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

For all the excitement that greeted the approval of Bitcoin exchange-traded funds this month, there was one group that wasn’t wowed by the impressive showings — Asian regulators.

No sooner had exchange-traded funds from Fidelity, Ark Invest and BlackRock’s iShares unit hit the market in early January than financial watchdogs in South Korea, Singapore and Thailand warned brokerages against allowing their clients to invest in offshore offerings.

Furthermore, Taiwanese regulators have said indices tracked by ETFs must include “securities,” which does not include bitcoin under the island nation’s rules.

The US Securities and Exchange Commission’s settled funds ban surprised market players. Asia is the fastest-growing ETF market in the world, and regulators usually pass the money along without much fanfare.

“A complete ban on US-certified ETFs is basically unprecedented,” said Jason Titman, COO of Swyftx, an Australian cryptocurrency exchange. “It is a bold move by these jurisdictions and the logic is difficult to decipher.”

One justification

Protecting individual investors from the predatory practices of fraudsters may be a major reason for this measure. The fight against cryptocurrency crime has become a pressing issue across the continent.

It may also be a case of fending off offers from Wall Street to give local efforts time to catch up.

Justin DeNithan, a senior executive at Hong Kong-based Keyrock, a cryptocurrency market maker, said, DL News There was a rationale behind the cautious approach taken by regulators.

“There is a question about how these ETFs fit within existing digital asset regulation, and how they monitor individual and professional interaction with cryptocurrencies,” D’Anethan said.

Criminal activities

And just this week, the United Nations Office on Drugs and Crime released a report that found that more than $17 billion worth of USDT, the stablecoin issued by Tether, was linked to criminal activity across Southeast and East Asia during a one-year period that ended last September.

Hong Kong law enforcement officials are seeking to shut down rogue cryptocurrency exchanges suspected of stealing hundreds of millions of dollars from unwitting investors.

Asian regulators likely fear that US bitcoin ETFs, which raised $10 billion in volume in the first three days of trading, could send investors scrambling before collateral is installed.

Again, there may be another motive, which is to protect domestic markets.

The $1 trillion ETF market

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

The uptake of ETFs, which are listed products that track securities and indexes and trade like stocks, has jumped about 19% in Asia compared with about 14% in the rest of the world. Asian investors have pumped more than $1 trillion into ETFs, Euroclear said, citing data from PricewaterhouseCoopers.

“The passivity may just be buying time for launches on their own terms and in their own places.”

— Justin Denithan, Kerouac

Titman suspects that government officials in several countries are politicizing digital assets and paving the way for their cryptocurrency-related products on local exchanges.

“I don’t see a lot of their decisions doing much to protect anyone other than the incumbents,” he said.

Dannythan agreed.

“The passivity may just be buying time for launches on their own terms and in their own places,” he said.

However, it is surprising to see regulators on a continent known for its freewheeling capitalism reject bids from firms like Ark Invest and BlackRock, the world’s largest investment house with $10 trillion in assets under management.

On January 12, the day after BlackRock launched the iShares Bitcoin Trust, South Korea’s Financial Services Commission warned brokerages that selling Bitcoin ETFs at the US spot price may be illegal in local markets.

It said such an action could “violate the current government position on virtual assets and capital markets law.”

The committee also said in a statement that regulations regarding virtual assets are being developed.

“We plan to review it further given the presence of cases abroad, such as in the United States,” the agency said.

There was some pushback, and confusion.

On January 19, Seong Tae-yeon, head of policy in President Yoon Suk-yul’s office, said during a press conference that the financial regulator should reconsider its position.

Use extreme caution

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

An official told a Singapore-based media outlet that those who choose to trade in overseas markets “should be very careful.”

On the same day, the Securities and Exchange Commission of Thailand said it “has no plan to allow spot bitcoin ETFs in Thailand” at the moment.

It recommended that investors seeking access to cryptocurrencies take advantage of the nine licensed companies that offer such investment services in Thailand.

“Denying people access to a product that the world’s largest investment managers recommend to wealthy clients doesn’t achieve much.”

— Jason Titman, Swiftex

If there’s anywhere where bitcoin spot ETFs can take root first it’s Hong Kong. In 2022, CSOP Asset Management launched the first Bitcoin and Ether futures ETFs to the market.

And now local lawmakers, like legislator Johnny Ng, are calling for approval of the same type of spot-rate ETFs the U.S. just approved.

In fact, cryptocurrency advocates are urging authorities to speed up the approval process.

Encryption bends

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

As Wall Street critics of cryptocurrencies, such as BlackRock CEO Larry Fink, now tout Bitcoin’s value, retail investors may increasingly demand a regulated means of accessing the asset class.

If Asian countries do not allow their fund providers to offer Bitcoin ETFs, it will become difficult for regulators to justify blocking access to products from US companies.

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

“But denying people access to the product that the world’s largest investment managers recommend to wealthy clients doesn’t accomplish much, other than putting ordinary investors at a disadvantage.”

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