Institutions Propel Crypto Growth in Eastern Asia, Says Report

The cryptocurrency adoption in Eastern Asia is experiencing remarkable growth, primarily fueled by institutional investors from areas such as South Korea and Hong Kong, as detailed in a recent Chainalysis report.

Crypto Landscape in Eastern Asia

Eastern Asia now stands as the sixth-largest cryptocurrency economy worldwide, representing 8.9% of the global value received from July 2023 to June 2024. In that timeframe, the region accumulated over $400 billion in on-chain value. The report indicates that the share of cryptocurrency transaction value in this area has remained consistent, with centralized exchanges (CEXes) being the dominant service category, constituting 64.7% of the total value received.

This activity is largely driven by substantial transfers that are characteristic of institutional and professional investors. Notably, Eastern Asia accounts for the highest proportion of professional-sized transfers compared to other regions analyzed in the report.

South Korea: At the Helm

South Korea has emerged as the foremost market in Eastern Asia, amassing around $130 billion in cryptocurrency value. The country’s transaction value share has been progressively increasing since Q1 2023. Contributing factors include a lack of trust in conventional financial systems and the adoption of blockchain technologies by major corporations such as Samsung.

A leader from a prominent South Korean crypto exchange stated, “The public’s belief in crypto as a legitimate investment option has been reinforced by the blockchain initiatives of major companies in the region.”

Interest in altcoins and stablecoins has surged in South Korea, particularly following Bitcoin (BTC) soaring past $70,000 in January 2024. Altcoins traded predominantly with the Korean Won (KRW) have observed larger outflows to global exchanges than any other crypto asset. The uptick in stablecoin outflows began in December 2023 alongside USDT listings on leading Korean exchanges.

Hong Kong’s Regulatory Advances

Hong Kong has solidified its position as a key crypto hub in the Greater China area, driven by its favorable regulatory environment. The region has reported the most substantial year-over-year growth in Eastern Asia at 85.6%, placing it 30th on the Chainalysis Global Crypto Adoption Index.

In June 2023, Hong Kong’s securities regulator introduced a new regulatory framework for virtual asset trading platforms (VATPs), establishing a regulated avenue for retail investors to engage with crypto. By May 31, 2024, exchanges were only permitted to operate if licensed or “deemed” to be licensed. This transition has shifted focus towards regulated exchanges.

Stablecoins have made up over 40% of the total value received by Hong Kong quarterly. As the regulatory framework from the Hong Kong Monetary Authority takes effect, the utilization of regulated stablecoins for retail investors is anticipated to rise.

The Crypto Scene in China

China’s relationship with cryptocurrency has been fraught with numerous crackdowns and regulatory shifts. Nonetheless, citizens have increasingly turned to over-the-counter (OTC) platforms and P2P trading networks as means to safeguard their wealth.

Ben Charoenwong, associate professor of finance at INSEAD, remarked, “The prevailing sentiment regarding the Chinese economy has been negative, prompting individuals to seek ways to transfer money abroad. The growing usage of OTC crypto in China indicates that people are looking for quicker methods to export their capital.”

Looking Ahead

The rising interest in altcoins and varied trading opportunities suggests a promising future for South Korea as a regional pioneer in cryptocurrency innovation. Concurrently, Hong Kong’s favorable regulatory policies are likely to accelerate institutional adoption throughout Eastern Asia.

For more comprehensive insights, visit the Chainalysis blog.

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