Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heart podcast,
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Monday, November. Ask any regulator and they'll
Speaker 1: tell you the same thing. They have a tough job.
Speaker 1: As soon as they seem to have a grasp on
Speaker 1: whatever the last crisis was that blew everything up. Something
Speaker 1: new comes along and blows up in the patch that
Speaker 1: they were responsible for. But that doesn't mean they all
Speaker 1: take the same approach to managing and preventing crises though.
Speaker 1: Consider crypto so many different vintages of debacle, so many
Speaker 1: different countries involved. In late Hong Kong updated its crypto
Speaker 1: regulations in a way that signal a goal of increasing
Speaker 1: retail access to the asset class US. Just days later,
Speaker 1: f t X filed for bankruptcy in nearby Singapore, which
Speaker 1: has been tightening regulations after big losses this year. For
Speaker 1: retail investors, the attitude seems to still be a little
Speaker 1: bit stricter. Korea, which is still dealing with the aftermath
Speaker 1: of the collapse of the Terra Luna tokens, is currently
Speaker 1: focusing on enforcement, and India somewhat uniquely in the region,
Speaker 1: is using tax policy to attempt to drive behavior. Here
Speaker 1: with me to talk about how different Asian countries are
Speaker 1: approaching crypto regulation in the shadow of the ft X
Speaker 1: collapse is Bloomberg Senior editor for Crypto, snel Jagtiani. It's
Speaker 1: going to be less about what's the taxonomyw tokens and
Speaker 1: how do they operate and how do we figure that out?
Speaker 1: And it's going to be more about the traditional things.
Speaker 1: Here's a crypto outfit, Okay, what do we know about it?
Speaker 1: Where the assets are? They say? Yeah, Neil, welcome back
Speaker 1: to the podcast. Thank you, Stacy Murray. You are a
Speaker 1: senior editor for Crypto based in Sydney and have lived
Speaker 1: and worked in Asia for a decently long time at
Speaker 1: this point and have this sort of unique vantage point
Speaker 1: of being able to see in real time, as it were,
Speaker 1: how different jurisdictions are trying to figure out what the
Speaker 1: hell they should do about this crypto asset class. Can
Speaker 1: you talk a little bit about the differences of opinion.
Speaker 1: Shall we say that they're emerging between two of the
Speaker 1: biggest players in the region on this subject? Sure? Yeah,
Speaker 1: Currently I'm in Singapore. UM and Singapore a few years
Speaker 1: ago was an early, if you like, adoptor of the
Speaker 1: idea that there's something to be said for trying to
Speaker 1: develop a crypto hub. So they were at the forefront
Speaker 1: of trying to create an environment that attracts investment and
Speaker 1: would yield a collection of companies and an investor landscape
Speaker 1: that gives them a chance to be a hub for Asia.
Speaker 1: So they began to pursue that. And then of course
Speaker 1: we've seen over the past year the route in cryptocurrencies
Speaker 1: and the way in which investors like the three Hours
Speaker 1: hedge Funds has blown up. Crypto hedge fund Three Arrows
Speaker 1: Capital has been ordered into liquidation by importing the British
Speaker 1: Virgin Islands. We saw the collapse of the terror USD
Speaker 1: in the lunar ecosystem. Terror u s D and its
Speaker 1: sister token Luna lost their head to the dollar in
Speaker 1: the last few weeks. They had a spectacular meltdowns. And
Speaker 1: these things buffeted Singapore because three three Hours Capital, the
Speaker 1: terror USD Lunar ecosystem, they both had links into Singapore,
Speaker 1: So that huge wipeout and the large numbers of investors
Speaker 1: who were affected by it lead single bare to become
Speaker 1: much more cautious about retail speculation and the retail part
Speaker 1: of the crypto industry. So they've pivoted towards becoming much
Speaker 1: harsher in their approach to retail investment. They split between
Speaker 1: high net worth investors who are given more liberty and
Speaker 1: the remainder and they're doing this, they say, because they
Speaker 1: want to ensure that people are appropriately protected from the
Speaker 1: risk that we've seen through crypto this year. So Singapore,
Speaker 1: if you like, still wants to become a hub, but
Speaker 1: a hub that is focused on the productive uses of
Speaker 1: blockchain technology, which, to be fair, haven't really emerged to
Speaker 1: the scale that we might have expected so far. It's
Speaker 1: still a work in progress, and they don't want the
Speaker 1: speculative avatars that come along with crypto and cause all
Speaker 1: kinds of problems. So that's where Singapore is right now.
Speaker 1: Hong Kong, interestingly, is if you like, going the other way.
