Crypto Oasis Founder Thinks UAE Set Up For Crypto Success

BOK Staffers Assess Crypto Market Vulnerabilities and Their ImplicationsOn Thursday, the Bank of Korea’s (BOK) staff members published an assessment of the vulnerabilities in the cryptocurrency market and their potential implications. Here is the summary of the report.Photo by D Tan on Unsplash2022 crypto winterThroughout 2022, the worldwide crypto market faced a series of adverse occurrences, such as significant drops in the prices of major crypto-assets and the collapse of prominent crypto companies. These events shed light on the vulnerabilities that had accumulated during the rapid growth of the market.The first major event occurred in May 2022 when the algorithmic stablecoin TerraUSD experienced a sharp decline, resulting in substantial losses and bankruptcies for numerous retail investors and crypto firms. This incident significantly eroded confidence in the overall crypto market. The subsequent bankruptcies of prominent crypto lender Celsius and hedge fund Three Arrows Capital (3AC) further highlighted the realization of risks commonly associated with traditional financial markets, such as multiple collateral loans and maturity and liquidity mismatches, within the crypto market.In November 2022, the well-known crypto exchange FTX filed for bankruptcy, demonstrating that the activities of a large crypto company can propagate risks through moral hazard and excessive profit-seeking behavior when it operates outside the realm of regulatory oversight.Similarities with TradFiThese negative events that unfolded in the global crypto market in 2022 share similarities with issues previously observed in financial markets, such as unsustainable business models, liquidity risk, leverage, and lack of transparency in financial conditions. These parallels suggest that if the crypto markets were subjected to comparable levels of regulation as traditional financial markets, it is plausible that the triggering of these risks could have been avoided altogether, or at the very least, the resulting damage could have been mitigated to some extent.Implications for the Korean marketAt present, it is deemed unlikely that events akin to those witnessed in overseas crypto markets will transpire in the Korean market. The Korean crypto-asset market has primarily evolved through exchanges, with limited influence from other enterprises such as crypto issuers and decentralized lending platforms. In addition, Korean crypto exchanges are subject to regulation under the Act on Reporting and Using Specified Financial Transaction Information. This mandates the separation of customer deposits from exchange assets and the strict management of custodial crypto-assets through secure wallets. Additionally, Korean exchanges are prohibited from listing their own tokens on their platforms.However, there remains a dearth of information regarding the business structures of crypto companies that offer services similar to those in the traditional financial industry. This lack of information poses challenges in accurately assessing risk and providing adequate investor protection. Meanwhile, there is a potential for a deeper integration between the crypto market and users’ daily lives, particularly through major technology companies, gaming companies, and security tokens.SuggestionsIt is vital to ensure that crypto-assets are regulated based on the principle of “same activity, same risk, same regulation” through the ongoing development of crypto-asset-related legislation. The Financial Stability Board, an international body monitoring the global financial system, explained this principle in a 2022 paper: “Where crypto-assets and intermediaries perform an equivalent economic function to one performed by instruments and intermediaries of the traditional financial sector, they should be subject to equivalent regulation.”Additionally, it is necessary to stay aligned with major countries in terms of the speed and comprehensiveness of regulatory measures to prevent regulatory discrepancies across borders due to the global nature of crypto risks.Enhancing the effectiveness and efficiency of regulation requires the establishment and maintenance of a close cooperation system between authorities. This collaborative effort should encompass various aspects, including monitoring, information gathering, and supervision of the crypto-asset market. Notably, the widespread adoption of stablecoins can affect the stability of the overall financial system, including monetary systems and payment and settlement systems. Hence, it is necessary to strengthen the involvement of central banks in the monitoring and supervision framework for crypto-assets, including stablecoins, as demonstrated by legislative approaches adopted by major economies like the EU. Furthermore, imposing disclosure requirements, external audits, and documentation submission obligations on crypto-asset operators is advisable.

