Southeast Asia, as one of the important engines driving global economic growth, is increasingly showcasing the potential of blockchain technology applications. The None Group research team recently released a report on the key trends in the blockchain industry in Taiwan and Southeast Asia.
Clarifying regulatory policies is the first step to enter new markets. PANews has selected content related to regulation from this report, presenting the current regulatory status of the cryptocurrency industry in Taiwan, Thailand, Vietnam, Indonesia, Malaysia, Singapore, and the Philippines.
Overall, with the continuous development of technology and the fluctuation of market sentiment, the regulatory path of blockchain often faces dynamic adjustments. Especially after major incidents occur, law enforcement agencies in various regions must face the still imperfect regulatory framework in the market, and therefore often accelerate the formulation and implementation of regulations. Although this may strengthen regulation in the short term, it may not necessarily hinder innovation and development in the long run. For example, after the ICO boom in 2017, countries such as Thailand and Singapore quickly introduced corresponding regulations to protect local investors.
Trends in blockchain regulation in Taiwan:
As the blockchain industry develops, various application scenarios continue to emerge, from financial services to supply chain management, from digital asset trading to smart contracts. With the rapid growth of the industry, compliance and regulatory issues have gradually emerged amidst financial fraud and collapses.
In Taiwan, the government has gradually taken relevant actions in recent years to regulate encrypted assets and has begun to work with relevant units to develop the best way to regulate virtual assets. The relevant measures can be traced back to June 2021, when the Executive Yuan designated the Financial Supervisory Commission (FSC) as the competent authority for anti-money laundering in the “virtual currency platform and trading business” under the Anti-Money Laundering Act. The FSC later issued the “Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism (AML&CFT) for Virtual Currency Platform and Trading Business” to prevent money laundering and combat terrorist financing. By the end of December 2023, 25 companies have been approved.
Starting from January 2023, the Legislative Yuan proposed to the Executive Yuan to study the relevant regulatory mechanism for virtual assets and included it in the central government’s budget. In late March of the same year, the Executive Yuan stated that the virtual asset field would be regulated by the FSC, and the regulatory approach would refer to international mainstream trends, including the European Union, Singapore, Japan, South Korea, Israel, etc., to gradually strengthen the protection of customers’ rights and interests of Taiwanese virtual asset platforms. Due to the special nature of virtual assets or digital assets, the diversification of product applications (including virtual assets, NFTs, payments, stablecoins, etc.) has increased the difficulty of regulation. Therefore, relevant units are still actively studying the rights and responsibilities of various asset applications. In September 2023, the FSC published the long-discussed “Guidelines for Virtual Asset Platform and Trading Business (VASP)” based on anti-money laundering regulations, and stated that it will strengthen platform customer protection from various aspects such as information transparency, asset custody, and internal control.
The Guidelines for Virtual Asset Platform and Trading Business (VASP) include:
1. Strengthening the management of virtual asset issuance
2. Establishing a review mechanism for virtual asset listing
3. Strengthening the separate custody of platform assets and customer assets
4. Enhancing transaction fairness and transparency
5. Strengthening contract formulation, advertising solicitation, and complaint handling
6. Establishing operational systems, information security, and cold/hot wallet management mechanisms
7. Information disclosure
8. Strengthening internal control and institutional inspection mechanisms
9. Treating individual currency dealers’ anti-money laundering supervision as equivalent to legal persons
10. Prohibiting overseas currency dealers from engaging in illegal solicitation activities
Trends in blockchain regulation in Thailand:
The Thai government enacted the Emergency Decree on Digital Asset Businesses in 2018, which provides comprehensive regulations for the issuance, trading, and related businesses of virtual assets. Here are some key points:
Definition of virtual assets: Thailand refers to virtual assets as digital assets, including cryptocurrencies and digital tokens, not limited to those with securities attributes.
Regulatory requirements: Virtual asset service providers, including trading platforms, need to be recommended by the Securities and Exchange Commission, Thailand (SEC) and obtain approval from the Thai Ministry of Finance. The minimum capital requirement is 50 million Thai baht, but if the platform does not custody user assets, the minimum requirement is 10 million Thai baht.
Protection of user assets: The law stipulates that virtual asset service providers must manage user assets separately and not use them for other purposes, and it is clear that users still own the assets in their accounts.
Regulatory details: Thailand emphasizes suitability review, best execution, and prohibits trading platforms from self-investment from a securities regulatory perspective, to ensure user rights and prevent conflicts of interest.
Thailand’s virtual asset regulatory system emphasizes user protection, more similar to securities market regulation, not only focusing on anti-fraud and information disclosure, which is significantly different from payment regulation models in places like New York State and Japan.
