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SEA Crypto Market: A Race to a Balanced Ecosystem Between Adoption and Regulation

Tuesday, 12 March 2024

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The crypto narrative in Southeast Asia is marked by a race amongst Vietnam, Philippines, Indonesia, and Thailand, all recognized in the top ten Chainalysis’s global crypto adoption index 2023, with Singapore also in the spotlight as a potential crypto hub. In Southeast Asia’s tech scene, the rise of crypto and Web3 highlights a strategic response to poverty in developing nations. Cryptocurrency serves as a vital DeFi option for the large unbanked populations—70% in Vietnam, 66% in Indonesia, and 44% in the Philippines—showcasing its potential to address financial exclusion and foster economic development. 

It all seems potential from the surface, but each country brings its unique strengths and challenges to the table, shaping a competitive landscape for analysis. First, let’s see the evolution of local crypto exchanges that provide a lens into the region’s enthusiasm for digital currencies. 

Registered crypto user

Thailand showcases nearly three million users on local exchanges, constituting about 4,27% of its population, signaling a pivot to digital currencies over traditional stocks. The Philippines counts seven million crypto holders representing approx. 6% of the population, and Vietnam latest reports over 16,6 million crypto holders, accounting for roughly 16% of the population. Indonesia leads the race with 18,25 million registered users, equivalent to 6% of its population. 

Given the diverse methodologies, data collection years, and potential use of global or P2P exchanges, these figures are not directly comparable. Yet, the core of this analysis dives into the trust and regulatory frameworks within each nation, aiming to pinpoint where the crypto market is not just growing but thriving. However, this analysis aims to uncover which country has earned the most trust from users and the industry, heavily influenced by regulatory frameworks.

Indonesia’s DeFi sector shows a strong preference for decentralized exchanges (DEXs) in 2023, likely driven by the legal status of crypto trading limited to spot markets, with Java and Bali as major hotspots. The government is now developing regulations for the futures market and establishing a licensing framework for crypto exchanges. Initiatives include a detailed regulatory framework with the creation of a national crypto bourse, custodian services, and a clearing house, with aim to ensure tax compliance, promote transparency, and enhance security.

Despite regulatory efforts, local exchanges voicing concerns over high taxes; the classification of crypto as a commodity in Indonesia subjects it to VAT and income tax, which potentially reduces trading interest and weakens local platforms’ competitiveness against global ones. This concern is validated by a 62% drop in crypto tax revenue last year, compared to the second half of 2022 when the tax was first introduced in May 2022. 

Despite Indonesia’s lead in crypto user numbers, attributed to the government’s proactive regulatory approach, this might contrast with the decentralized ethos of crypto. The regulatory efforts are seen as a double-edged sword, fostering growth while imposing constraints.

Trading Volume

While Indonesia’s proactive regulations have shaped a unique crypto ecosystem, Vietnam’s less regulated crypto environment presents a contrasting approach, fostering innovation in areas like blockchain gaming with global hits such as Axie Infinity. 

Despite holding the second largest crypto users in Southeast Asia, Vietnam does not legally recognize crypto, so there are no crypto tax, exchange licensing, or AML/CFT measures. As reported by the Wall Street Journal in May last year, Vietnam’s crypto trading volume on Binance alone ranked fourth globally, hitting USD20,84 billion – significantly outpacing Indonesia’s USD6,05 billion, and the Philippines’ USD 1 billion in 2023. 

Thailand stands out with the highest crypto trading volume at USD 116.4 billion last year, despite having the smallest registered user base. The country has implemented comprehensive regulatory measures including taxation, AML/CFT licensing, and consumer protection to secure its digital finance landscape.

The crypto and WEB3 sectors in Southeast Asia are rapidly evolving, with each country showcasing unique developments and strengths in the digital finance sector. Indonesia is a standout in the NFT space with Paras, one of the largest NFT marketplaces built on a nearly carbon-neutral blockchain, and the Karafuru project, which has seen transactions reach Rp1 trillion. The gaming sector is also making strides with Mythic Protocol, a blockchain-based play-to-earn action RPG. Indonesian exchanges are gaining prominence as well, with Tokocrypto receiving backing from Binance, Reku supported by AC Ventures and Coinbase Ventures, and PINTU funded by Lightspeed. The local scene’s energy is further amplified by significant events like Coinfest Asia, underscoring Indonesia’s leadership in the region’s crypto and WEB3 development.

