Government regulation of cryptocurrencies: Asia

The crypto-currency direction in Asia is developing rapidly, and with it comes the need for government regulation. Because of this, there are many aspects that crypto-enthusiasts need to know in advance.

Why States Regulate Cryptocurrency

Regulation of cryptocurrencies has become one of the main topics of recent years both in the East and in the West.
While Europe and the USA are building international crypto regulation through common standards and initiatives such as MiCA, Asian countries are going their own way. We will cover global regulation, including the West, in the next article; now we will focus on how legal regulation of cryptocurrency is developing in major Asian countries.

The reasons for state intervention are obvious: the growth in popularity of digital currencies, fears of money laundering, the need to protect investors, and the desire to control cash flows. All states sooner or later face the question of how to solve crypto-regulation issues. The answers depend on the country itself—some ban, others actively license.

Main Approaches in Asian Countries

Crypto regulation in Asia is diverse and shows different strategies depending on political and economic priorities:

China — one of the most famous examples of a tough approach. 

For several years now, China has banned cryptocurrency, including mining and trading. This decision was motivated by the fight against capital flight, speculation, and the desire to promote the central-bank digital currency—the digital yuan.

Bottom line—Is cryptocurrency allowed in China? No, since 2021 all crypto transactions are considered illegal. Nevertheless, gray schemes and interest in DeFi persist.

Japan — one of the first countries to legalize Bitcoin as a means of payment.

Legal regulation in Japan has been in place since 2017 and includes licensing of crypto exchanges, asset-custody requirements, and mandatory AML and KYC measures.

Crypto regulation in Japan is recognized as one of the most well-thought-out in the world, making the country attractive for crypto start-ups and retail investors.

Thailand — has regulated the market since 2018.

In Thailand, a crypto-regulation law came into force that obliges all providers to obtain licenses from the SEC, and users must pass KYC. It is also forbidden to use crypto as a means of paying for goods and services.

Singapore — chose a flexible approach.

The regulator supports innovation while introducing strict anti-money-laundering requirements. A legal regime is in place governing DeFi, exchanges, and wallet providers. Cryptocurrency in Asia feels relatively comfortable here—although recent incidents with platforms like Terraform Labs have led to increased oversight.

South Korea — a country with an active market and strict rules. 

The Virtual Assets Act requires mandatory registration of all exchanges and the use of real-name bank accounts. The main focus in South Korea is on AML and KYC, as well as on increasing transaction transparency.

Cryptocurrency in India

The situation with crypto in India is quite dynamic. First there was a complete ban, later it was lifted by the Supreme Court. Now India taxes crypto profits at 30 % and is studying the creation of a central-bank digital currency—the digital rupee.

However, clear legal regulation of cryptocurrency has not yet been implemented, which slows sector development and creates uncertainty for investors, businesses, and of course the general population.

Tough vs. Soft Regulation

Which is better: a total ban or adaptation to existing legal frameworks? Tough regulation, as in China, can slow innovation but protect the financial system. Soft regulation, as in Japan and Singapore, lets the market breathe but demands a high level of participant maturity.

Crypto regulation in China is an example of a complete ban; crypto exchanges have no legal status, and any crypto operations are outside the law. In Japan, exchanges are licensed, allowing regulation of their activities and protection of users.

How State Regulation Affects Users and Companies

For traders and investors, regulatory impact can be double-edged. On the one hand, it increases trust, reduces fraud risks, and eases institutional access. On the other—restrictions, taxes, and KYC procedures can become barriers for many. Some countries even practice blocking crypto transactions between users.

For companies, exchanges, and fintechs, the legal status of crypto exchanges is crucial. Only with a license can they operate legally and attract clients/investors.

Trends and the Future of Crypto Regulation in Asia

• Growing interest in central-bank digital currencies
• Increased licensing of crypto exchanges and DeFi platforms
• Tightening AML and KYC requirements
• Combating cross-border money laundering through international crypto regulation
• Greater transparency via reporting and audits

The future of the Asian crypto market will be defined by a balance between safety and innovation. DeFi regulation, interaction with international standards, and the launch of central-bank digital currencies could all positively influence the development of the entire digital-currency sector.

FAQ

1. In which countries is cryptocurrency regulated?
   The market is most actively regulated in Japan, Singapore, South Korea, Thailand, and India. Cryptocurrency in Asia faces both strict and flexible measures.
   
   
2. Is cryptocurrency allowed in China?
   No, China banned cryptocurrency in 2021. Operations with it are illegal, and mining is also prohibited.
   
   
3. How to solve cryptocurrency-regulation problems?
   International coordination, transparent legal mechanisms, balancing consumer protection and innovation, and developing global standards for crypto regulation worldwide are necessary.