It is worth noting that the SEC of Thailand recently announced regulations that prohibit exchanges from providing the following services to users:
– Using the digital assets deposited by users for lending, investment, or collateral, and paying returns to users.
– Providing returns to users through company marketing expenses and other budgets using the digital assets deposited by users.
– Providing related services or advertisements through third parties.
In addition, to avoid risks to the overall financial and economic system, the SEC of Thailand prohibits the use of virtual assets for payment by nationals, and exchanges must also restrict users’ transfer functions.
Trends in blockchain regulation in Vietnam:
Vietnam’s regulation of virtual assets is not clear and mainly includes the following points:
– The State Bank of Vietnam (SBV) has stated that virtual assets are not considered legal tender and are prohibited as a means of payment.
– The State Securities Commission of Vietnam (SSCV) prohibits listed companies, securities companies, fund management companies, and securities investment funds from participating in any issuance, trading, or brokerage activities related to virtual assets and strictly complies with AML regulations.
– The Ministry of Industry and Trade of Vietnam (MOIT) believes that Bitcoin is not a commodity or service under the legal framework of Vietnam and warns against operating virtual assets.
Apart from these three points, Vietnam has no other regulations regarding the regulation of virtual assets. Although the government restricts virtual assets as a payment tool, there are no specific regulations regarding other purposes such as investment and trading. At the same time, the government does not strongly restrict overseas virtual asset companies from operating in Vietnam. Many well-known centralized exchanges such as Binance value the local market and have been deeply involved in Vietnam for many years.
It is worth noting that after Vietnamese Prime Minister Phạm Minh Chính learned about the active virtual asset trading in the country, he ordered the SBV and relevant units to study policies and mechanisms for virtual asset management in 2020. With the support of the Vietnamese government, the Vietnam Blockchain Association was officially established in 2022 with the aim of assisting in the construction of a more comprehensive regulatory framework. However, as of the end of 2023, no formal opinions or regulations have been proposed.
Trends in blockchain regulation in Indonesia:
Indonesia’s virtual asset market is rapidly developing, and the government is actively promoting regulatory measures. Cryptocurrency trading in Indonesia falls under the jurisdiction of the Commodity Futures Trading Regulatory Agency (Bappebti/CoFTRA), which considers it a commodity. In terms of trading, the regulatory framework is mainly governed by CoFTRA Regulation No. 13 of 2022 and CoFTRA Regulation No. 8 of 2021. In addition, the overall market currently has the following important developments and trends:
– National Exchange: Indonesia officially established the National Exchange (also known as the Indonesian Virtual Asset Futures Exchange) in July 2023, aiming to provide legal certainty and protect users from risks.
– Expansion of tradable assets: In June 2023, the government expanded the tradable virtual assets’ scope.
Note: The translation may vary slightly depending on the context and specific terms used in the target language.Regulatory and Supervisory Trends in Southeast Asia
Indonesia:
Regulatory Reform: Indonesia is currently undergoing regulatory reforms for virtual assets, transferring regulatory authority from Bappebti to the Financial Services Authority (OJK) with a transition period of 2 years. Virtual assets are currently considered commodities, but they are expected to be classified as securities after the transition period.
Types of Regulation: According to Bappebti regulations, regulated virtual asset businesses include futures exchanges, cryptocurrency futures clearing houses, virtual asset custodians, and virtual asset exchanges. However, initial coin offerings (ICOs) are currently not regulated.
Licensing Requirements: Different licensing requirements apply depending on the type of business, including minimum capital requirements, organizational structure, and technological requirements, as well as compliance with anti-money laundering and anti-terrorism financing regulations.
Blockchain Regulatory Trends in Malaysia:
Virtual assets are legal in Malaysia, and the government has implemented relevant regulations to ensure stability and transparency in the virtual asset market. However, the Securities Commission Malaysia (SCM) is still actively monitoring and tracking the development of virtual assets, taking measures to protect investors from potential risks. Key points of virtual asset regulation in Malaysia include:
Regulatory Approach: In 2019, Malaysia enacted the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order, which brings all virtual assets within the scope of securities laws, regardless of whether they are considered securities.
Regulation of Trading Platforms: Virtual asset trading platforms in Malaysia are referred to as “Digital Asset Exchanges” (DAX) and are regulated under Chapter 15: Digital Asset Exchange of the Recognized Market Guidelines. They require licensing from the Securities Commission Malaysia and approval to trade specific virtual assets. The minimum capital requirement is 5 million Malaysian Ringgit.
