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How Asian Self-Regulation Will Change The Future Of The Digital Economy

Oleg Koldayev

The Southeast Asian market has become a kind of an incubator and testing site for the digital economy. And now Japan, following South Korea, has introduced self-regulation for crypto-exchanges. The Financial Services Agency (FSA) has delegated part of its powers to the Japan Virtual Currency Exchange Association (JVCEA), which will create security technologies, combat with money laundering and carry out the legal regulation of the industry.

Moreover, the official statement of the FSA says: “Due to accreditation (with the Agency - ed.note), we will continue to make efforts to create an industry that anyone who uses crypto-exchanges can trust.” In other words, accreditation and membership in the organization should be perceived as two inseparable things.

JVCEA has already released to public the 100-page rules of the trading platforms work. New standards do not allow, for example, insider trading on exchanges. According to many officials and experts, market manipulations prevent the integration of digital companies into modern financial institutions. By the way, the American SEC considers the same thing.

The Association appeared in April 2018 after a memorable hack of the Coincheck Stock Exchange, during which $532 million were stolen. The backbone of the non-profit-making organization was composed of 16 accredited crypto-exchanges interested in working in a clean market.

Previously, South Korea followed the same way. Although, the Korean Blockchain Entrepreneur Association (KOBEA) offers milder standards of self-regulation. According to the chairman of the profile committee of the Korean Blockchain Association, Jeong JAE-JING, the main task of the Association is to create a safe environment for people using digital assets. “The exchanges expect the new rules of self-regulation to become a guarantee of their reliability for banking organizations. We contribute to the creation of a healthy financial market and are confident that our actions will contribute to setting up of accounts,” he stressed.

Initially, the rules were offered to 33 organizations. Only 23 of them agreed to them. And 10 exchanges preferred to stay independent. At the same time, the Korean regulator, the Korea Fair Trade Commission (KFTC) also took part in the making the rules.

The Japanese and the Korean experience of self-regulation differ only in one aspect – the movement vector. In the Land of the Rising Sun, it is the reference of the state and in the Land of the Morning Calm – it is the initiative of the market participants themselves. The experience of two Asian dragons can change the future of the digital economy for a couple of reasons.

The first one: the creation and circulation of virtual assets is a very specific industry, where there are many technical and legal factors that are understandable only to specialists. Officials of various departments cannot understand the nuances of the market and quickly respond to changes. Therefore, effective industry regulation is available only to professionals. A high-ranking FSA official said directly that experts were able to handle operational refinement and rule changes  much better than bureaucrats.

The second one is the reasonable restriction of competition. If you think outside the situation, it will become evident that the majority of scams and other fraudulent schemes and enterprises appeared due to the excessive attractiveness of the market and the complete lack of social responsibility. Too many people aim at virtual assets, too many are gripped by the throat by taxes and claims of states to control. Therefore, the threshold of critical thinking among consumers of virtual assets is very low.

Southeast Asia demonstrates the whole range of circumstances and conditions that may affect the development of the digital economy: from the ban on virtual currencies in China to encouraging them in Singapore. And once again, the East offers the West an optimal way out - if the digital economy still does not come under the centralized regulatory governance, then let it come up with its own rules. But under the control of the state, of course. Do regulators in the USA, the UK, and the European Union consider this sign? Or will political ambitions prevail once again?

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