Asia is at the forefront of the digital money revolution
Asia has become the epicenter of digital money

Asia is at the forefront of the digital money revolution

March 2022

"Asia is for many reasons at the forefront of innovation in digital money," James Kallman, director of Moores Rowland Indonesia, said to the EFE News Agency.

Asia has become the epicenter of digital money, both in the area of ​​cryptocurrencies and in terms of digital currencies managed by central banks, which place the continent at the forefront of what is called to be the monetary revolution of the 21st century.

There are many factors that make Asia unique in leading the world of digital money: in addition to being a powerhouse in innovation, exporting up to two-thirds of global technology, its population has a higher level of digital knowledge than other regions, points out the OECD , while there are hundreds of millions still without a bank account.

Its two demographic giants, China and India, still have 20 percent of citizens disconnected from banks, and up to 300 million souls live in Southeast Asia not linked to financial institutions, notes Global Finance magazine.

Circumstances that make Asia an optimal place for the exploration of digital money, something that the pandemic -and the technological dependency it has generated- has only accelerated; According to Nikkei Asia, 60 million people in Southeast Asia have become online consumers since the outbreak of the crisis.

At the forefront of digital innovation

The consulting firm McKinsey , for its part, estimates that the proportion of digital payments in Asia will reach 65 percent in 2024, in contrast to the global average of 52% predicted for then.

"Asia is for many reasons at the forefront of innovation in digital money," James Kallman, director of Moores Rowland, a consulting firm specializing in finance and technology based in Jakarta (Indonesia), assures EFE News Agency.

Japan was in fact the first country in the world to approve cryptocurrencies, transferred between users without intermediaries through a decentralized system known as blockchain, as commodities or assets - not as currencies - in 2014.

The consumption of cryptocurrencies such as Bitcoin has since become a phenomenon in other Asian nations, with Vietnam and the Philippines rising as the second and third countries, after Nigeria, with the highest proportion of users in 2021, according to the data company Statista.

In the heat of its popularity, many countries in the region have chosen to enter the route of digital currencies (CBDC, Central Bank Digital Currency), which share blockchain technology with cryptocurrencies but differ in their essence: while the former are decentralized and the user preserves his anonymity, the latter are issued and regulated by a central authority such as banks and federal reserves.

Digital National Currency

Rather, it is about digitizing the national currency, allowing countries to maintain greater control over their monetary policies, but also over the transactions of their citizens, whose data does appear linked to the CBDC.

Two worlds with a common technological denominator that can collide, as in the case of China, little friend of initiatives that escape the radar of the authorities. The second world economy, for example, prohibited all cryptocurrency transactions in 2021, although it has triggered the development of the e-yuan.

The cyber yuan, with value identical to the physical one, ranks third (after the Bahamas and Cambodia) in CBDC project maturity level for all types of clients, according to a 2021 PwC study.

This report also places Asian countries at the top of the share of CBDC initiatives aimed only at exchanges between financial institutions, with Thailand, Hong Kong and Singapore in the top three positions.

World lab

Asia has thus become a global laboratory investigating how to adapt and regulate the use of digital money in its various forms, with examples of collision between the "crypto" world and CBDCs such as China and India, and also cases of coexistence more peaceful between the two like Japan or Singapore.

India has recently announced a 30% tax on virtual digital assets, maintaining its reticence towards them and betting instead on the digital rupee.

Japan, by contrast, launched its first phase of testing a digital currency last year while continuing to allow cryptocurrency transactions.

For its part, Singapore, which is also considering creating its own electronic currency, has granted five licenses to cryptocurrency services, but has warned against their advertising for being "highly risky" given its proclivity for speculation, a position similar to that of Spain.

Illicit activities

"Cryptocurrencies are a blessing for illicit activities, so it should not be surprising that some countries are betting on the measured, methodical and careful development of CBDCs," says Kallman.

But its possible use for illegal actions, with reports linking cryptocurrencies to money laundering, is not reason enough to dismiss its benefits, according to See Wan Toong, chief technology officer at RedDot Digital, which applies blockchain technology to the world of cryptocurrencies and video games.

“It could be said that cryptocurrencies could rebalance world wealth”, considers the Singaporean, based in Taiwan, highlighting their potential as a tool for financial inclusion in a continent with great contrasts in development.

"Their rejection comes largely from Wall Street, governments and people who still have a lot of interest in the old system, but money laundering is going to exist with and without them," he adds.

At the moment, the highest representatives of that "old system,"  the finance ministers and governors of central banks of the G20, urged last week from Jakarta to regulate cryptocurrencies, while clues are given from the continent about what the future holds for cryptocurrencies and the digital money revolution.

The above text is from an article published online, originally in Spanish, by the EFE News Agency, on February 23, 2022: