ASEAN’s crypto and DeFi players seek nuanced regulation
Published on February 27, 2023
The regulatory picture for crypto and digital assets in Southeast Asia remains something of a patchwork. Lawmakers are forced to continuously play catch-up, with countries now reviewing or modifying their policies in light of the FTX implosion and other high-profile debacles in the industry (the fall of Axie Infinity, Three Arrows Capital, etc).
More nuanced regulation is needed to prevent abuses while enabling crypto and decentralized finance (DeFi) to realize their potential. This was the expert consensus on a recent episode of Indonesia Digital Deconstructed, hosted by Leighton Cosseboom of AC Ventures. Panelists included Jesse Choi, COO of Reku, a leading Indonesian exchange for investing in, buying, and selling various crypto assets; along with U-Zyn Chua, Co-founder and CTO of Cake DeFi.
As the name implies, Cake is a tool that takes something hard and makes it easier. The platform simplifies the user experience of DeFi so that even first-timers or less-savvy crypto users can understand what they’re doing with their assets. Additionally, it has various baked-in layers of transparency that other DeFi platforms in ASEAN simply don’t offer. With simplicity and transparency as its core tenets, Cake’s offerings include lending, staking, and liquidity mining for the crypto community.
“The use of digital assets and smart contracts in DeFi can provide greater financial inclusion for the unbanked population and enable cross-border transactions with lower fees. Crypto trading and mining activities can also drive economic growth and create job opportunities,” said Leighton, kicking off the discussion.
“However, there are also concerns about the potential for illegal activities such as money laundering and fraud. Governments and regulators in Southeast Asia are currently navigating the challenges and opportunities presented by the growth of crypto and Defi in the region.”
More scrutiny for crypto and DeFi is a good thing
Unsurprisingly, blockchain regulations vary from country to country in Asia. In Indonesia, legally specified cryptocurrencies are recognized as trading commodities, but cannot be used as a means of payment. Further, a new Indonesian law that switches crypto regulatory powers from commodities regulator CoFTRA to the Financial Services Authority (OJK) may signal that crypto will soon be treated as a security.
Regulation is important to the future of the industry in two ways, explained Jesse. “One way is to add legitimacy to the industry through increased government backing. Another is to weed out the bad apples,” he said.
“In an incident like FTX, there was a lack of governance on all sides – from the company’s point of view, from the regulator’s point of view, and from the investors’ point of view. I think a lot of that could have been controlled with slightly better regulation.”
Meanwhile, U-Zyn suggested that much of the recent regulatory scrutiny in the industry is about how to provide better and more granular transparency. For this reason, he said, Cake has not seen a downturn in the wake of the FTX meltdown, but rather an uptick in activity. He added, “We’re just doing what we’ve been doing all along. We’ve been providing superior transparency from our start in 2019.”
Other companies might be drawing more scrutiny now, not from regulators but also from users, about how funds are being managed and where said funds are being stored, mentioned U-Zyn.
Jesse added that increased regulation is likely a positive thing for Reku, founded in 2018, as well as for Cake because consumers are becoming more aware of core company values such as “being clean and playing safe and doing the right thing by the end user.”