Scan, swipe, tap. The slight, subtle movements are an everyday sight along the streets of one of the world’s leading tech hubs. In China, nearly 90 percent of all transactions with an estimated value of US$5.5 trillion are now facilitated by smartphones. From wet markets to alms, the rise of QR-code-enabled payments has enabled individuals from all walks of life to participate in the digital economy.
Across emerging markets throughout the continent, tech-forward countries are quick to flock to emerging technologies, be it AI, IoT, or simply the next big mobile payments success story. Here, innovation is not so much a matter of disruption, as it is both an indicator and enabler of socioeconomic progress. Enter blockchain, with its emphasis on transparency, accountability, and cost-efficiency. With 49 nations and 60 percent of the global population, Asia is home to a varied mix of both developed and developing countries, each of which have shown some of the industry’s most promising implementation stories to date. Whether accelerating long-held goals of digital transformation or maintaining a competitive edge against their western counterparts, these countries continue to move the dial on their embrace of innovation, cementing the continent’s position as a global leader.
Putting policy into practice
Blockchain began as a movement by the people. Today it has evolved into an economic tool for governments as much as an accelerant for social progress. From China’s 13th Five-Year Plan to Thailand 4.0, emerging markets that have refocused nation-wide economic policies toward a more innovation-centric agenda are seemingly leading the way.
With an economic model that places greater precedence on startups and high-skilled labor, Thailand has implemented blockchain in various areas, ranging from politics and public services to finance. Its National Electronics and Computer Technology Center (NECTEC) announced that it was developing blockchain-based e-voting earlier this year for national, provincial, and local elections, injecting greater transparency into its electoral process. Further out east, to serve the nation’s $30 billion-strong remittance industry, the Philippines’ UnionBank successfully coordinated its first blockchain-based cross-border remittance transaction between provincial Cantilan Bank and Singapore’s OCBC Bank. Earlier this summer, UnionBank also launched PHX, a Philippine peso-backed stablecoin backed by the bank’s reserves, to facilitate transactions on its nationwide i2i payment system. As an improvement on existing infrastructures, blockchain can help to cultivate greater trust in legacy sectors.
Meanwhile, established markets are continuing on a progressive trajectory, with central banks in countries such as Singapore playing a leading role in blockchain exploration. The Monetary Authority of Singapore (MAS) embarked on a proof-of-concept project with R3 to facilitate blockchain-enabled interbank payments as early as 2016. Consortium partners in Project Ubin included local and foreign banking institutions such as Credit Suisse, DBS Bank, OCBC, HSBC, and JPMorgan. The following year, the second phase of the project included more consortium members, as well as a host of technological providers including Accenture, IBM, R3, Microsoft, and even ConsenSys. Project Ubin has since evolved to produce spin-off projects including a cross-border interbank payment and settlement pilot with the Bank of Canada and the Bank of England.
A safe haven
As one of the region’s leaders in innovative technology, Singapore has long positioned itself as a fintech hub, actively providing resources and mentorship to pioneering projects. Guidance has been swift in the city-state, thanks to MAS’ Fintech Regulatory Sandbox, which has provided a safe space for projects to test their solutions in order to ensure their real-world applicability. A few months ago, MAS launched a Sandbox Express program, designed for low-risk projects that address existing issues understood by the market. Hong Kong has adopted a similar model with its Fintech Supervisory Sandbox, which enables tech projects to conduct pilot trials with an initial batch of test customers. This allows banking partners and tech firms to easily obtain feedback directly from their users, allowing for ongoing improvement to expedite the launch of their solutions.
Meanwhile, regulations that strive to provide greater clarity rather than bans have been crucial to the success of markets. The Inland Revenue Authority of Singapore (IRAS), for one, recently released an e-Tax draft guide that proposed an exemption of cryptocurrency transactions from goods and services tax (GST). The move helped to bolster the city-state’s position as one of the most crypto tax-friendly jurisdictions in the world. Japan, on the other hand, known as one of the earliest crypto-friendly markets, has had regulations in place since April 2017. Largely catalyzed by notorious bitcoin exchange Mt. Gox’s claim for insolvency in 2014, Japanese lawmakers began developing regulations for cryptocurrencies during that time. As a result of research conducted by a working group as part of the country’s Financial Services Authority (FSA), the government amended its Payment Services Act to provide a registration system for cryptocurrency exchanges, ensure that cryptocurrency transactions are subject to anti-money laundering (AML) regulations, and introduce a system to safeguard protections for users and investors.
In many ways, countries such as Thailand, Singapore, and Japan are success stories in their own right, exemplifying the benefits of first-mover advantage. One will find that in these countries, a collaborative model that seeks to better understand the technology with help from projects themselves has helped to legitimize it in the eyes of businesses as much as consumers. Unable to capitalize on regulatory uncertainty or ambiguous grey areas, projects are provided with the necessary guidance to ensure that their operations are compliant from the get-go. If there’s anything we can learn from Asia, it’s that such an approach has helped to shape the resulting local industry landscape for the better.
— The author is Danny Phan, Managing Director, APAC at Wachsman