Asia hosts some leading global financial centers, such as Singapore, Hong Kong, Dubai and Japan, along with economic powerhouses in China and India. All of these are different jurisdictions with their own policies regarding cryptocurrencies.

Singapore has allowed trading and possession of digital assets, though the country discourages retail cryptocurrency advertisements. Hong Kong has welcomed cryptocurrency companies to keep its place as a major hub for international money. The United Arab Emirates, particularly Dubai, has been actively working to embrace digital assets. Japan has gradually loosened the rules regarding token listings, and the country is now more welcoming toward crypto. 

On the other hand, in 2021, China banned cryptocurrency mining and trading. India has put in place harsh crypto laws, while the government is working to come up with comprehensive crypto laws.

This article will run through the legal status of the crypto industry in Asian countries, discussing the different government regulations and standards and their implications for cryptocurrency and its holders.

Which countries have regulated or banned crypto in Asia? 

Currently, crypto laws and regulations are inconsistent in Asian countries. The regulatory framework is fragmented and varied across the board. Some countries, such as China, have banned cryptocurrency mining amid concerns over energy consumption

North Korea has used cryptocurrencies to evade sanctions from the West and fund its nuclear missile program. However, their regulatory framework for retail and institutional investors is very unclear to the rest of the world. Bhutan has partnered with Ripple to develop their central bank digital currency (CBDC), while Myanmar’s shadow government has recognized stablecoin Tether (USDT) as legal tender, though the overall regulatory status of crypto is still uncertain.

Crypto regulations in Singapore and Thailand appear milder than in other countries. Still, the crackdown on the crypto economy is felt, particularly in matters pertaining to Anti-Money Laundering (AML), Counter-Financing Terrorism (CFT) and licensing. 

In the Philippines, cash remittances represent around 10% of the total gross domestic product, and cryptocurrencies have become a cheap way to send money in and out of the country, especially for the unbanked population, who need only an internet connection and a smartphone to execute transactions.

In Indonesia, legally specified cryptocurrencies are recognized as trading commodities, not as a means of payment, and banks are forbidden to encourage the use of cryptocurrency as a form of payment. This is in line with the regulations set by the Indonesian Commodity Futures Trading Regulatory Agency (BAPPEBTI), which oversees cryptocurrency trading. 

As of August 2022, BAPPEBTI has approved more than 350 tradable crypto assets that include Bitcoin (BTC), Ether (ETH), XRP (XRP) and memecoins such as Shiba Inu (SHIB) and Dogecoin (DOGE). Moreover, cryptocurrencies must comply with risk assessment, AML and CFT requirements. 

In 2022, the country experienced a rise of 280% in crypto investors, from 1.5 million to 4.2 million, with a daily trading volume of roughly $117.4 million, and issued a “fatwa” to its Muslim population against cryptocurrency use.

The overall perception is that most Asian countries recognize the benefits of cryptocurrency adoption, including low transaction costs, particularly for remittances, and the use of blockchain technology in their public services, like in Cambodia. In October 2020, the National Bank of Cambodia launched a blockchain-based nationwide payment system called Bakong.

They are, however, concerned about the implications of cryptocurrency in terms of money laundering and terrorism financing and demand more rigid rules to protect customers from speculative trading activities and businesses from risky financial investments.

The quick rise of cryptocurrencies has taken many countries by surprise. Some have only undertaken a regulatory approach toward cryptocurrencies, while others have not yet introduced clear legislation. 

Crypto regulations in the UAE

Dubai, among the top cities in the UAE, is aiming to become a global hub for crypto and blockchain activity and has been open to technological innovation in the realm of financial services. 

Dubai’s Virtual Assets Regulatory Authority (VARA) was set up in 2022 as a single watchdog controlling crypto in the city. VARA has helped set up a vibrant ecosystem of digital asset firms in the city. To operate a cryptocurrency business in the UAE, one needs to obtain a license from the Securities and Commodities Authority (SCA), the primary regulator in the country for cryptocurrencies.

The law requires cryptocurrency businesses in the UAE, including Dubai, to implement Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures. The Financial Services Regulatory Authority (FSRA) is another regulator in the country that’s active in creating a regulatory framework for cryptocurrencies.

While Dubai is leading the charge when it comes to digital assets, Capital Abu Dhabi and emirates like Sharjah and Ras Al Khaimah are also promoting digital assets.

Cryptocurrency regulations in Asia

Crypto regulations in Japan

Japan is one of the most crypto-friendly countries in Asia. Its government regulators recognize Bitcoin and other cryptocurrencies as a type of money and legal property.