User Asset Protection: Regulation in Malaysia distinguishes between custody of money and custody of virtual assets. Money custody requires platforms to hold customer funds in trust accounts with qualified financial institutions, while virtual asset custody requires platforms to have secure storage media to safeguard virtual assets.
Market Integrity Obligations: Malaysia has established comprehensive regulations, including real-time market monitoring, measures to handle market volatility, and procedures to address erroneous trades and system failures.
In addition to trading platforms, the SCM also requires relevant licenses for companies in the IEO operator, digital asset custodian (DAC), and fund categories. Currently, six centralized exchanges (DAX) in Malaysia have obtained SCM recognition, allowing users to trade virtual assets approved by the SCM, including BTC, ETH, AVAX, and others. DAX platforms are also required to provide information on the public market structure and types of orders on the platform. In summary, Malaysia is actively considering a comprehensive legal framework to protect investor interests while promoting industry development.
Blockchain Regulatory Trends in Singapore:
Singapore is one of the countries with relatively comprehensive and friendly regulations for cryptocurrencies or digital assets, making its practices worth emulating for many countries. Singapore adopts a regulatory approach known as “coin-chain separation,” which involves actively exploring the application of blockchain technology while maintaining a relatively conservative policy towards cryptocurrencies prone to speculative behavior. In particular, after several major lending institutions collapsed and the well-known exchange FTX went bankrupt in 2022, the government, after listening to various opinions, introduced a series of strengthened protective measures in 2023 to safeguard the interests of local investors. Overall, Singapore’s stable, transparent, and open regulatory framework continues to be favored by many companies. The following are introductions to local regulatory guidelines:
Regulatory Approach: The Singaporean government considers virtual assets not to be legal tender but tools that can be used for alternative payments. Providers of digital payment tokens (DPT) services in Singapore are regulated under the Payment Services Act.
Types of Regulation: According to local regulations, providers of DPT services are defined as those who facilitate the exchange of digital payment tokens, operate DPT exchanges, engage in services involving digital payment tokens (buying or selling DPT for money or other DPT), transfer DPT on behalf of customers, provide custody wallets for customers, or act as brokers for DPT transactions on behalf of customers.
Types of Licenses: Depending on the nature of the business, licenses are categorized into three types: money-changing license, standard payment institution license, and major payment institution license. The Monetary Authority of Singapore (MAS) evaluates the soundness, security measures, and compliance procedures of the companies applying for licenses.
Stablecoin Regulation: MAS issued digital currency rules for stablecoins in August 2023. These rules require the reserves of stablecoins to consist of low-risk and highly liquid assets. The reserves must always equal or exceed the value of stablecoins in circulation.
MAS clarifies government regulatory requirements for domestic exchanges through the issuance of administrative notices or guidelines. For example, MAS announced in mid-2023 that by the end of the year, companies must hold customer assets in statutory trusts and separate customer funds from company assets. They also require companies to discourage speculative trading behavior among retail users.
Blockchain Regulatory Trends in the Philippines:
The Central Bank of the Philippines (BSP) actively shapes the country’s monetary landscape to embrace the digital economy. While virtual assets are not considered legal tender in the Philippines, their legitimacy was recognized by the BSP through Circulars No. 944 and 942 issued in February 2017.
Regulatory Approach: In 2021, BSP introduced the Virtual Asset Service Provider (VASP) Guidelines to establish a comprehensive regulatory framework for virtual asset transactions in the Philippines.
Licensing System: VASPs are required to obtain a license from BSP before operating and comply with effective know-your-customer (KYC) and anti-money laundering (AML) measures. This includes collecting customer identification information and actively monitoring transactions to detect and report suspicious activities. Additional licenses, such as Electronic Money Issuer (EMI) and Remittance and Transfer Company (RTC) licenses, are required for additional services.
Unique KYC Environment: The Philippines does not have a unified national identification card, so KYC systems of industry players must be able to recognize valid identification documents from the country’s 82 different provinces.
Audit Standards: In quarterly audits, companies are required to publicly disclose information about their balance sheets and disclose the status of their assets in hot and cold wallets.
The regulatory framework for virtual assets in the Philippines is clear, and the government is committed to substantial regulation of VASPs. In September 2022, BSP closed the regular application window for new VASP licenses for a period of three years. Since the end of 2023, the Securities and Exchange Commission of the Philippines (SEC Philippines) has issued warnings against exchanges that do not hold compliant licenses in the country. Regarding Binance, the BSP has requested the assistance of the National Telecommunications Commission and the Department of Information and Communications Technology to block access to Binance by the public. It has also asked Google and Meta to prohibit online advertising of Binance to the Philippine community and demanded that Binance exit the Philippine market within three months.
