Fri, Dec 29, 2017 - Page 8 News List

A chance to lead innovation in Asia

By James Cooper and Michael Sung

Everyone is talking about blockchain technology. The incredible rise of bitcoin, the cryptocurrency which introduced blockchain technology to the world, and its rapid year-end market rout in a matter of weeks are attracting feverish international attention, both among investors and regulators.

The hacks that robbed tens of millions of dollars, the Web site activity overloads of exchanges and the ever-present specter of money laundering are all part of the hype.

Blockchain technology is essentially a universally transparent ledger where distributed trade and services can be conducted without the need for the usual trusted intermediaries of the past. The old world order of centralized services controlling all the data and mechanisms of business, such as HSBC, Ebay and Facebook, are gone.

In its place will be disintermediated marketplaces and services where buyers and sellers can conduct business directly to great efficiency and transparency.

The original Internet massively disrupted society by connecting the offline to the digital. Internet 2.0 furthered connectivity and multimodal interaction via social networks and mobile technology.

Blockchain technology represents Internet 3.0, where the tidal wave of market potential of new distributed business models will make the earlier disruptions looks like small ripples in a pond.

In the US, the mania is reaching fever pitch. Block.one, another cryptocurrency, raised close to US$700 million — more than all but 10 of the 195 initial public offerings in US this year.

It is no surprise everyone wants to be part of the blockchain. In the US, a beverage company changed its name from Long Island Ice Tea Corp to Long Blockchain Corp and saw its value on NASDAQ increase by US$35 million. The company has nothing to do with digital currencies or any other use of blockchain technology.

The mania will without a doubt continue in the US next year and new legislation to regulate the cryptocurrency market is sure to follow.

The fastest-growing market for digital currencies is Asia. However, governments in the region are approaching the regulation of blockchain technologies differently.

Hong Kong’s government still sees bitcoin as a commodity rather than a currency, leaving it unregulated by financial legislation. However, Japan is taking the bull by the horns. In May this year, Japan’s Payment Services Act was amended by the national Financial Securities Agency (FSA) to allow for cryptocurrencies as a legal form of payment.

Cryptocurrency exchanges in Japan must register with the government; exchanges must separately manage their funds and customer funds; exchanges must be subject to regular audits; dispute resolution is contracted out to third parties; and the FSA provides strict top-down guidance to these exchanges.

Derivatives based on blockchain technology are in the offing for next year.

However, some countries in Asia are not allowing cryptocurrencies at all.

In the People’s Republic of China, one of the largest cryptocurrency markets in the world, all online coin exchanges have been shut down by the government.

On Dec. 7, Indonesia’s government issued a new regulation that prohibited the use of all forms of cryptocurrency. Citing a “weak foundation” and “high volatility,” the government said Monday would be the deadline for all organizations using bitcoin to cease and desist.

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