How is cryptocurrency regulated in Japan? The industry is regulated by the Financial Services Agency (FSA), which manages transactions in the country’s currency, the yen. The Japanese Payment Services Act provides a regulatory framework for payment services and regards crypto assets as payment methods. Owning and investing in cryptocurrencies have no restrictions. 

The Payment Services Act also defines crypto exchange providers as businesses that carry out the following:

  • The sale, purchase and exchange of crypto assets 
  • Intermediating, brokering or acting as an agent for the trading of crypto assets 
  • Managing customers’ money in connection with the activities mentioned above 
  • Managing crypto assets on behalf of another person.

Like many other countries, Japan regulates cryptocurrency under AML and CFT measures. Exchange providers are subject to cryptocurrency scrutiny by the authorities as outlined in the Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism, enforced as of February 2021.

Crypto regulations in India

The government of India has considerably changed its standpoint on cryptocurrency regulation over the years. In April 2018, India’s central bank imposed a ban on the sale or purchase of cryptocurrencies, though the ban was later overturned by the Supreme Court.

In the 2022 budget, the government clarified its stance regarding digital assets. The government has imposed a flat 30% tax on profits gained from cryptocurrency trading or investments, along with a 1% tax deduction on source (TDS). The law doesn’t allow traders and investors to offset gains against losses. For instance, if a trader makes a profit of $500 on trading Bitcoin in the tax year while incurring a loss of $700 while trading ETH, they will have to pay taxes on the gain of $500, their loss notwithstanding.

In December 2023, the Financial Intelligence Unit (FIU) accused nine cryptocurrency exchanges of illegally operating in India and sent them notices. These exchanges were Binance, Huobi, Kraken, Bitstamp, MEXC Global, Gate.io, KuCoin, Bittrex and Bitfinex, and they were later banned. However, Indian exchanges that had registered with the FIU were allowed to function. Some prominent names among these exchanges were WazirX, Unocoin, ZebPay, CoinDCX, Mudrex and CoinSwitch.

Crypto regulations in Singapore 

Cryptocurrency trading and possessing digital assets are legal in Singapore. The country has long been one of the world’s leading countries to encourage blockchain development and the innovative application of cryptocurrencies in beneficial use cases.

However, the Monetary Authority of Singapore (MAS) has cracked down on retail cryptocurrency advertisements for companies that offer crypto-related services to protect investors from a risky allocation of their money and the assets’ volatility. The measure included outlawing crypto ATMs, which are considered advertisements to the public.

How does Singapore regulate crypto? Strict AML and CFT regulations were handled by the MAS in January 2020 and further restricted in 2021. They are outlined in the Guidelines to Notice PS-N02 to stop the illegal transfer of crypto funds through Singapore, and they are applied to digital payment token (DPT) service providers. In 2021, the scope was extended to the provision of custodial wallet services for DPTs.

Licensing requirements for virtual asset service providers (VASPs) in Singapore are delineated in the Payment Services Act 2019. Companies that want to get involved in the crypto business need to apply with the MAS, and only when licensed can they operate their business. They must have their primary location in Singapore and be compliant with AML/CFT requirements.

Crypto regulations in Thailand

The rapid growth of cryptocurrency businesses and trading has signaled the need for Thai authorities to regulate the industry to mitigate financial risks for investors and companies, including assets’ volatility, cyber theft, personal data leakage and money laundering.

Regulators want to prevent businesses from enabling the use of crypto as a means of payment for goods and companies, as outlined by the Bank of Thailand, the Securities and Exchange Commission and the Ministry of Finance in a joint press release.

They believe the widespread adoption of crypto assets could threaten the country’s economic and financial stability. Thailand’s central bank is running a pilot retail CBDC project. Due to the rapid growth of digital assets’ adoption in the country, Thailand has imposed a 15% capital gains tax on profits from cryptocurrency trading as a way to gain some revenue from the industry. 

The tax is applicable under the Royal Decree and the Amendment of the Revenue Code. The Thai cabinet has dispensed with corporate income tax and VAT for enterprises issuing digital tokens for investment.

Crypto regulations in Malaysia

Cryptocurrency is legal and regulated in Malaysia by the Security Commission (SC) under the Capital Markets and Services Order 2019. It is considered a security and is therefore subject to Malaysia’s securities laws. Cryptocurrencies and tokens are not regarded as legal tender or payment instruments by the Bank Negara Malaysia, Malaysia’s central bank.

On Oct. 28, 2020, the SC published new guidelines on digital assets for crypto providers that want to raise funds through token offerings but also for entities that want to run an initial exchange offering (IEO) platform and those who intend to provide storing and custody services for digital assets.

