Regulatory Positions in Southeast Asia Q3 2018

How do you tame the crypto Wild West and rein in the industry? Look Southeast.

by Edmund Yong

How do you attract the bees and keep out the flies at the same time?

Such is the regulator’s dilemma in drafting ICO guidelines. They have to cherry-pick the good actors and throw out the rest. The guidelines have to be taut because there cannot be too much legal ambiguity that may be challenged or regulatory discretion that may be abused. Not all good projects can be approved, and many might be unintentionally lumped together with bad actors in the reject pile.  Of the scores that apply, only a handful will be accepted – many are called but few are chosen.

To wit, Thailand Expects to Approve Five ICO Projects out of 50.

While regulators have relied on the “do no harm” approach in the beginning, it places too much faith on private enterprise and self-policing. Regulators are becoming wary that there is very little room for trial-and-error even though this is uncharted space. They do not have the right to be wrong as investor anger is often misdirected at the regulators rather than the perpetrators. All it takes is just one scandal to wreck thousands of lives. Tempers will flare, media will hound, fingers will point; but the money will stay gone. In the end, the crypto industry will suffer the blowback and be worse off for it. Everyone loses.

Read, Vietnam Vows Crackdown After Alleged US$660M Scam.

So it is a delicate balancing act, and a tough one to pull off. Regulators have to juggle public interest and private initiative. They need to maintain market confidence without choking off a funding source for SMEs, the largest creator of jobs in this region. Even though crypto is too small to carry systemic risk at this time, they still need to instill order where none exists. The lesson of the 90s are upon them when the internet dawned – regulators need to be opportunists too; the hand that rocks the cradle of innovation rules the world!

Most major economies have not formulated specific and comprehensive guidelines on ICOs yet. So it is quite remarkable that the SECs in Thailand and Philippines launched theirs this quarter, even before the crypto forerunners in East Asia. MAS of Singapore did it last year (Nov 2017), notably among the first in the world, followed by FINMA of Switzerland (Feb 2018), and G20 members Russia (Apr 2018) and France (Sep 2018). For many others, the practice is to fall back on existing laws albeit with some limitations. As for Southeast Asia, the position is clear: This region has always been a hive of crypto activity, now it is a serious hotbed as well.

To sign off, here is the comparison between the three pioneers: Singapore, Thailand, and Philippines. Since about every conference these days comes with regulatory verbiage, done ad nauseam, we will just leave it on display and let you read yourselves. Can Southeast Asia finally tame the Wild West with these rules? Let us know what you think.