Regulators in Asia's major economies are increasingly concerned about the boom in virtual currencies such as Bitcoin, Ethereum, and Litecoin. Many believe a cryptocurrency bubble will have a major impact on the region's financial markets.
At last week's meeting, Bank of Japan Governor Haruhiko Kuroda warned that bitcoin's dizzying price rise was “abnormal.”
Sharing Mr. Kuroda’s view, lawmakers in major regional economies such as China, South Korea and India have also warned about the threat of the ‘cryptocurrency storm’ sweeping the region.
Bitcoin's recent sharp price rise is considered unusual. (Photo: Getty Images)
According to CNBC, their concerns are not unfounded, as Asia accounts for the largest share of cryptocurrency trading in both volume and value. Figures from research firm CryptoCompare show that, as of the end of month 11, Japan, South Korea, and Vietnam accounted for as much as 80% of global Bitcoin trading volume.
Since the start of the year, Bitcoin’s price has risen more than 1,500%, despite a sharp correction this week. Many people fear a steep Bitcoin decline could strongly affect financial markets.
China: Seeking Complete Control
In September, China took strong steps to control virtual currencies, announcing a ban on trading and fundraising through initial coin offerings (ICO). The country's central bank (PBOC) said an unregulated virtual currency market could pose major risks to the financial system of the world's 2nd-largest economy.
Notably, despite its tough stance on cryptocurrencies, Beijing still supports the use of digital currency. The PBOC said it is researching the issuance of China's own digital currency.
Japan: The First Country to Legalize Bitcoin
In April, Japan announced that Bitcoin and several other virtual currencies could be used as a means of payment, and recognized 11 cryptocurrency exchanges in September. However, Japan has no plans to issue its own virtual currency.
However, Bank of Japan Governor Kuroda recently warned that Bitcoin's “wild” price rise was “abnormal” and said the virtual currency was “being traded for speculation,” losing its function as a means of payment.
India: Concerns about illegal use
The Reserve Bank of India has repeatedly warned about the risks of cryptocurrency trading. Authorities also fear that digital currencies could be used for tax evasion and money laundering… Last week, the country’s authorities expanded investigations into cryptocurrency-related violations.
South Korea: Controlling financial institutions
In early December, South Korea banned financial institutions from activities involving virtual currencies, including buying, owning or holding them as collateral. ICO activities were also deemed illegal.
According to AFP, South Korea currently accounts for about 20% of all Bitcoin trading worldwide. An estimated 1 million South Koreans own Bitcoin, most of them small retail investors.
Southeast Asia: Warnings about cryptocurrencies' downsides
Southeast Asia was the region hardest hit by the 1997 Asian financial crisis, and its officials have issued strong warnings about cryptocurrencies' downsides.
Specifically, Indonesia – the region's largest economy – planned to ban virtual currency transactions from 2018 to protect its domestic currency, the Rupiahm.
The State Bank of Vietnam also stated that issuing, supplying or using Bitcoin and similar virtual currencies violates the law and is subject to administrative fines of 150–200 million dong.
Singapore also warned earlier in the week that investors “risk losing all their assets” when investing in cryptocurrencies, while Thai officials said the cryptocurrency world was at risk of developing a bubble.
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