In the Philippines, the integration of crypto transactions into GCash, a widely-used payment app boasting over 80 million users, marks a significant leap toward grassroots-level adoption of cryptocurrencies, making it simpler for a vast population to engage with the crypto economy. Projects like BlockchainSpace, with Animoca Brands’ backing, are enhancing community engagement in the WEB3 space, further enriching the digital landscape. Additionally, the success of Yield Guild Games (YGG) underscores the Philippines’ growing role in the blockchain gaming sector, attracting attention and investments globally and regionally, including support from Crypto.com Capital, Animoca Brands, and Indonesian investors BRI Ventures and Bukalapak. Highlighted by the Philippines Blockchain Week, these developments showcase the region’s enthusiastic embrace of cryptocurrency and blockchain technology, signaling a vibrant future for digital finance within the country.

Vietnam’s blockchain sector is gaining international recognition with highlights like Axie Infinity by Sky Mavis and the Aura Network, enhancing its profile in the blockchain world. In Thailand, the crypto scene is energized by the launch of Binance Thailand last month, and significant moves by the second largest bank in Thailand, Kasikorn Bank, such as acquiring a major stake in the crypto exchange Satang and launching a USD 100 million fund for WEB3 and AI startups. The bank’s focus on blockchain and virtual token custodial services further highlights Thailand’s proactive stance in embracing blockchain technology. 


Essentially, every country has its strengths and weaknesses. Indonesia, with its large population, experiences uneven economic development, which may lead some to experiment with trading, especially during bull markets. It’s proven by the significant drop in trading volume, from Rp859 trillion in 2023 to Rp 94.4 trillion in 2023, highlighting how crypto is seen as a way to ‘improve one’s fate’.”

Despite a sizable user base, a Consensys survey reveals that only around 30% of Indonesians grasp crypto concepts, translating to just one in three individuals. This makes Indonesia a soft target for industry players to develop crypto with the lure of free airdrops, or lower-cap coins and memecoin that offer short-term profitability due to their small market caps. This may also be what causes local exchanges to develop more than other projects, with local exchanges faster at listing new coins that dominate the market.

However, trust in memecoin and “micin coins”—driven by FOMO and a lack of DYOR—has led to many people falling victim to crypto scams. This concern has been echoed by Muhaimin Iskandar, one of the vice presidential candidates in Indonesia, who highlighted that while cryptocurrencies are being considered as an alternative for the unbanked, there is a high risk of many people falling victim to scams.

Consequently, Indonesia becomes a prime target for major players in the crypto industry, especially when approached with clear literacy and promises of quick profits, all while ensuring trust and regulatory compliance. Additionally, Indonesia could enhance its gaming sector akin to the developments seen in the Philippines and Vietnam, given Indonesia’s position as the largest gaming market in Southeast Asia.

In the Philippines and Vietnam, crypto literacy rates are higher at around 50%, which expands in the gaming sector. The absence of crypto regulation may look like it gives more freedom and creativity to WEB3 industry players, especially in Vietnam where taxes are not yet imposed. But, basically the cryptocurrency and blockchain industry players in Vietnam say the opposite. “Of course, cryptocurrency and blockchain companies really want a clear and thoughtful legal framework so that they can understand the limitations and also their liabilities in this sector,” said Phong La from Coin68, one of the biggest crypto media in Vietnam, to CoinDesk Indonesia. He also mentioned that big global exchanges like Binance and OKX still operate in the gray area, making it difficult to launch large marketing campaigns like banks, because they don’t want to attract too much attention in fear of legal matters. 

Following high-profile scams like Bitcoin Vault (BTCV), Pincoin, and Ifan scheme, it’s understandable that Vietnamese users may also be wary of “expected scams”, especially with Initial DEX Offerings (IDOs) and fundraising efforts. 

In conclusion, crypto scams don’t care about geography or regulations; they pop up everywhere, from tightly regulated to the wilder, less-regulated countries. But here’s the kicker: regulations aren’t just about stopping scams; they need to be tailored to fit the unique landscape of each country’s industry. Regulations are crucial for carving out a safe haven for innovation, ensuring that stepping into the web3 world doesn’t feel like rolling the dice. Southeast Asia’s strategy towards crypto demonstrates that with clear rules, the market can transform from a chaotic free-for-all into a thriving hub for growth, making crypto investment less of a gamble and more of a calculated move. It’s about nurturing trust and security, not just setting up barriers. 



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