Crypto News – Stablecoins: The Future of Banking in Emerging Economies?
Crypto News – Stablecoins and cryptocurrencies are increasingly replacing fiat currencies in several Eastern Asian countries, underscoring their importance in emerging economies. According to a September 17 report by Chainalysis, Eastern Asia has emerged as the sixth-largest crypto economy in 2024, accounting for over 8.9% of the global cryptocurrency value received between June 2024 and July 2023.
Drivers Behind Crypto Adoption
The rising adoption of cryptocurrencies and stablecoins is significantly influenced by countries experiencing constant fiat currency devaluation and high inflation rates. Maruf Yusupov, co-founder of Deenar, a digital stablecoin backed by physical gold, stated:
“In most emerging markets, stablecoins are gradually replacing fiat because of lower barriers to entry, low cost, and ease of use. If the current adoption trend is sustained, the asset might fuel lower patronage to traditional banks as we have it today.”
Stablecoins are emerging as a cheaper and faster alternative to traditional bank transfers, particularly for cross-border transactions, which can be costly for emerging economies. According to Statista, the average remittance fees cost about 7.34% of the total transfers during 2024 if they involved bank account transfers.
Eastern Asia’s On-Chain Value Surge
Between June 2024 and July 2023, Eastern Asia received over $400 billion in on-chain value. The Chainalysis report indicates that much of the cryptocurrency activity in this region is driven by institutional and professional investors. It noted:
“Notably, Eastern Asia accounts for the largest share of professional-sized transfers compared to any other region studied in this report.”
While institutional investors primarily utilized decentralized exchanges (DEXs) and other decentralized finance (DeFi) services, professional investors continued to prefer centralized exchanges (CEXs). The report suggests that DEXs typically offer more arbitrage opportunities than CEXs due to their diverse asset coverage.
Hong Kong’s Aspiration to Become a Crypto Hub
Hong Kong’s ambitions to establish itself as a global cryptocurrency hub are becoming a reality, as evidenced by the region’s increased digital asset activity. In terms of cryptocurrency adoption, Hong Kong witnessed over 85.6% growth, making it the largest year-over-year growth among Eastern Asian countries, followed by South Korea. Notably, stablecoins accounted for over 40% of the total value received in Hong Kong.
However, Yusupov cautioned that the growing usage of stablecoins will invite increased regulatory oversight:
“Central Banks will do what they can to limit the impact of stablecoins on fiat dominance. Also, new scam models might arise due to the growth in stablecoin usage globally. While innovators are fixated on the revolutionary tendencies of stablecoins, preparation for headwinds must go hand in hand.”
Regulatory Developments Fueling Crypto Activity
The uptick in activity may also be attributed to recent regulatory developments. In July 2024, Hong Kong’s regulators unveiled the first proposal for a new stablecoin licensing regime aimed at fiat-backed stablecoin issuers. This regulatory framework is expected to further shape the landscape for stablecoins and their usage in the region.
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