Since its inception as cypherpunk, the blockchain industry has long positioned itself as something on the edge of the mainstream. Today, distributed ledger technology experiments by governments, financial institutions, and global corporations, as well as wider adoption of digital assets, have peaked.
The pandemic aside, 2020 was a year of tremendous growth for the digital assets space. From China’s ambitious DCEP (Digital Currency Electronic Payment) to the launch of Cambodia’s Bakong project, these initiatives have been largely led by traditional currency institutions, a strong signal of crypto’s growing credibility.
This post is part of CoinDesk’s 2020 Year in Review – a collection of posts, essays, and interviews about the year in Crypto and beyond. Amrit Kumar is President, Co-Founder and Scientific Director of Zilliqa. His academic research has been published at conferences such as IEEE / IFIP and IFIP TC-11 SEC.
Interestingly, many of the most advanced developments are taking place in the East, despite significant differences in digital literacy and technological maturity. Southeast Asia saw up to 40 million new internet users this year amid the coronavirus as consumers flocked to digital services like hail, e-commerce and digital payments.
Whether in developed or developing markets, the financial development of Asia remains steady and unaffected. From the rise of mobile payment platforms and QR code-enabled transactions to the rise in the adoption of e-wallets, Asian economies are setting the innovation agenda for the entire industry. Infrastructural challenges or concerns related to cybersecurity have hardly hindered the digital transformation in the region. What makes Asia so predisposed to innovate at any cost, and what does this mean for the future of digital assets in the year ahead?
The fintech frontier
With a growing consumer base, burgeoning financial infrastructure, and the presence of some of the world’s largest tech companies, Asia is leading the way in the fintech revolution. For the developing markets of Asia, these emerging economies are poised to skip digital transformation due to the lack of a deeply ingrained ancient financial ecosystem – coupled with a high prevalence of cell phones and limited access to traditional financial services. Many governments in Asia’s developing markets are keen to promote financial inclusion and reduce the use of cash, and have taken a progressive stance on the region’s innovation agenda.
Mobile payments have become the dominant and even preferred payment method in countries like Vietnam and Thailand, where over 60% of their respective populations use mobile payments for everyday transactions. Cambodia’s Bakong project is a blockchain-based all-in-one application for retail banking and mobile payments. Support for transactions in both dollars and Riel, the central bank-backed digital currency, is designed to help Cambodians make payments and transfer money between people using their smartphones. The Central Bank for Retail Customers (CBDC) digital currency was introduced to promote financial inclusion in Cambodia. It also serves to revive the use of the Cambodian riel in its digital form to challenge the domestic dominance of the US dollar.
Asia seems ready to continue on its path towards digital dominance.
The Philippines also adopted a progressive monetary policy that has resulted in the legalization of cryptocurrencies since 2017 and most recently 14 crypto exchanges. At the beginning of this year, the Ministry of Finance, Unionbank and PDAX launched a blockchain app called Bonds.ph for the sale of government bonds. The new mobile app enables Filipinos, especially non-banks, to invest in the government’s new government bond and help the country raise funds to support the economic recovery and bolster the COVID-19 response.
See also: China’s Xi calls on the ASEAN nations to participate in the construction of the “Digital Silk Road”
In the midst of the pandemic, Asia saw a significant increase in the acceptance of e-wallets last year. According to a report released by Allied Market Research, the global mobile wallet market was valued at $ 1.04 billion in 2019 and is projected to reach $ 7.58 billion by 2027. This corresponds to an average annual growth rate of 28.2% from 2020 to 2027. With high smartphone penetration and the ease of mobile payment, the main factors for the introduction of digital wallets are. The need for security is often cited as a central concern for consumers.
When it comes to the region’s reputation for technological innovation on a global scale, Asia is embracing the digital revolution on its own terms. With consumer demand for technology-based services and digital experiences increasing, Asian governments have taken the step to support the efforts of technology companies through planning, qualification and assistive regulation.
By prioritizing technology and investing in research and development, developed markets such as China, Japan and South Korea have built strong foundations for innovation and have considerable capital and knowledge to catalyze innovation in other Asian economies.
As the most populous country in the world, China is Asia’s anchor market and offers a connectivity and innovation platform for the rest of the continent. China’s government-sponsored DCEP project was launched with the aim of replacing cash and internationalizing the yuan by making it easier to use in transactions around the world.
See also: Zhou Xiaochuan: The Father of the Digital Yuan
The People’s Bank of China (PBOC) has already published a bill that gives legal status to the DCEP system and allows the digital yuan to be included and defined as part of the country’s sovereign fiat currency. This bill would also prohibit any party from making or issuing yuan-backed digital tokens to replace the renminbi in the market. In this way, China seeks to expand its soft power by maintaining government control of the currency and creating less dependency on the US dollar while challenging the monopoly of existing digital payment providers like WeChat and Alibaba.
Singapore has also advanced research into CBDCs with its multi-phased Ubin project, created with the aim of reducing cross-border payment costs and speeding up the settlement of securities. Since its inception, the government has worked actively with the private sector in both mainstream and blockchain sectors to study how the technology can be used in a real-world environment.
As one of the earliest players in the field, the completion of the Ubin Phase 5 project is a significant step forward in the innovation and adoption of digital assets in progressive Singapore. In looking beyond the feasibility of the technology – which they have since proven – they have now expanded to examine the utility of Ubin from a commercial viability perspective. This is a promising sign that the Monetary Authority of Singapore (MAS) has gone beyond legitimizing the technology and is already reviewing applications to identify companies ready to sustain the idea of integration.
Digital currencies and fintech can play an important role in the emerging economies of Asia by enabling greater financial inclusion of the non-bank population, especially in remote communities that do not have access to traditional banking facilities or countries with low trust in their banking institutions.
With technology-driven innovations taking center stage in the next phase of global growth, Asia appears poised to continue on its path towards digital dominance.
Year in Review is a collection of posts, essays, and interviews about the year in Crypto and beyond.