Speaker 1: That's overly simplistic in some ways, but it's it's pivoting
Speaker 1: towards an environment where they want to allow retail trading,
Speaker 1: and it's pivoting towards where they wanted to allow things
Speaker 1: like exchange traded funds, that retail investors have access to UM.
Speaker 1: They're even looking at the legal status of smart chain contracts,
Speaker 1: and they're even looking at tokenized assets and how a
Speaker 1: regulatory framework would work for tokenized assets. So and all
Speaker 1: of this came through UM at the end of October.
Speaker 1: So all of a sudden, Hong Kong is moved from
Speaker 1: a voluntary licensing regime that some people viewed as signaling
Speaker 1: are not very welcoming environment. They moved from that all
Speaker 1: of a sudden to trying to promote themselves as the
Speaker 1: pre eminent hub for Asia. So you have these two
Speaker 1: jurisdictions going on very different tracks right now. And the
Speaker 1: question is what kind of what kind of a reordering
Speaker 1: that's going to yield in Asia, And we don't have
Speaker 1: the answer yet because it's all happening right now. And
Speaker 1: in the midst of that, f t X blew up.
Speaker 1: To add to add to the complications, here's the thing.
Speaker 1: Before FTX was domiciled in the Bahamas, it was domiciled
Speaker 1: in Hong Kong, and they left because you know, in
Speaker 1: the aftermath of the AUS, countries in Asia, notably China,
Speaker 1: taking this much harsher stance on all things crypto various
Speaker 1: other jurisdictions, i e. Places like the US, the Bahamas.
Speaker 1: Bermuda popped up and we're like, hey, we have great
Speaker 1: weather over here, Miami fantastic, and they do Nasau beaches
Speaker 1: outstanding and you know, sort of rolled out the red carpet,
Speaker 1: although the carpets don't work well in sand, but you
Speaker 1: get the analogy, rolled out the red carpet for these folks.
Speaker 1: And you know, sbf FTX, etcetera. Up Sticks moved to
Speaker 1: the Bahamas. What does that say about what the regime
Speaker 1: was in Hong Kong before, right, And it's kind of
Speaker 1: the same question for Singapore because Three Arrows Capital was
Speaker 1: also domiciled in Singapore. So you have these two places
Speaker 1: that had historically different paths now being beset by very
Speaker 1: similar types of blow ups. Yes, so Sam back when
Speaker 1: Freed set up in Hong Kong, but then Hong Kong
Speaker 1: began to introduce a voluntary licensing regime and that's what
Speaker 1: they have in place right now. And it's somewhat restrictive
Speaker 1: if you opt to become licensed, because you cannot offer
Speaker 1: your service just to retail investors unless they have more
Speaker 1: than a million dollars of assets to invest so it's
Speaker 1: it's restricting you to high net worth investors who you
Speaker 1: would assume have a better understanding of the risks they're taking.
Speaker 1: So that, together with the fact that China has imposed
Speaker 1: basically a year long bound on all things pretty much
Speaker 1: all things crypto, those two things together gave you the signal.
Speaker 1: You know, if you if you were a crypto player,
Speaker 1: you would look at them and think, well, those two
Speaker 1: things together suggest that Hong Kong isn't the place to be.
Speaker 1: There was, also, at the same time, so pretty harsh
Speaker 1: COVID restrictions that lingered in Hong Kong longer than in
Speaker 1: other places. And you also had um a degree of
Speaker 1: political unrest in Hong Kong. So all of those things
Speaker 1: conspired to not just in crypto, but they conspired to
Speaker 1: create a brain drain. People wanted to leave Hong Kong.
Speaker 1: Its status as a for angel center came into question.
Speaker 1: And it's all of those things that Hong Kong is
Speaker 1: now trying to reverse. So yes, f TX set up
Speaker 1: there and and and left, but in a way they're
Speaker 1: trying to create a regime that could encourage what FD
Speaker 1: because it's not past, but other companies of that sort
Speaker 1: to come back in and and invest and set up
Speaker 1: in in Hong Kong. And you know, we can talk
Speaker 1: about this if you like, but it looks like even
Speaker 1: after fd X that the upper levels of government are
Speaker 1: still going to stick with this plan. Korea, for you know,
Speaker 1: several years now, has been a place where there's a
Speaker 1: significant retail crypto presence, interest, activity, volumes. It's been the
Speaker 1: place that you know, various types of DFI protocols sprung up.
