Crypto-Friendly Does Not Mean Crypto-Easy

A major theme of 2023 was Asia’s continued rise as a critically important region in the crypto world. This is largely thanks to well-known digital asset hubs like Singapore, as well as the re-emergence of Hong Kong and Japan. While these jurisdictions indeed welcome digital assets, the hype around them can be somewhat misleading. Places that are commonly referred to as “crypto-friendly” or “pro-crypto,” actually have some of the toughest rules in the world. Crypto-friendly does not mean crypto-easy.

Singapore got its pro-crypto reputation thanks to its early moves to regulate the industry and a consultative approach from its regulators. But while Singapore may be all in on asset tokenization, it’s actually not “crypto-friendly” at all. Singapore’s financial regulator basically said as much. Last year, Ravi Menon, managing director of the Monetary Authority of Singapore, gave a talk called, “Yes to Digital Asset Innovation, No to Cryptocurrency Speculation.” This year he went even further, saying that cryptocurrencies “have failed the test of digital money.” Menon argued that cryptocurrencies have not performed well as a medium of exchange or a store of value. He also pointed to sharp speculative swings and significant losses by crypto investors.

It’s not just talk, either. Last year MAS issued guidelines to discourage crypto trading by the general public, which included prohibiting crypto service providers from advertising in public areas. By contrast, Singapore regulators are extremely enthusiastic about the tokenization of funds such as foreign exchange and bonds.

There’s also been a lot of excitement about Hong Kong’s re-emergence as a crypto hub. In June, Hong Kong’s Securities and Futures Commission (SFC) started accepting license applications for crypto exchanges. Hong Kong appears to be more outwardly friendly to crypto trading than Singapore. Hong Kong regulators, for example, pushed banks to take on more cryptocurrency exchanges as clients.

But again, this friendliness comes with a lot of conditions. Hong Kong still has only two licensed exchanges, with only spot trading and a limited list of tokens. Ninety-eight percent of an exchange’s assets must be held in cold wallets. Exchanges also must set up a legal entity for custody inside of Hong…