As with the rest of the world, digital asset trading is becoming increasingly popular in parts of Asia, as users seek out better returns amid the challenging market conditions elsewhere.
Following the recent Network Forum Asia event in Singapore at the end of 2024, Ripple takes a look at some of the big digital asset trends happening across the Asia Pacific (APAC) region right now, and what that means for 2025 and beyond.
1. Digital assets become more embedded in APAC
Asian users and consumers are piling into digital assets as volatility in traditional equity and bond markets, together with global geopolitical tensions, is prompting more allocators to incorporate alternative assets such as cryptocurrencies into their portfolios.
According to Chainanalysis, Central & Southern Asia and Oceania (CSAO) is the third largest crypto market in the world, accounting for more than $750 billion in crypto asset inflows between July 2023 and June 2024. CSAO accounts for nearly 17% of the global crypto market value, putting it just behind North America and Western Europe, but well ahead of all of the other regions.
Not to be forgotten is Eastern Asia (i.e. China, Hong Kong, South Korea, Japan, etc), which Chainanalysis ranks as the sixth largest crypto market globally, with $400 billion in cryptocurrency value, corresponding to 8.9% of global value.
In other words, the scale of cryptocurrencies’ penetration in Asia should not be underestimated.
Nine Asian markets are in the top 20 of Chainanalysis’ Global Adoption Index, including India which is ranked first, but also Indonesia (3), the Philippines (8), Pakistan (9) , Thailand (16), Cambodia (17), South Korea (19) and China (20).
Expect adoption rates in the region to continue trending upwards into 2025 and beyond.
2. APAC digital asset regulation goes on the front foot
Regulators in Asia are largely supportive of digital assets, and many are busy developing digital asset custody frameworks.
“A lot of regulators in Asia recognize that there is a lot of value to be realized by embracing digital assets and cryptocurrencies. Singapore and Hong Kong are both good examples of jurisdictions which have introduced progressive regulations. Both markets are exploring the use of blockchain, digital assets, and tokenization—highlighted by projects such as Project Orchid and Project Ensemble, ” said Richard Swainston, Custody Sales Director at Ripple.
Singapore and Hong Kong are widely considered to be leaders in providing a clear regulatory pathway for digital asset custody.
For example, the Monetary Authority of Singapore (MAS) recently updated its Payment Services Act in April 2024 to bring digital asset custody within its regulatory remit. In addition, MAS has published extensive guidance for digital asset custodians on matters such as the segregation of customers’ assets. According to the guidelines issued, digital asset custodians should ensure at least 90% of clients’ digital assets be held offline and not connected to the Internet or any other form of wireless communication cold storage.
Elsewhere, the Hong Kong Monetary Authority (HKMA) released a circular in February, providing guidance for digital asset custodians on governance and risk management, segregation and safeguarding of client assets, delegation and outsourcing, disclosure and record-keeping, and anti-money laundering/counter terrorist financing. In a bid to promote sustainable market development in Hong Kong, the Securities and Futures Commission (SFC) has also approved three Ether and Bitcoin spot ETFs, a significant move as one of the first in Asia to embrace cryptocurrencies.
South Korean regulators are imposing more rigorous rules on digital asset markets, which among other things, will require exchanges to hold 80% of clients’ deposits in cold storage separate from their own funds. The provisions also require exchanges to delegate digital asset custody to a licensed local bank and maintain digital asset reserves mirroring those of customer deposits.
Meanwhile, the Australian Government is advancing its regulatory approach towards digital assets, with an exposure draft legislation for regulating digital asset platforms expected to be released in early 2025. The proposed regulatory framework for digital asset platforms also includes plans to introduce a digital asset custody regime and establish licensing requirements for digital asset exchanges.
Other Asian markets are taking a harder line, however. Despite being the biggest digital asset market in the world, India is clamping down on the asset class. In late 2023, India’s Financial Intelligence Unit told a number of digital asset exchanges that they were in breach of the country’s anti-money laundering laws, and subsequently blocked their URLs.
The regulatory landscape in APAC's dynamic market will undoubtedly continue to evolve throughout 2025.
3. Digital asset custodians move beyond proofs-of-concept
Similar to other markets, digital asset custody is gaining momentum across Asia.
“We are seeing more clients, namely custodian banks, move away from the Proof of Concept (POC) stage of development when it comes to digital asset custody, and now they are executing their plans, “ said Swainston.
Among the high-profile names to have gone live with digital asset custody solutions are DBS Bank, Société Générale Forge, and Standard Chartered, while HSBC announced it too would launch a digital asset custody tool for tokenized securities, added Swainston.
Most experts believe this is only the beginning and that more banks will launch digital asset custody products moving forward. However, commercializing digital asset custody will require the industry to think more laterally about how it makes its money. According to one speaker at TNF Asia, digital asset custody will struggle to generate meaningful revenues if providers are just offering safekeeping and other ancillary services on behalf of institutions.
The speaker continued that the bulk of cryptocurrency trading is being driven by retail users, and not institutions. If digital asset custodians want to maximise their revenues, they need to develop products which support both the supply and demand sides. Whether this happens is open to debate, as servicing retail clients would inevitably bring about greater regulatory scrutiny.
For many traditional banks, moving into the digital custody space is not without its challenges, not least because many providers are struggling with achieving connectivity and interoperability between their legacy technology stacks and new systems.
This is where strategic partnership with infrastructure technology providers come into play. Although some banks may choose to build their digital asset technology stacks internally, others are leveraging the expertise of external providers such as Ripple Custody—the institutional standard for digital asset custody and tokenisation infrastructure, used by some of the world’s largest global custodians to establish digital asset custody platforms.
Interested in more APAC digital asset trends and crypto custody landscape? Download Ripple's regional New Value Report: Digital Asset Custody Trends in Business and Beyond for additional insights.