Speaker 1: There is a pretty active developer community among you know,
Speaker 1: Korean developers who are interested in crypto. What is the
Speaker 1: regime there as it relates to regulation. The president who
Speaker 1: took power in May UM he came in on a
Speaker 1: platform that was pro crypto UM and that was in
Speaker 1: the wake of UM, the huge boom in crypto and
Speaker 1: in Korea, before the before the recent blow up and
Speaker 1: the recent route in in crypto currencies in Korea, you
Speaker 1: saw a whole bunch of people create huge bounds of
Speaker 1: wealth and become billionaires. And they were well known and
Speaker 1: famous UM in Korea. And so when you came in,
Speaker 1: his idea was to bring in a comprehensive framework to
Speaker 1: regulate the industry, and he was adopting a pro crypto stance.
Speaker 1: But then of course he came into power and that
Speaker 1: was in May, and pretty much straight afterwards, Terror Luna
Speaker 1: blew up. So so so the crypto change, the regime
Speaker 1: change in in career installed, and we have to work
Speaker 1: through the fallout of the Kwan situation. Tokuan was the
Speaker 1: pro genital of the terror Lunar ecosystem. He is apparently
Speaker 1: the subject of an Interpol red notice. We're not sure
Speaker 1: where he is, and there's an arrestaurant for him that's
Speaker 1: been issued by by the Koreans, So that is we
Speaker 1: have to resolve all that, and as they're pursuing do
Speaker 1: Quan and they're also trying to figure out what kind
Speaker 1: of crypto regime they want, so it's incredibly difficult and complicated,
Speaker 1: and lawmakers are arguing out exactly how that framework should
Speaker 1: look like, and it doesn't look like it's going to
Speaker 1: be in place anytime soon. So Korea is um to
Speaker 1: say the least, very vexed by crypto and what to
Speaker 1: do now. Vexed is truly one of my favorite words.
Speaker 1: I want to also ask you. We've had our colleagues
Speaker 1: at Stuggler on the podcast talking about the Indian approach
Speaker 1: to crypto regulation, which is not exactly to regulated, but
Speaker 1: use taxes and taxation as a way to either incentivize
Speaker 1: or disincentivize certain types of behavior. They've also taken steps
Speaker 1: to make it more difficult for entities like coin base
Speaker 1: to use, you know, Indian banks or have access to
Speaker 1: Indian banks, and what that means in practices. If you
Speaker 1: are a person in India trying to fund a coin
Speaker 1: based wallet, the number of hoops you would have to
Speaker 1: jump through is sufficiently exhausting that you kind of give
Speaker 1: up halfway through, even if there's nothing technically saying you're
Speaker 1: not allowed to do that. Do you think if we
Speaker 1: were having this conversation sort of six months from now,
Speaker 1: that we live in a world in which some version
Speaker 1: of all of these approaches, there's like a middle ground, right,
Speaker 1: There's like a little sprinkling of tax policy, there's a
Speaker 1: little sprinkling of different types of registration regimes, there's some
Speaker 1: consumer protection or are we staring into everybody's going to
Speaker 1: do completely their own thing, and you know which is
Speaker 1: a nightmare for the company's involved. Right, You're you know,
Speaker 1: how you get regulated in India versus how you get
Speaker 1: regulated in Korea versus Singapore, versus Hong Kong versus China.
Speaker 1: What are you gonna do? UM. If we look at
Speaker 1: India first, I would hesitate to extrapolate very much from
Speaker 1: India to the rest of the world. One because India
Speaker 1: historically has struggled with a very low tax take. They
Speaker 1: have lots of rules and lots of taxes, and you know,
Speaker 1: tax evasions the national sport UM. So you have to
Speaker 1: look at the imposition of the levy on crypto transactions
Speaker 1: in India, both from the perspective of trying to control
Speaker 1: the industry, which they are skeptical of, but also because
Speaker 1: India struggles to raise money UM, and India has this
Speaker 1: kind of reflexive concern about UM, you know, nefarious uses
Speaker 1: of technology, and they're always worried about what they call
Speaker 1: black money, which is money under the table that could
Speaker 1: be used for all kinds of things, including for example,
Speaker 1: terrorist activity. So India is a unique situation country and
Speaker 1: I'm not sure you can extrapolate too much from what
Speaker 1: they're doing to the rest of the world. However, we
Speaker 1: have seen the International Monetary Fund, We've seen European officials
Speaker 1: who are if you like a bit further ahead and
Speaker 1: regulations of crypto that both those bodies have talked about,
Speaker 1: how do you have a globally coordinated approach to regulating crypto?
Speaker 1: But that's no difference to other topics. How do you
Speaker 1: have a globally coordinated approach to taxation? How do you
Speaker 1: have a globally coordinated approach to corporate taxation for example?
