Last year’s industry-wide meltdown has haunted Asian firms as they cautiously plot their recovery. China was once a hotbed for crypto mining and trading. Even after announcing a blanket ban on all digital asset activities more than a year ago, there’s reason to believe that the country may make a comeback in the space.
Tron founder Justin Sun, who has a history of hyping the industry, also said China could embrace the asset class, especially after the implementation of a tax on crypto transactions, which he considers to be “a big step toward cryptocurrency regulation.”
Some Chinese authorities have started levying a 20% personal income tax on the investment profits of individual crypto investors and Bitcoin miners. In an attempt to control crypto tax, many believe China could actually end up legalizing the asset class.
Crypto-related activities are illegal, which hinders taxation policies. To work around it, similar discussions have taken place in the past. Months after the ban, a subsidiary of the State Administration of Taxation in China published an article focusing on – “Preventing Tax Risks from Virtual Currencies.”
In fact, Chinese blockchain reporter Colin Wu said Huobi and other exchanges provided information to the Chinese tax authorities in January 2022 before it was acquired by Sun.
Aside from the FTX debacle, policymakers in the East Asian country have been vocal about concerns such as the wasteful energy footprint of crypto mining as well as the dangers of speculation in volatile assets. Crypto activity has seen a slowdown to a large extent but is far from dead, suggesting that trading restrictions imposed by Beijing have been largely circumvented by determined users.
Chainalysis’ revealed that China jumped up to 10th place in 2022 in the company’s Global Crypto Adoption Index after noting a strong usage of centralized services. This evidenced that the government’s move “has either been ineffective or loosely enforced.”
Hong Kong and Singapore’s Stance on Crypto Regulation
China’s ban on crypto raised fears of a ripple effect. But Hong Kong and Singapore are charting their own way.
Hong Kong has welcomed crypto firms in a bid to maintain its status as an international finance center with regulatory clarity in place. Virtual asset service providers looking to operate in the region will have to undergo a licensing procedure complying with AML guidelines and investor protection laws.
Hong Kong’s Securities and Futures Commission (SFC) will soon publish a list of crypto assets open to retail traders to limit retail investors to a few whitelisted cryptos.
Meanwhile, regulations in Singapore are expected to get more stringent for existing market players, especially after the high-profile implosion of firms registered in the city-state, such as Three Arrows Capital (3AC) and Terraform Labs.
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