pivoting their product offerings as well.
Southeast Asia is also a digital payments hotspot.
A recent report from the International Data Corporation (IDC) says that ecommerce spending is expected to grow by a whopping 162% by 2025, with 91% of payments being digital.
Crypto is at the frontier of financial inclusion
In conflict with this is the reality that parts of APAC are among the most underbanked and unbanked regions in the world.
This lack of equal opportunity and financial inclusion for millions of citizens has provided yet another use-case for crypto to contribute to levelling the playing field.
In recent years, it has become nearly impossible to find rewarding interest rates on capital parked within the traditional banking system. Asia is no exception, with average savings account interest rates in Singapore coming in at just 0.33%.
In this environment, dozens of DeFi protocols and centralised exchanges such as AAX are attracting users looking for more bang for their buck.
Depending on the digital asset and platform used, users could be earning in the region of 20% APY on crypto holdings, a far cry from what legacy institutions have to offer.
First-movers for digital innovation
GameFi and NFTs are both trending around the world. The fact that these are taking off on such a scale in Asia is a sign of what’s to come.
At the intersection of art and finance, NFT adoption is on the rise, with 6.8% of Singaporeans now holding these new digital assets.
We’ve also seen how Axie Infinity caught fire in the Philippines, becoming one of the most popular GameFi platforms used worldwide.
Stricter GameFi regulations coming into place in China and South Korea could signal a major shift in attitude across the region, but for now the trend looks here to stay.
Governments are paying close attention
Throughout Asia, governments are starting to pay attention to the macro trends at play and the rising popularity of crypto both within and outside the region.
There are lots of examples of Asian markets leading the way for crypto regulation in a bid to make the industry more robust and entice investors.
Just this month, the Thai government cabinet approved relaxed tax rules to incentivise retail investment and promote the crypto startup growth.
Central bank digital currencies (CBDCs) are also making a splash, with several Asian countries paving the way.
- China has implemented its pilot program for the digital yuan (eCNY).
- Hong Kong is in the early stages of designing its own digital payment system.
- South Korea has made an announcement calling for a tech partner to create its CBDC.
- Singapore has created a task force in an effort to make its digital currency a reality.
- Cambodia’s Project Bakong is one of the few fully operational retail CBDCs already on the market.
CBDCs can serve as an entry point to crypto wallet ownership for everyday people, and in turn as a government-sanctioned stepping stone into the broader crypto market.
In a nutshell, a CBDC is a digital fiat currency issued and controlled by a country’s central bank. Instead of physical money, it’s a tokenised representation of the national currency with a view to expanding the capabilities of financial products and cross-border payments.
The crypto (r)evolution is in midswing in Asia. Builders in the industry are creating the products a user base wants and needs while governments are trying to keep up with positive regulations and their own digital products.
What is for sure, though, is that the Asian market is undergoing a major financial transformation. Thanks to its tech-savvy population, advanced public sector infrastructure and pro-digital innovation stance, crypto is well on its way to taking centre stage.
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