Crypto is increasingly looking to Asia for a revival as the chastened sector reels from a crackdown in the US.
Greater regulatory clarity in Hong Kong, Singapore and Japan is a drawing card, industry executives said, compared with enforcement actions and lawsuits by US agencies and slow progress in Congress toward legislation to clarify the status of digital assets.
The company heads spoke in Singapore at a high-profile Asia crypto conference, which began Wednesday right after the Binance.US exchange eliminated over 100 staff as the American clampdown erodes its business. A $2 trillion crash in digital assets since 2021 added to the challenging backdrop.
Among the attendees was Tom Farley, a former New York Stock Exchange president who is chief executive at the Gibraltar-registered digital-asset exchange Bullish. Farley said Bullish plans to apply for a license in Hong Kong after the city rolled out a new regulatory framework to develop a crypto hub.
“We have chosen not to engage in commercial activity in the US,” he said in an interview. “We are approved in many states. We could do it tomorrow. But the environment in the US is not terribly friendly. It’s frustrating.”
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The US Securities & Exchange Commission under Chair Gary Gensler views most tokens as unregistered securities and has acted against issuers and exchanges for failing to register with the agency. But conflicting court judgments on the matter have stirred confusion in the US. Speaking before a Senate panel on Tuesday, Gensler reiterated his view that crypto is rife with fraud and misconduct.
Balancing Act
Asia, meanwhile, is enacting crypto rules, exemplified last month by Hong Kong’s first licenses for trading platforms under its new regulations. Hong Kong, Singapore, Japan and South Korea are among the jurisdictions trying to create frameworks that are strict on protecting investors but also attractive to firms — a tough balancing act.
“Strictness doesn’t bother me,” said Brad Garlinghouse, chief executive of San Francisco-based crypto payments company Ripple Labs Inc., which is embroiled in a legal dispute with the SEC. “It’s the lack of clarity. It’s when it’s not clear what being a good actor looks like, that makes it hard.”
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The SEC sued Ripple in 2020, alleging the company failed to register the XRP token as a security. Earlier this month, Ripple objected to an SEC request to appeal a court ruling that tokens aren’t securities when sold to the public.
In the likes of Singapore, Hong Kong, the UK and Dubai, “governments are partnering with the industry and you’re seeing leadership, they’re providing clear rules and you’re seeing growth,” Garlinghouse said on Bloomberg Television. He added that more than 80% of Ripple’s hiring this year will be outside the US.
Aside from Ripple, some of the SEC’s other notable lawsuits include those against Binance and Coinbase Global Inc., which the companies are contesting. The agency intensified a crackdown after a rout in tokens in 2022 and blowups such as the bankruptcy of the FTX exchange, whose co-founder Sam Bankman-Fried goes on trial in October.
“It’s not a matter of lack of clarity,” Gensler said earlier this year. “This is a field that, in the main, has built up around non-compliance, and that’s their business model.”
Asia’s Pull
There have been growing signs of Asia’s pull in recent months. For instance, leading digital-asset market maker Wintermute Trading Ltd. said in July it planned to move staff to Singapore. Huobi, OKX and Amber Group have said they plan to apply for licenses in Hong Kong.
In Japan, banking giant Mitsubishi UFJ Financial Group Inc. is in talks with companies behind popular global stablecoins as well as other firms about issuing such tokens. The nation’s stablecoin law — one of the first among major economies — became operative on June 1.
“Japan is quite interesting,” Wintermute’s Chief Executive Evgeny Gaevoy said in an interview. “You are seeing it opening up much more, you are seeing positive developments on the taxation side. It might be important to have a small office there to be able to serve local counterparties.”
Of course, the crypto industry could just as quickly pivot back toward the world’s largest economy as the US over time puts in place clearer rules. The question is how long that might take.
“It will be regulated,” Jenny Johnson, chief executive of Franklin Templeton Investments, said on a panel at the Singapore conference. “It takes time.”
