EVEN after a recent pullback, cryptocurrencies are some of the best-performing assets this year – and demand from Asia-Pacific retail investors has been a major engine of the rally.

There’s a lot going on in the region. Hong Kong just listed a batch of cryptocurrency exchange-traded funds (ETFs) and Australia plans to bring the products to the country’s largest stock market. Singapore, meanwhile, is racing to become a hub for digital currencies, while elsewhere esports and Web3 blockchain technologies are soaring in popularity.

It comes after crypto’s credibility was boosted globally when US regulators finally greenlit ETFs that invest in Bitcoin. The January decision helped rehabilitate the asset class after a “crypto winter” in 2022 that saw a series of scandals, bankruptcies and Bitcoin’s price drop 64 per cent. Still, this year has not been without volatility – the largest token slumped almost 16 per cent in April as a mania for the US ETFs flatlined after earlier lifting the token to a record high of almost US$74,000 in March.

Some investors in Asia are long-time enthusiasts who have already weathered the ups and downs, while others recently jumped in. In places ranging from South Korea to the Philippines and Australia, small-time traders have built unique ecosystems.  

“The region as a whole has always been an early adopter and taken strongly to Web3 technologies,” said Leah Callon-Butler, director of Emfarsis, a Web3 advisory firm based in the Philippines. “Outsiders tend to lump ‘Asia’ into one bucket as one homogenous region and that’s a very big mistake if you seek to truly understand how and why crypto is taking off here.”

Here’s a look at the trends around Asia:

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South Korea

Traders in South Korea are among the most fervent in the world. In fact, the country’s won just supplanted the US dollar as the most-used currency for trading in and out of crypto tokens. Smaller tokens, known as altcoins, are especially popular, accounting for 80 per cent of Korean exchanges’ volume compared with roughly 50 per cent on global platforms, according to CryptoQuant data.

Retail investors are also known for their love of crypto-based esports, which reward players with crypto or non-fungible tokens, known as NFTs. This year, South Korean gaming companies such as Nexon Games and NCSoft are slated to release new play-to-earn games, said Charles Pyo, founder and CEO of AI3, a Seoul-based firm enabling enterprise adoption of Web3 and artificial intelligence.

Regulators in South Korea have stepped up scrutiny of the sector after the collapse of digital tokens created by Terraform Labs co-founder Do Kwon. Last year, the country’s parliament passed a bill to boost investor protection, which allows officials to oversee crypto operators and asset custodians.

The Philippines

In recent years, Web3 games such as Axie Infinity and Pixels have gained immense popularity in the Philippines. For instance, “guilds” or groups that play a game together, work to earn NFTs and other rewards. Internet cafes have popped up for groups to come together in real life.

One guild, called Yield Guild Games, has grown so much that it’s now transitioned into building Web3 protocols and helping other guilds around the world.

“It’s the epicentre of the world for blockchain gaming adoption,” Callon-Butler of Emfarsis said about the Philippines. “Guilds form a layer over all the other games, and they can move between games.”

Crypto transactions are allowed in the Philippines, but cryptocurrencies are not legal tender. The central bank has established a sandbox approach where it welcomes new innovations but with supervision. It’s also piloting a central bank digital currency.

Hong Kong

Retail traders in the financial hub are big on using leverage in their trades, explained Patrick Pan, chief executive officer of the digital asset platform OSL. They have high-risk appetite, he said, and have a larger interest in alternative investment products. They are also heavily influenced by social media and KOLs – or key opinion leaders – in the crypto space.

Chun Ho Chow, a 23-year-old retail investor who also works at a Web3 startup, said he’s comfortable with trades that others would find too risky.

“A lot of younger people are looking to ‘get rich quick’ by doing leveraged trades on volatile assets – many people became millionaires from trades like these and posted on social media,” he said, adding that he believes he could do the same despite knowing there is a survivorship bias involved.

Hong Kong only began allowing retail traders to invest in crypto legally last year, and it has since pursued a system to regulate crypto exchanges and related entities. Regulators tout their approach as high on consumer protection, though there are concerns this may lessen the city’s appeal for companies who could earn greater profits from off-limits activities such as staking and derivatives.

The city allowed three ETFs that invest directly in crypto to be listed on Apr 30. The level of demand for the funds will give clues on whether Hong Kong’s push to be a tightly regulated digital asset hub is gaining traction.

In mainland China, all crypto activities are banned, including crypto-dominated fundraising, exchange trading and Bitcoin mining. That said, enforcement has always been a question mark.