The Thai government is planning to enable tourists to spend crypto via credit card, according to information revealed by Thailand’s finance minister on May 26.Photo by rc.xyz NFT gallery on UnsplashPichai Chunhavajira, the Southeast Asian nation’s finance minister and deputy prime minister, delivered a keynote speech at an investment seminar in Bangkok in which he outlined that while some countries enable people to purchase goods directly with cryptocurrency, another option is to allow consumers to link their digital assets with other services such as credit cards.  In that way, the consumer can spend crypto through credit card services. English language news outlet The Nation reported that Chunhavajira confirmed that the government is preparing to launch a pilot project that would allow tourists to spend crypto in this manner within Thailand. Seamless conversion from crypto to fiatWith this system, merchants would still receive payment in Thai baht. From the point of view of the user, crypto could be spent but any exchange between crypto and fiat currency would happen seamlessly and automatically via the credit card service provider’s platform.Discussions between officials from the Bank of Thailand and the Ministry of Finance are ongoing with regard to the proposed scheme. It’s understood that similar existing models which have been introduced overseas are being examined. It’s likely that the pilot program is the same as the project that was announced by Chunhavajira in January when he alluded to a program enabled for foreign tourists visiting the Thai tourist resort of Phuket. At that time, it was envisaged that the scheme would adhere to existing legal frameworks and implicate identity verification through a third party service provider, with conversion from crypto to Thai baht to be enabled such that there would be no material difference experienced by merchants. Targeting touristsThis is not the first occasion in which tourists have been targeted by crypto-related initiatives. Earlier this month, it was announced that Binance Pay, a crypto payment service offered by global crypto exchange Binance, had partnered with the government of the Buddhist kingdom of Bhutan to launch the world’s first national-level crypto tourism payment system. In July 2024, the governor of Jeju Province in South Korea advocated for the use of non-fungible tokens (NFTs) and crypto as part of Jeju Island’s tourism strategy. Last December the province announced a digital transformation roadmap that sets out a cashless future. Plans include the introduction of a system for converting digital assets and facilitating payment methods from neighboring countries like China and Japan. However, not all governments have been keen to facilitate tourists in spending crypto. In May 2023, the governor of the province of Bali in Indonesia cautioned foreign visitors to the region against the use of cryptocurrencies as a means of payment for goods and services. Governor Wayan Koster warned that visitors using cryptocurrency for payments could face severe consequences, including criminal penalties and deportation.

Siam Commercial Bank (SCB), Thailand’s oldest bank and fourth-largest lender, has launched a cross-border payments service which depends upon the use of stablecoins.  The project is the culmination of a collaboration between SCB, SCB 10X, the disruptive technology investment arm of the SCBX Group, payment solutions provider Lightnet and blockchain development platform Fireblocks. It has successfully completed its testing phase within the Bank of Thailand’s regulatory sandbox, moving forward to the commercialization phase. According to Indian news portal Business News This Week, SCB launched the cross-border payments solution on October 16 in an effort to get out ahead of its TradFi peers relative to banking and financial services innovation.Photo by allPhoto Bangkok on PexelsFaster with lower costsThe service will enable 24/7 transfers on an international basis for the bank’s retail users. In accessing the service, users may use local currency to make transactions. Ordinarily cross-border payments implicate a number of steps in order to complete clearance, including the need to effect a currency conversion. Furthermore, banks need to maintain nostro/vostro accounts with foreign banks to complete such transfers.  In this instance, the bank is claiming that transactions using the service will be much faster than existing cross-border transfer options. The clearance and settlement process will be far more efficient in terms of the time required and the liquidity requirements. Pre-funding required in the legacy process has been eliminated, reducing capital requirements, while operational costs have also been reduced. SCB’s First Executive Vice President and Head of Digital Juristic and Payment, Thanawatn Kittisuwan, commented on the development, stating: “By integrating blockchain technology, the project promises a more efficient, reliable, and accessible solution for cross-border transactions. By leveraging blockchain technology and stablecoins, we are making cross-border remittances more efficient, reliable, and accessible for everyone. SCB has a long-standing tradition of embracing innovative technologies to enhance our financial services. This latest collaboration with Lightnet and Fireblocks builds upon SCB’s history of pioneering fintech solutions. ” Improved customer experienceLightnet CEO Tribodi Arunanondchai suggested that the new service will provide significant improvements to customers’ experience in cross-border money transfer. He added that the service “promotes financial inclusion as there is a lower capital requirement per transaction,” while strengthening Thailand’s position as an ASEAN (Association of Southeast Asian Nations) financial hub.  SCB and Lightnet first partnered in 2020. At that point, the duo envisaged that there was scope to cooperate in order to facilitate payment processing and frictionless real-time remittances to Thailand from any point overseas with low fees. Lightnet relies upon the Velo Protocol to enable its remittance services. Back in 2022 the firm received a $50 million commitment from LDA Capital, with Lightnet earmarking the funding to boost cross-border payments over the Velo protocol. For its part SCB has demonstrated its interest in crypto beyond this Lightnet collaboration. In 2023 the bank struck a deal with South Korean crypto venture capital firm Hashed, with the objective of pooling resources and researching and exploring how best to deploy any research outcomes relative to the company’s affiliates. The bank has also been involved in developing an application for Thailand’s central bank digital currency, the digital baht.