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Web3, Sensible Regulation, and Asia Pacific's Global Competitiveness

Power of Ideas
Web3, Sensible Regulation, and Asia Pacific's Global Competitiveness

Thirteen years after the introduction of bitcoin, it is clear that virtual assets are here to stay. Over 10.2 percent of the world’s population owns digital assets, and a large portion of recent adopters have remained resilient despite the bear market.

Growth in blockchain technology is set to become a core differentiator and critical measure of international competitiveness in the next decade—especially for the Asia Pacific (APAC) region. A thriving, pro-innovation Web3 ecosystem powered by sensible regulatory frameworks could propel countries to global leadership in the next wave of technological revolution.

What’s special about the crypto industry is how emerging markets dominate on adoption—despite falling behind on traditional financial inclusion metrics such as bank account ownership. Eighteen of the top-20 ranked countries on the Global Crypto Adoption Index in 2022 fall into the upper- and lower-middle income categories as defined by the World Bank.

The best form of user protection is regulation—not outright prohibition.

APAC’s leadership in this space has been remarkable. Central & Southern Asia and Oceania represented 14 percent of global transaction value in 2021 and was the fastest growing region—growing sevenfold year-on-year thanks to a boom in DeFi, gaming, and other Web3 applications. Of the aforementioned 20 countries leading on adoption, eight are in APAC, including the top two—Vietnam and the Philippines—along with India, Pakistan, Nepal, Indonesia, Thailand, and China.

In 2020, 21 percent of Vietnamese consumers reported using or owning cryptocurrency. Vietnam’s ongoing leadership is driven by the high density of engineers, rising middle class, and popularity of centralized, DeFi, and P2P tools alike.

The popularity of cryptocurrencies in middle-income countries is largely attributable to meeting unique financial needs such as remittances, net worth preservation in times of local currency volatility, and alternatives for lending and evaluating creditworthiness—where traditional finance has fallen short. Cryptocurrencies are considered a positive tool for growth in developing countries, conditional upon continued adoption and increasing financial literacy.

More broadly, blockchain technology can unlock new use cases beyond just within financial services. APAC is again at the helm, projected to dominate the global Web 3.0 market expected to reach $81.5 billion in 2030, driven by the high demand for solutions in various sectors such as banking, financial services, and insurance; e-commerce and retail; health care; pharmaceuticals; and others.

And here is why this matters:

  • A thriving blockchain ecosystem attracts an influx of foreign investment. Global VC firms have poured $89 billion to date in funding to over 15,000 Web3 and blockchain companies, including 79 unicorns.

  • Japan, for instance, despite being the global leader on patent and intellectual property activity, has immense untapped startup potential. VC funding of Japanese startups stood at $9 billion in 2021, versus $270 billion in the US, $32 billion in the UK, and $17 billion in Germany. Long leading the charge in deep gaming and virtual and augmented reality, Japanese companies are well-positioned to lead in the MetaVerse and Web3 within a supportive regulatory and political environment.

  • Web3 gaming platforms, including play to earn and move to earn models, are also particularly popular in Vietnam. The top-grossing P2E game Axie Infinity is based in Ho Chi Minh City, with its success inspiring more Web3 gaming startups to explore Vietnam’s potential.

  • The APAC region, home to 60 percent of the world’s youth that is amongst the world’s most digitally native, has some of the world’s highest internet and gaming penetration. Asian economies are creating a young, tech-savvy middle-class audience, top-notch talent pool, and vibrant Web3 communities.

  • Jobs in the blockchain industry increased tenfold from 2016 to 2019 and 118 percent in 2021 alone. The industry attracts high-skill talent, especially in engineering and technical roles.

  • The abundance of funding and talent creates strong incentives for innovative tech firms to be based and listed locally. Additionally, the country’s institutions take a leading role in shaping global crypto regulation.

Sensible regulation is key to driving widespread adoption of virtual assets, addressing issues like financial inclusion, and unlocking opportunities through responsible innovation.

In that context, the best form of user protection is regulation—not outright prohibition. Banning crypto will only lead to users operating in the shadows, at their own risk, and without any safety net. By contrast, user protection and market integrity are enhanced when lawmakers and regulators expand the scope of permissible activities. There have been many examples of other industries in the past, including health care, pharma, internet, and content.

The best regulations are globally consistent, commensurate with the risks, and enable responsible innovation—all while protecting consumers’ interests and empowering them to make their own choices.

We have a fundamental responsibility to work with regulators and believe that a well-regulated crypto market provides adequate consumer protection while continuing to cultivate innovation, market integrity, and progress. We strongly believe that a stable regulatory environment can support innovation and is essential to establishing trust in the industry that will lead to long-term growth.