Speaker 1: These things are very hard, and they're hard in crypto
Speaker 1: as well. So I think if I had to bet,
Speaker 1: I would say it's almost impossible to have the kind
Speaker 1: of coordination you were talking about across jurisdictions, and instead
Speaker 1: you're can have companies playing arbitrage, trying to figure out
Speaker 1: where the best places for them to set up and
Speaker 1: how many people they can serve from that location. And
Speaker 1: that's why we're seeing places like Hong Kong do what
Speaker 1: they're doing with their policy shift, which to your point,
Speaker 1: is exactly what we saw with taxation for a while,
Speaker 1: right Like, why did everybody have an Ireland HQ if
Speaker 1: not to take advantage of those extremely preferential tax treatments
Speaker 1: that weren't available to them in other places. We'll be
Speaker 1: right back with Bloomberg Senior editor for cryptos In Neil
Speaker 1: Jack Tianni with more on crypto regulations in Asia. We
Speaker 1: focused a lot on like the institutional side of the house,
Speaker 1: weather from the regulatory perspective of the companies themselves. But
Speaker 1: I'm going to say three letters, and I just want
Speaker 1: your reaction to it, which is a VPN. Yes, UM,
Speaker 1: understand what you're saying. You're what what you're saying is
Speaker 1: that technology can make a laughing stock of any kind
Speaker 1: of regulatory approach, right UM, And to an extent, I agree,
Speaker 1: But I feel like what we're seeing now with the
Speaker 1: ft X collapse is going to really concentrate the minds
Speaker 1: of regulators. I think they're gonna look really really closely
Speaker 1: at things like disclosure, making sure that UM exchanges really
Speaker 1: are very clear that client assets are safe, disclosing very
Speaker 1: clearly where leaveradge is disclosing very clearly, how they manage.
Speaker 1: I think all of these things are going to shoot
Speaker 1: up and be front of set, know, front of house
Speaker 1: for regulators. It's going to be less about what's the
Speaker 1: taxonomy your tokens and how do they operate and how
Speaker 1: do we figure that out? And it's going to be
Speaker 1: more about the traditional things. Here's a crypto outfit. Okay,
Speaker 1: what do we know about it? Where the assets are
Speaker 1: they safe? How much the lead which if they really
Speaker 1: got um, have they got the right kind of risk
Speaker 1: management practices. I think it's going to be a lot
Speaker 1: of that that we see coming through over the next
Speaker 1: few years. But it's not going to happen quickly, so
Speaker 1: there's lots of time for more things to blow up
Speaker 1: while they try and put that into place. The perpetual
Speaker 1: struggle of regulators, it's like you're always fighting not the
Speaker 1: last war, but like the one before that. Yeah, exactly.
Speaker 1: I don't envy them. It's a very hard task. It's
Speaker 1: hard enough for regular finance. Can you imagine how haw
Speaker 1: they must be for for for crypto. Somebody was talking
Speaker 1: the other day about not stable coins, but what they
Speaker 1: call flat coins, things that would go up and value
Speaker 1: along with inflation while retaining their essential value beyond that.
Speaker 1: So you can see from the point to be a regulator. Okay,
Speaker 1: we're trying to get our head around stable coins, and
Speaker 1: now people talking about flat coins at the time, I
Speaker 1: would go up with inflation. How's that going to work?
Speaker 1: So it's it's almost it's like a Gordian knot right.
Speaker 1: It's almost impossible to untangle um. But that's what they've
Speaker 1: paid the small or big bucks to do. Mostly small,
Speaker 1: mostly small. Thank you, big headaches, yeah, small box, big headaches. Well,
Speaker 1: thank you very much for that tour of crypto regulation
Speaker 1: in Asia pac Where can folks find you if they
Speaker 1: want to see more of your coverage or at least
Speaker 1: know what you're up to. You know, you can probably
Speaker 1: find my byeline here here or there on on the
Speaker 1: Bloombloo terminal or on the Bloomberg website as well. And
Speaker 1: if you have any complaints please send them to stay
Speaker 1: sy Marie. Thank you very much, fair enough, fair enough,
Speaker 1: Thank you so much to they. I'll take care. This
Speaker 1: is Bloomberg Crypto, a daily podcast from Bloomberg and I
Speaker 1: Heeart Radio. For more shows from I Heeart Radio, visit
Speaker 1: the I Heart Radio app, Apple Podcasts, or wherever you
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Speaker 1: for the show to Crypto at Bloomberg dot net. The
Speaker 1: supervising producer of Bloomberg Crypto is Vicky Verglina. Our senior
Speaker 1: producer is Janet Babin. Our producers are Mohammed Faruk and
Speaker 1: Sharon Barriro. Our associate producers are Ty Butler and Moses
Speaker 1: on Them. Desta wonder At is our engineer. Original music
Speaker 1: by Leo Sidrin. I'm Stacy Marie Schmal We'll be back tomorrow.