How Does Political Involvement in Southeast Asia Affect Crypto?
Key Considerations for Market Entry: Navigating the Political Landscape in Southeast Asia's Crypto Market
TL;DR
Political and Regulatory Landscape: Southeast Asia's cryptocurrency market is influenced by political support, but success depends on the ability to translate rhetoric into actionable policies, as seen in Thailand's proactive stance versus Malaysia's slower implementation.
Country-Specific Approaches: Thailand has a well-established regulatory framework with strong political backing for cryptocurrency, while Malaysia is focusing on blockchain for economic growth but faces challenges in execution.
Market Entry Considerations: When entering the Southeast Asian crypto market, it's crucial to assess the regulatory environment, policy feasibility, and the capacity of regulatory bodies to enforce compliance effectively.
1. Political Use of Cryptocurrencies Spreading to Southeast Asia
The blockchain revolution, which originated in the financial sector, is now making significant inroads into the political sphere. While some political figures recognize the importance of integrating investor protection, others have only now begun leveraging the support of crypto users to bolster their election campaigns.
For example, former U.S. President Donald Trump attended Bitcoin 2024 and has integrated cryptocurrency into his political narrative, aiming to garner support from the crypto audience for his presidential campaign. This trend extends beyond the U.S., reaching Southeast Asia, where politicians are increasingly endorsing cryptocurrencies, recognizing their appeal to a tech-savvy electorate.
However, as Vitalik Buterin, co-founder of Ethereum, has cautioned, "If you see a ‘pro-crypto’ politician today, it’s worth exploring their underlying values and understanding which side they will prioritize if a conflict does arise." This perspective emphasizes the importance of critically evaluating the motivations behind political endorsements of cryptocurrency. Accordingly, this report examines the current landscape of cryptocurrency support among SEA politicians, analyzing the potential benefits and drawbacks, and exploring the broader implications for the future.
2. The Current Status in Southeast Asia
In recent years, SEA countries have demonstrated a growing interest in cryptocurrencies and blockchain technology. Politicians in nations like Indonesia, Thailand, and Malaysia have become increasingly vocal in their support for digital assets. Unlike some of their Western counterparts, who often publicly back crypto primarily to garner votes, SEA politicians and governments tend to adopt a more balanced approach. They acknowledge the potential benefits of digital assets while placing a strong emphasis on investor protection. To achieve this balance, they focus on developing comprehensive regulations and issuing warnings to safeguard investors, ensuring that the growth of the crypto industry remains both sustainable and secure.
2.1. Indonesia: Growing Public Interest and Emerging Political Engagement
Indonesia's approach to cryptocurrency is characterized by a careful balance between proactive support and prudent regulation. Under the new leadership of President-elect Prabowo Subianto and his running mate Gibran Rakabuming Raka, there has been a strong push to advance blockchain and cryptocurrency expertise. Their campaign emphasized tightening tax compliance among traders and promoting blockchain education for the youth, with the goal of positioning Indonesia as a tech hub and a leader in economic modernization. Gibran's focus on developing "future talents with future skills" underscores a commitment to preparing the younger generation for a digital economy, signaling the creation of a future-ready workforce.
Despite this supportive stance, current President Joko Widodo has emphasized the risks associated with cryptocurrencies. He has raised concerns about the potential for money laundering activities involving crypto assets and urged the Financial Transaction Reports and Analysis Centre (PPATK) to closely monitor such transactions.
Despite differing views on cryptocurrencies from President Joko Widodo's administration, Vice President-elect Gibran Rakabuming Raka, his son, might push for blockchain technology advancement. This relationship may result in a well-balanced market approach, utilizing a dual strategy. Moreover, the rapid increase in the number of crypto accounts in Indonesia reflects growing public interest, which the government aims to leverage for economic modernization.
