Why South Korea, Singapore and Thailand are blocking US Bitcoin ETFs in an “unprecedented” move – DL News

In contrast to the excitement that greeted the approval of Bitcoin ETFs this month, there was one group that was overwhelmed by the groundbreaking proposal: Asian regulators.

As soon as exchange-traded funds from Fidelity, Ark Invest and BlackRock’s iShares arm hit the market in early January, financial watchdogs in South Korea, Singapore and Thailand told brokerages to allow their clients to invest in overseas products. I warned you not to do that.

Additionally, Taiwanese regulators have said that the indexes tracked by ETFs must consist of “securities,” and the island nation’s rules do not include Bitcoin.

The liquidation of the funds was blocked by the U.S. Securities and Exchange Commission, which surprised market participants. Asia is the world’s fastest-growing ETF market, and regulators typically move money around with little fuss.

“A blanket ban on US-approved ETFs is basically unprecedented,” said Jason Titman, chief operating officer of Australian crypto exchange Swyftx. “This is a bold move by these jurisdictions, and the logic is difficult to disentangle.”

one basis

Protecting retail investors from the predatory activities of fraudsters may be the main reason for this action. Combating crypto crime has become an urgent issue across the continent.

Perhaps it’s similarly fending off Wall Street’s offer to give domestic efforts time to catch up.

Justin Danesan, a Hong Kong-based senior executive at crypto market maker Keylock, said: DL News There were rationales behind the regulator’s cautious approach.

“There are questions about how these ETFs will fit into existing digital asset regulations and how they will monitor both retail and professional interactions with cryptocurrencies,” Danesan said. .

criminal act

Just this week, the United Nations Office on Drugs and Crime found that more than $17 billion in USDT, a stablecoin issued by Tether, was involved in criminal activity across Southeast and East Asia in the year to September last year. A report was released stating that.

And Hong Kong law enforcement authorities are scrambling to shut down fraudulent cryptocurrency exchanges suspected of defrauding unwitting investors of hundreds of millions of dollars.

Read now

Asian regulators fear a US Bitcoin ETF, which posted $10 billion in trading volume in its first three days of trading, could trigger a rush of investors before safety measures are in place. There is a possibility that there are.

But there may be another motive: protecting the domestic market.

$1 trillion ETF market

Over the past five years, Asia-Pacific has become the fastest growing market for exchange-traded funds, according to Belgian financial services company Euroclear.

Penetration of ETFs (exchange traded products that track securities or indexes and trade like stocks) surged by almost 19% in Asia, compared to about 14% in the rest of the world. Euroclear cited PwC data and said Asian investors poured an additional $1 trillion into ETFs.

“Negative thinking may just be buying time for a launch on its own terms and at its own venue.”

— Justin Danesan, Keylock

Titeman suspects that government officials in several countries are politicizing digital assets, cultivating products linked to their national cryptocurrencies on local exchanges.

“I don’t think many of their decisions actually do much to protect anyone other than the incumbent,” he says.

Danesan agreed.

“Negative thinking may just be buying time for a launch on its own terms and at its own venue,” he says.

Read now

In any case, regulators on a continent known for its unfettered capitalism are rejecting offers from companies such as Ark Invest and BlackRock, the world’s top investment firm with $10 trillion in assets under management. That’s surprising.

On January 12, a day after BlackRock launched the iShares Bitcoin Trust, the South Korean Financial Services Commission said it could be illegal to sell US spot-price Bitcoin ETFs in the domestic market, brokers said. warned.

It said such actions “could violate existing government positions on virtual assets and capital markets laws.”

The commission also said in a statement that regulations regarding virtual assets are being established.

The agency said, “There have been cases in the United States and other countries, so we will consider this further.”

There was some backlash and confusion.

On January 19, Song Tae-yoon, director of the presidential office’s policy office, said at a press conference that financial regulators should reconsider their position.

Please pay close attention

Meanwhile, the Monetary Authority of Singapore announced on Tuesday that investment firms cannot offer US Bitcoin ETFs to retail investors.

Officials told Singapore media that those choosing to trade in overseas markets “need to exercise extreme caution”.

On the same day, the Securities and Exchange Commission of Thailand stated that there are “no plans to allow spot Bitcoin ETFs in Thailand” for the time being.

Investors seeking access to crypto assets were encouraged to use nine companies licensed to provide such investment services in Thailand.

“Denying people access to products that the world’s largest investment managers recommend to their wealthy clients doesn’t do much.”

— Jason Titman, Swyftx

If there’s one place a Bitcoin spot price ETF could take root first, it’s Hong Kong. Back in 2022, CSOP Asset Management brought the first Bitcoin and Ether futures ETF to market.

Now local lawmakers, including Rep. Johnny Ng, are pushing for approval of a spot-price ETF similar to the one just approved in the United States.

In fact, crypto advocates are calling on authorities to speed up the approval process.

crypto flex

Regulators in other regions may also feel the pressure as cryptocurrencies fluctuate in a new bull market. While Bitcoin has fallen more than 10% in the past seven days, the top cryptocurrency has soared more than 89% in the past 12 months.

As former Wall Street crypto pundits like BlackRock CEO Larry Fink have touted Bitcoin’s value, retail investors are facing restrictions on accessing the asset class. This may lead to increased demand for the means provided.

If Asian countries do not allow their own funders to offer Bitcoin ETFs, it will be harder for regulators to justify cutting off access to the product for U.S. companies.

“It’s entirely natural for national regulators to protect retail investors, and I fully accept that parts of the industry need to mature,” Swyftx’s Titman said.

“But denying people access to products that the world’s largest investment managers recommend to their wealthy clients doesn’t do much except penalize ordinary investors.”

Do you have a story about cryptocurrencies in Asia? Contact the author at: callan@dlnews.com and sebastian@dlnews.com.