Eastern Asia’s Growing Influence in the Cryptocurrency Market
The landscape of cryptocurrency adoption in Eastern Asia is evolving rapidly, with institutions playing a key role in driving this growth. According to the Geography of Cryptocurrency Report for 2024, Eastern Asia ranks as the sixth largest cryptocurrency economy globally, representing 8.9% of the total global value received in the period between July 2023 and June 2024. This region received over $400 billion in on-chain value during the same timeframe, showcasing significant activity within the cryptocurrency market.
Stability in Cryptocurrency Transaction Value
Despite the dynamic nature of the cryptocurrency market, Eastern Asia has maintained a relatively stable share of cryptocurrency transaction value during the period under study. Centralized exchanges have emerged as the most popular service category in the region, accounting for 64.7% of cryptocurrency value received. This preference for centralized exchanges suggests a strong presence of institutional and professional investors driving the market activity in Eastern Asia.
Institutional vs. Professional Investors’ Preferences
A notable trend observed in Eastern Asia is the distinct preferences of professional investors versus institutional investors when it comes to cryptocurrency services. While professional investors predominantly utilize centralized exchanges (CEXes), institutional investors show a preference for decentralized exchanges (DEXes) and other decentralized services (DeFi). This divergence in choice may stem from institutional investors seeking investment strategies that leverage market inefficiencies, with DEXes offering more arbitrage opportunities due to their diverse asset coverage.
Leading the Way in Cryptocurrency Adoption
Eastern Asia boasts five countries among the top 50 highest grassroots adopters of cryptocurrency worldwide: South Korea (19), China (20), Japan (23), Hong Kong (29), and Taiwan (40). These countries have demonstrated significant interest and engagement with cryptocurrencies, contributing to the region’s overall position in the global cryptocurrency market.
South Korea’s Dominance in the Cryptocurrency Market
Among the countries in Eastern Asia, South Korea emerges as the leading market for cryptocurrency value received, with approximately $130 billion recorded during the study period. The country’s share of transaction value within Eastern Asia has been steadily increasing since the first quarter of 2023, indicating a growing interest in cryptocurrencies among South Korean investors.
Factors Driving Crypto Adoption in South Korea
Several factors have been identified as drivers of cryptocurrency adoption in South Korea. Mistrust in traditional financial systems has prompted investors to explore cryptocurrencies as alternative assets, with major corporations like Samsung embracing blockchain technology, further legitimizing crypto investments. The ease of access to digital asset trading through mobile apps and PCs in South Korea has also fueled the population’s interest in cryptocurrencies, especially following significant milestones such as Bitcoin surpassing $70,000 in January 2024.
Altcoins and Stablecoins: Popular Choices in South Korea
South Koreans have shown a strong preference for altcoins, particularly for trading with the Korean Won (KRW), with altcoins accounting for significant outflows to global exchanges. Additionally, the introduction of stablecoin listings on major Korean exchanges has led to increased stablecoin outflows, reflecting a growing trend towards stable digital assets in the market.
Ripple’s Popularity in South Korea
Ripple has gained significant popularity in South Korea, driven by its fast transfer speeds and relatively low price compared to other cryptocurrencies like Bitcoin and Ethereum. The country’s interest in Ripple dates back to 2017 when the cryptocurrency was seen as a potential replacement for the SWIFT international remittance system, further solidifying its position in the South Korean market.
Market Strategies and Trends in South Korea
South Korean investors often utilize local exchanges to facilitate fund transfers to global exchanges, enabling access to a wider range of assets, arbitrage opportunities, margin trading, and off-ramping. The correlation between the kimchi premium and arbitrage opportunities further highlights the market dynamics in South Korea, with traders capitalizing on price differentials to maximize their returns.
Hong Kong’s Influence on Crypto Regulation in China
While China has historically implemented strict regulations on cryptocurrency activities, Hong Kong has emerged as a crypto hub in the Greater China region, fostering institutional adoption through its regulatory framework. The Special Administrative Region’s openness to crypto and proactive regulatory measures have positioned it as a key player in the cryptocurrency market within the region.
Regulatory Shifts in Hong Kong
In June 2023, Hong Kong’s securities regulator introduced a new regulatory regime for virtual asset trading platforms (VATPs), aimed at providing a regulated pathway for retail investors to engage with cryptocurrencies. The implementation of stringent standards for consumer protection, anti-money laundering, and prudential measures reflects Hong Kong’s commitment to fostering a secure and compliant crypto market.
Institutional Engagement in Hong Kong
The approval of Bitcoin and Ether-based spot Bitcoin ETFs by Hong Kong’s financial regulator, the Securities and Futures Commission (SFC), has paved the way for increased institutional involvement in the crypto market. These ETFs have not only provided a regulated avenue for digital asset investment but have also generated interest in direct holdings of BTC and ETH among institutional investors, signaling a broader acceptance of cryptocurrencies within the institutional investment community.
Conclusion
Eastern Asia’s cryptocurrency market continues to evolve, driven by a combination of institutional interest, regulatory developments, and shifting investor preferences. Countries like South Korea and Hong Kong are at the forefront of this transformation, showcasing the region’s growing influence in the global cryptocurrency landscape. As the market matures and regulatory frameworks solidify, Eastern Asia is poised to play a significant role in shaping the future of cryptocurrencies worldwide.