Australia

Retail investors in Australia are known for their interest in Ether, with some even eschewing Bitcoin entirely for its peer currency.  The average Australian wallet is comprised of 59.4 per cent Ether and 17.7 per cent Bitcoin, which compares with 34.5 per cent Ether and 29.9 per cent Bitcoin globally, according to a survey from crypto exchange Kraken.

Kurtis Dawe, a 33-year-old trader in Sydney, is more bullish on Ether than Bitcoin, since its price has not risen as much and because so many alternative coins use the Ethereum blockchain.

“I think it just has more room to grow than Bitcoin does,” said Dawe, who recently sold out of all his Bitcoin positions.  He’s also optimistic that exchange-traded funds holding Ether will debut soon, further boosting the price.

Japan

The Japanese government is trying to grow Web3 companies as part of its broader plans to reinforce the economy. It has moved towards easing crypto rules on listings, taxation and allowing venture capital firms and other investment funds to hold crypto directly. Nomura Holdings and other financial firms are also pushing to grow Japan’s market for securities tokens – a kind of real-world asset coin – which turn corporate bonds, securitised real estate and other financial products into coins.

But overall regulations are still viewed as strict – for instance, mutual funds cannot hold crypto, including Bitcoin ETFs.

Japanese financial firms remain slow to engage in crypto activities such as custody services, as they tend to stay away from anything without a clear go-ahead from regulatory officials, said Masamichi Matsushima, Monex Group’s crypto assets analyst.

India

Crypto investors in India are interested in the US Bitcoin ETFs. Through an initiative called the Liberalised Remittance Scheme from the Reserve Bank of India, investors can send up to US$250,000 per year outside the country and use that to buy foreign securities. At the same time, startups are seeing increased demand for crypto derivatives and are expanding their product offerings.

This is a turnaround from last year, when crypto trading in India dried up after an onerous tax regime was implemented in 2022. The government presented it as a way to formalise the asset class, but the side effect was to make trading prohibitively expensive.

Officials have also recently cracked down on offshore exchanges operating without local registrations, while also promoting their own central bank digital currency. Various pilots for that are being carried out.

Singapore

Singapore is largely an institutional market for crypto investors due to its relatively small population and partly because of the central bank’s repeated warnings against crypto trading by the residents. It has banned public advertisements by crypto companies, a key tool used by such entities to promote their products.

But for institutions, Singapore has encouraged using blockchain for tokenisation, cross-border remittances, digital bonds and similar initiatives that typically expedite payments and reduce costs. Project Guardian is one such initiative undertaken by the Monetary Authority of Singapore.

Taiwan

In Taiwan, the new US Bitcoin ETFs are a major topic of discussion. The country’s crypto investors could initially purchase Bitcoin ETFs through sub-brokerage services provided by brokers, but then in January the Financial Supervisory Commission (FSC) instructed onshore brokerages to stop accepting customer orders in order to “protect investors”.

The FSC later added that it would consult with brokers to potentially reopen services for Bitcoin ETFs in April, but that has not occurred yet.

Thailand

Retail investors in Thailand were hit hard by 2022’s plunge in crypto prices, especially as local exchange Zipmex collapsed. That prompted regulators to tighten supervision. But Prime Minister Srettha Thavisin’s government, which took office late last year, has strongly promoted Thailand as South-east Asia’s centre for digital asset trading. He has waived some taxes on the crypto and digital asset transactions, and now traders are allowed to invest in overseas crypto ETFs.

Plus, competition in the Thai crypto trading business is heating up with the entry of Binance and Kasikornbank, one of the major local commercial lenders. Binance has partnered with Gulf Energy Development, the nation’s largest private power company controlled by Thailand’s second richest person, to launch a new crypto exchange. Most recently, regulators began allowing mutual funds to invest directly in cryptocurrencies for the first time.

Vietnam

Many Web3 games were created in Vietnam, including Sky Mavis which built the blockchain home to Axie Infinity. Another game called Sipher also came from developers in the country.

Giap Van Dai, founder and CEO of Nami Foundation which offers a crypto trading platform, said that local investors are looking to crypto for higher yields.

“Vietnam’s regulations related to crypto and blockchain have not yet been established, offering a so-called sandbox for developers, investors and the market to grow,” he said.

Vietnam’s laws do not ban cryptocurrency-related business, but crypto is not among legal tools for payment. Issuance of crypto and using it as a payment tool are technically violating the law. The central bank has warned that making crypto transactions poses risks and victims of scams will not be protected by the law. Earlier this year, the government asked the finance ministry to finalise a legal framework on cryptocurrency by May of next year to combat money laundering. BLOOMBERG