High-growth economies take the lead in crypto regulation

Although the United States is often considered a leader in both financial and technological advancement, it has clearly struggled in recent years to establish a clear (and consistent) cryptocurrency regulatory framework.

This lack of clarity has allowed other countries, especially the Middle East and Asia, to take the lead. High-growth economies in these regions have built frameworks tailored to digital assets, often more effectively than their Western counterparts. These regulations provide a model for the rest of the world to follow. If Western countries don’t catch up, they risk being left behind as the crypto industry shifts its center of gravity.

The US should not be the regulatory blueprint

Over the past few years, the United States has struggled in its attempts to regulate the cryptocurrency industry, with regulatory bodies such as the SEC often taking hostile and inconsistent actions.

Lawsuits against Ripple and Coinbase have made headlines around the world, clouding innovation and forcing some crypto companies to relocate to friendly countries. Without clear guidelines from the SEC, founders and investors are walking on eggshells, unsure whether their next move will land them in legal trouble.

One of the main problems is that the US is trying to subject digital assets to existing laws (such as securities and commodity regulations) that were not designed for cryptocurrencies in the first place.

While the newly elected crypto-friendly Congress in the US shows promise for progress, the country has a lot of catching up to do. It is no longer practical to wait for the United States to set the standard when other countries are already leading the way.

Emerging markets are regulatory hidden gems

Meanwhile, high-growth markets such as Indonesia and Malaysia are introducing new ways to approach cryptocurrency regulation, with the understanding that digital assets are not the enemy and should be regulated like any other asset. are.

While the US SEC spent years classifying cryptocurrencies such as Ethereum (ETH) as securities, Indonesia’s Commodity Futures Trading Regulatory Authority (known as BAPPEBTI) announced as early as 2019 that all digital assets should be classified as securities. officially classified as a product.

In Malaysia, the Securities Commission has created a comprehensive framework for virtual currency exchanges with high standards for licensing, investor protection, and anti-money laundering. This has also been implemented in Indonesia, introducing clearer rules for exchanges, including customer funds separation obligations, strong security requirements, and token listing requirements. In both countries, these measures have reduced fraud and increased trust in the system as a whole, making the use of cryptocurrencies safer (and more attractive!) for everyone.

This is the level of clarity and commitment we need for Web3’s global adoption.

As a result, the Asian crypto market is thriving. Indonesia’s virtual currency market had a transaction value of over $30 billion from January to October 2024, an increase of 350% compared to the previous year. It is currently the world’s third-largest cryptocurrency adopter after the United States. In fact, seven of the top 20 countries in this index are located in Central and South Asia and Oceania, which is the world’s largest cryptocurrency adopter. This shows that it is a multipolar industry.

Emerging markets lead in crypto utilities

But why does crypto regulation seem to be more advanced in high-growth markets? Because crypto utilities shine brighter in these markets than anywhere else?

Cryptocurrencies address several pitfalls, including high transfer costs and limited access to asset ownership and investment. On average, remittance fees are about 6.65% of the amount remitted, and they can account for a large portion of the amount workers send to their families. In the Philippines, remittances account for nearly 10% of the country’s GDP, showing just how important remittances are.

Digital assets can also act as a hedge against inflation. In Asia and the Middle East, gold has traditionally been a safe and reliable asset that has maintained its value over the years. However, access to owning physical gold is complicated by high entry fees, storage issues, and lack of access for the general public. Cryptocurrency enables the creation of tokenized gold, allowing consumers to own the tokenized digital portion of gold at a much lower price, thereby lowering the barrier to entry.

Cryptocurrency regulation in high-growth markets is not perfect and will take several more years to become more comprehensive. However, these markets understand that effective regulation is not one-size-fits-all and are tailoring their rules to actual digital asset use cases.

The future of cryptocurrencies will not be defined by Wall Street or Silicon Valley. It will be defined by people who can routinely use crypto to solve real-world problems and address the pitfalls of traditional finance. That’s exactly what cryptocurrencies are for.