How Hong Kong, Singapore and Japan Are Approaching Crypto Regulation

Singapore and Hong Kong are known for having better legal clarity around digital assets when compared to the United States. But these jurisdictions also have some of the toughest rules in the world joining us now to discuss is Coindesk, Executive Director of global content, Emily Parker, Emily, how's it going? Good to see you guys. It's good. It's good, good. Well, it's as you know, always a pleasure, always very excited to have you on the show since you're just not here every day anymore. And it saddens us just, I'm with you in spirit. I'm with you in spirit. OK? Thank you, Emily. You wrote this article for Coin Desk, unpacking the very tough rules in some of these regions. And I just want to compare that to some of the folks who come on the show who um have received licenses from Hong Kong from Singapore. And they're all always very positive. They're always saying the regulators are very forward thinking, they're very innovative, they're allowing them to participate in regulatory sandboxes and we don't actually hear anyone say actually the rules are very tough. So unpack that for us. Sure. So I think, you know, the the, the the issue is, is that, you know, I would, this, this piece is just sort of some of my big takeaways from this year as you know, I've spent a lot of time in, in Asia and the US as well. And this term that's thrown about a lot or, you know, crypto friendly crypto haven, crypto hub pro crypto. And, you know, Singapore has had that label for a long time, but now we're sort of seeing Hong Kong. Uh you know, there's a lot of, there's been a lot of buzz about Hong Kong since they started um allowing exchanges to apply for licenses. And also Japan for the people who are paying attention. You know, Japan has seen this kind of very pro crypto. And basically what I'm just trying to say is like, you're right. Yes, in a sense they are open to crypto and welcoming to crypto, but they're, but crypto friendly is a little bit misleading because some of these countries have some of the toughest rules in the world. And I think that, you know, for example, if you read a headline and you see, ok, you know Hong Kong is a crypto haven or you know Singapore is so crypto friendly and then you go over there and you try to do crypto business, you might be in for a rude surprise because the rules there are actually very, very, very tough. Um And I think that's just something important to understand. And I also think this is a big trend going forward. I think that crypto regulations are trending towards more strictness. Um So, you know, they are welcoming but they're tough and that's what I was just trying to untangle in this piece. So you're looking at three countries, Hong Kong, Singapore and Japan before we go into it, if you were to compare it to the United States, which ones would you say are friendlier or easier for crypto companies to start compared to the United States if at all? Well, I think it's pretty uncontroversial, at least in the crypto industry that the United States is decidedly unfriendly to the crypto industry, at least right now. But I think the reasons why that is can sometimes get confused. I don't think the US is unfriendly because it's too strict. The US is unfriendly because it's too confusing and that's the issue. The issue is that people don't even clearly understand what the rules are. There's still so much debate about what is the security and what is a commodity and so often what happens in the US as you guys know better than anyone else is that these battles are fought out in the courts. I mean, we saw this with ripple for example. So people are anxiously awaiting the ripple decision to see, ok, what is, what is, what are crypto regulations in the United States? But this is not really the most effective way to regulate an industry, it would be better, of course, to have like a more comprehensive crypto framework from the outset rather than these court decisions because not all companies have the time and millions of dollars to spend fighting the sec in in court. So I'd say that the US is unfriendly, but again, not because of strictness because of the lack of clarity. So what Hong Kong, Singapore and Japan all have in common is that they are relatively clear, there are comprehensive crypto regulations. So, you know, even if you don't like the rules or even if you think the rules are too strict, at least, you know what the rules are. Emily, I don't know if you have one top of mind. But do you have an example of one of the uh tougher rules in one of these countries, especially when compared to other places in the world? Sure. I mean, all of them, I mean, you know, um so, ok, look at Hong Kong for, for a moment. Um Hong Kong, you know, right now, um just one example, you know, they require um 98% of assets to be kept in cold wallet storage, you know, and that makes a lot of sense. This is sort of to prevent, you know, to protect against hacking and, but that's a very, very high requirement. Other countries have, you know, above 90 percent, but 98% is extremely high. That's just one small example, you know, Hong Kong also has the exchanges are limited to spot, you know, there's a lot that you can't do on crypto exchanges there. And just the licensing process in general is extremely rigorous and it can be very costly. You know, coin desk has reported on this in the past, the cost of compliance can be very, very high. So those are just a few examples. But Japan, you know, I wrote a lot about Japan and stablecoins, for example, you know, Japan is one of the first major economies to actually have stablecoin regulations take effect. But that does not mean at all that it is easy. There are a lot of very, very rigorous requirements for issuing a Stablecoin in Japan, how you can invest that stable coin where you know, where, where the assets backing the stable coin or custody, things like that and what do you think is going to happen going forward? You know, we obviously at the end of the year here looking for 2024 in these three spots, Hong Kong, Singapore and Japan. Well, I think it's like constantly shifting look and I want to be clear, it is possible to be too strict. And I think, you know, especially for some of these newer regulatory regimes, you're going to see probably some tweaking going forward as the industry responds. So it's important that regulators have an open consultation with the industry because some things might need to be tweaked a little bit. But I do think that global regulations are trending more towards clarity because I think we are seeing that there is a really high cost to how things are done in the United States. Like the thing about the United States, again, it's not because the rules are unclear, doesn't mean that anything goes, it just means that you don't know what you can and cannot do. And it also means that you could very likely find yourselves in court. And I think for entrepreneurs, especially people starting smaller businesses, that's a really high risk. And there are a lot of other places in the world that you could do crypto business. So I think that that model is just really out of favor and, um, you know, if people don't like doing business in the US, they're just going to go elsewhere. All right, Emily, we are going to have to leave it there. If you want to read Emily's article, you can find that on coindesk.com.