All companies that want to raise funds with token offerings must use approved and regulated crypto asset exchanges that facilitate IEOs. Such exchanges are required to conduct due diligence on the issuer, who must be a Malaysian corporation with its primary business operations in Malaysia and comply with AML and CFT laws.

Two prominent names in the cryptocurrency space, Binance and eToro, are not allowed to operate in Malaysia because they don’t comply with its security laws. At present, Malaysia does not have a tax framework for crypto businesses, and no capital gains tax is enforced to sell investments or capital assets. However, companies with digital assets as their primary business activity may be liable for income tax, while crypto exchanges are subject to corporate income tax.

Crypto regulations in China

China applies the strictest regulation in terms of cryptocurrency. It’s a blanket ban on all crypto-related activities, and all companies are banned from providing cryptocurrency services, from mining to trading and issuing cryptocurrency. 

Such activities are considered illegal financial activities by the People’s Bank of China and government bodies. In September 2021, the country announced further strict measures to combat cryptocurrency adoption in China, including further scrutiny of the companies supervising the regulations.

The first crypto ban in China dates back to 2013, when the country banned banks from running crypto transactions. In 2017, the ban that initially crashed cryptocurrency value was an explicit prohibition of initial coin offerings (ICOs) and a tough crackdown on crypto exchange businesses. In the aftermath, the country adopted a milder approach for a few years but then resorted to a straight ban again.

Why is Bitcoin illegal in China? China used to host over 50% of Bitcoin mining hashing power, and mining facilities represented good revenue for the local economies. The drastic ban on mining in June 2021, with the official reason to reduce carbon emissions, initially had a dramatic effect on the mining industry. 

It caused a massive exodus of miners from China to more crypto-friendly countries where electricity is cheap. Chinese giant merchant Alibaba announced it would ban all sales of cryptocurrency mining rigs. However, the country is developing a CBDC; the People’s Bank of China (PBoC) understands the need for a digital currency, but decentralization is not on the table. 

The PBoC’s digital yuan project advanced in 2019 with trials in various cities, broadening in 2021 to include more locations and applications, including international transactions, online shopping and usage at the Beijing Winter Olympics.

Crypto regulations in Hong Kong

Cryptocurrencies don’t qualify as legal tender in Hong Kong. Therefore, they are outside the purview of the Hong Kong Monetary Authority (HKMA). There is no capital gains tax and frequent crypto trading is treated as regular income. In March 2023, a court declared property under the law of Hong Kong.

In June 2023, Hong Kong began giving crypto licenses to digital asset trading platforms, enabling licensed exchanges to roll out retail trading services. Hong Kong’s Securities and Futures Commission (SFC) oversees digital asset tokenization activities in the city and approves applications for spot crypto ETFs.

All financial activities in Hong Kong need to comply with AML and CFT laws. Anyone can purchase cryptocurrencies through exchange platforms, crypto ATMs and individual holders. As for mining, any premises used in the operation need to comply with the Buildings Energy Efficiency Ordinance. The Office of the Government Chief Information Officer monitors the data centers.

Crypto regulations in Vietnam

Like Hong Kong, Vietnam doesn’t recognize cryptocurrencies as an approved mode to conduct transactions. Therefore, using a digital currency to conduct financial transactions in Vietnam is illegal. Regarding the trading of virtual currencies, there are no specific legal provisions in the Vietnamese legal system.

The government’s approach is cautious after the State Bank of Vietnam declared cryptocurrencies illegal as payment instruments in 2018. The government’s policies have usually been tolerant toward crypto. However, there is no comprehensive regulation governing the crypto ecosystem. 

Crypto regulations in Pakistan

Pakistan has adopted different approaches to cryptocurrency over the years. The regulators’ approach toward crypto has evolved. In 2018, a statement from the central bank of Pakistan demanded that banks and payment providers refrain from engaging in any crypto-related activity.

Cryptocurrencies are neither regulated in Pakistan nor illegal or banned. One of the reasons Pakistan is not legalizing cryptocurrencies is to keep the country off the gray list of the International Monetary Fund (IMF), the global finance watchdog. In January 2022, the State Bank of Pakistan (SBP) declared it planned to ban crypto, but there was no further communication on those plans later.

Regardless of the regulatory ambiguity, cryptocurrencies have been finding traction in Pakistan. By May 2023, the annual trading volume for Pakistan-based wallets had gone up to $25 billion, from a range of $18 billion–$20 billion. As the crypto industry thrives across the region, people can expect other Asian countries to regulate the market soon.

Written by Dilip Kumar Patairya