2.2 Thailand: Well-Established Regulatory Framework and Strict Supervision
Thailand's approach to cryptocurrency is characterized by a combination of enthusiastic support and stringent oversight. The recent appointment of Prime Minister Srettha Thavisin, who has a background in digital assets, signals a potential shift towards more lenient crypto regulations. His campaign promise of a national airdrop, distributing 10,000 Thai Baht to every citizen using a form of token, underscores a practical application of blockchain technology aimed at stimulating the economy.
The involvement of crypto supporters like Srettha and opposition leader Pita Limjaroenrat in the political mainstream reflects a broader push towards mass adoption, with both leaders actively holding and promoting various cryptocurrencies such as BTC, ETH, ADA, and BNB. However, it is important to note that Pita Limjaroenrat, who advocated for the revision of the lèse-majesté law, has been banned from political activities for 10 years. This issue requires continued observation to assess its impact on the broader crypto landscape in Thailand.
However, Thailand's cryptocurrency market has faced several challenges, including the collapse of Terra-Luna and the revocation of Zipmex's license, highlighting the ongoing need for increased regulation. In response, the Securities and Exchange Commission of Thailand (SEC) has implemented a clear licensing framework and is enforcing specific oversight measures, such as issuing warnings against over-hyped transactions and cracking down on illegal activities. SEC Secretary-General Pornanong Busaratrakul has emphasized the importance of regulatory compliance in fostering a trustworthy cryptocurrency market.
These policies are making Thailand an attractive market for crypto projects, presenting both opportunities and challenges for companies. Collaborating with local firms is crucial for meeting the growing demand while ensuring compliance with regulatory requirements.
2.3. Malaysia: Ambitious Plans, Slow Execution
Malaysia is accelerating its digital transformation with blockchain as a central focus. The Ministry of Science, Technology, and Innovation (MOSTI) has released a National Blockchain Roadmap for 2021 to 2025, yet actual adoption cases remain limited. The government appears to be leveraging blockchain as a means to increase tax revenue, evidenced by the Inland Revenue Board's (IRB) recent launch of Operation Opt Token to uncover hidden cryptocurrency investment histories. With Malaysia's digital asset exchange market expected to generate $312.1 million in revenue by 2024, the strategy is to capitalize on cryptocurrencies as a new economic growth engine.
Simultaneously, regulations are tightening. The May 2022 suspension order against Huobi Global highlights the government's increasing scrutiny, and there are ongoing crackdowns on illegal activities such as electricity theft by crypto miners.
As noted in our previous research, Malaysia's Web3 market is not yet among the most prominent in Asia. However, the presence of global players like CoinGecko and Etherscan indicates potential. Despite the national policy framework, there has been little tangible progress, underscoring the need for Malaysia to take more concrete steps to realize its blockchain ambitions.
4. The Importance of Assessing Practical Feasibility
Understanding the current state of the cryptocurrency market in Southeast Asia is crucial, as political support alone does not necessarily translate into success. Thailand offers a positive example, where Srettha Thavisin's national airdrop initiative demonstrated how cryptocurrency can gain popularity and stimulate economic growth—a clear case of political will being transformed into actionable policy. Conversely, Malaysia serves as a cautionary tale. Despite ambitious governmental plans, tangible examples of implementation are hard to find, highlighting the disparity between political rhetoric and actual execution.
When considering entry into this market, it is essential to consider the following:
Analyze the Regulatory Framework: Assess the overall regulatory environment, including specific regulations governing the cryptocurrency market.
Assess Policy Feasibility: Evaluate whether politicians have the resources and expertise necessary to turn their rhetoric into effective policies.
Evaluate Regulatory Execution: Investigate the capabilities of regulatory bodies and determine their ability to implement and enforce regulations effectively.
In conclusion, if you are contemplating entering the cryptocurrency market in Southeast Asia, it is vital to thoroughly analyze the government's commitment, capacity, and the regulatory environment as a whole. Avoid being swayed by superficial support and instead, critically assess the likelihood of practical implementation.
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