The spread of crypto in Asia

In a report on the health of the crypto and blockchain world in Asia, Chainalysis goes into detail and finds that the growth trend knows no rest.

The trend of crypto adoption in Asia

The CSAO, which includes Central and South Asia and Oceania, represents the third-largest cryptocurrency market. 

Investors in CSAO countries have obtained $932 billion in cryptocurrency value from July 2021 to June 2022.

Seven of the top twenty countries in the index that defines the prevalence of cryptocurrencies on the planet are part of the CSAO and they are Vietnam, which ranks first, followed closely by the Philippines, India which gets the fourth position, Pakistan sixth and Thailand eighth while at the bottom we find Nepal sixteenth and Indonesia the tail end of this small club of performing countries. 

The unweighted crypto activity sees India in the lead, which is confirmed for the second consecutive year in first place and receiving an impressive $172 billion in cryptocurrency value from July 2021 to June 2022 while, for example, Thailand, Vietnam, Australia, and Singapore stand at over $100 billion each. 

NFTs lead this process of opening up to this world with 58% of searches leading back to IP addresses pertaining to the topic in the second quarter of 2022 and 21% involving blockchain play-to-earn games. 

Several NFT game items, such as Axie Pet in Axie Infinity and Sneakers in STEPN, represent tradable assets on MagicEden and OpenSea highlighting high correlation and admixture between platforms and NFTs themselves. 

According to Chainalysis, while NFTs take absolute dominance in Asia, the second largest share in terms of importance and volume is represented by video games and blockchain entertainment in general. 

Polygon and Immutable X are based in India and Australia while Axie Infinity and STEPN, the two largest play-to-earn games, are operated in Vietnam and Australia, respectively.

Liminal (Singapore’s portfolio infrastructure provider) Senior Vice President for Operations and Strategy Manan Vora said: 

“The collapse of the FSO played an important role in shaking the confidence of the cryptocurrency market. When one of the top ten coins goes to zero, it becomes very difficult to convince people who have just entered the market to stay in the market. These are the users you could lose forever.”

Vietnam ranked first among Southeast Asian countries

As we scratch the surface further, we find that leading the way in crypto adoption is Vietnam, which ranked 1st, immediately followed by the Philippines, which rose from 15th to 2nd in just one year.

Vietnam and the Philippines are also crowded by similar growth drivers such as play-to-earn (P2E) games and remittances, with 25% of Filipinos and 23% of Vietnamese having played a pay-to-earn game at least once, and, there was a phase when this percentage rose so high that it accounted for 40% of Axie Infinity’s player base.

Remittances, Chainalysis reports, account for 5% and 9.6% of the respective gross domestic products of Vietnam and the Philippines. 

On the topic, Manan Vora chimed in, stating:

“It makes a lot of sense. Why pay 3% to a bank broker and wait two days for the funds to reach them when USDT / USDC can reach them in a minute, with almost zero fees?”

Blockchain-based payment service providers are beginning to disrupt traditional intermediaries (Pakistan, India and Bangladesh each have more than $20 billion deployed in remittances). 

In CSAO countries, value transfers are usually made with stablecoins (mostly ETH and WETH) so that the value transferred does not change upon transfer. 

However, this monstrous expansion is being held back (as it is in China) by stringent crypto regulations, especially in countries such as India and Pakistan. 

On 1 April this year, the Indian government increased the tax on all cryptocurrency gains by 30%, with no way for users to offset their losses; to this, on 1 July, the government also added a 1% transaction fee at source (TDS). 

“This has led to a major brain drain,” Vora said: “first in Singapore and now in Dubai. … because even if your business is market-making, it is now effectively treated as a lottery business.”

Vikram Rangala, the director of ZebPay, an Indian cryptocurrency exchange stepped in to shed light on the issue:

“From the conversations my colleagues and I have had, the people in the Indian government, including members of parliament, are not anti-crypto per se. Some are very pro-crypto. But they are concerned about their constituents trading a volatile asset without adequate information. A 25-year-old saver to get married or provide for his family could trade a few meme coins and get blown away. No public official can be seen supporting something that is so risky for most people. The rich can survive such losses, but a cleaner, farmer, or rickshaw driver can’t. India has dozens of [crypto] projects working to establish property rights, access tickets and passes, help rural artisans monetize, while also giving token holders the ability to “skydive with a movie star at Dubai” and more.”

The relationship between Pakistan and cryptocurrencies

Following India’s footsteps, Pakistan’s central bank and government have recommended a ban on cryptocurrencies and formed three subcommittees to deliberate further on the issue and keep an eye on the phenomenon while leaving hope for a resounding turnaround on crypto.

Pakistan also finds itself in an awkward situation as it has been on the Financial Action Task Force (FATF) gray list since 2018, and is not eligible for international financial aid leading the country’s government to consider this asset as an alternative to circumvent the international community’s obstructionism. 

The governor of the State Bank of Pakistan (SBP), Reza Baqir, stated that:

“The potential risks associated with cryptocurrencies” far outweigh the benefits. The enlargement of the shadow economy and the flight of capital as key concerns.”

Vikram Rangala, on the other hand, on the topic of opening up to digital currencies said.

“After seeing Venezuela and Argentina, I think anyone who is in a country where things aren’t that stable are starting to see cryptocurrency as a possibility.”