1. Rise of Cryptocurrency and Stablecoin Usage
2. Institutional and Professional Investors Leading Activity
3. Hong Kong's Ambition to Become a Crypto Hub

Cryptocurrencies and stablecoins are beginning to replace fiat currencies in some Eastern Asian countries, highlighting their significance in emerging economies.

Rise of Cryptocurrency and Stablecoin Usage

Eastern Asia emerged as the sixth-largest crypto economy in 2024, accounting for over 8.9% of global cryptocurrency value received between June 2024 and July 2023, according to a Sept. 17 report by Chainalysis. The growing adoption of cryptocurrencies and stablecoins is partly driven by countries with constant fiat currency devaluation and high inflationary rates, according to Maruf Yusupov, the co-founder of Deenar, a digital stablecoin backed by physical gold.

Institutional and Professional Investors Leading Activity

Most of the cryptocurrency activity in the East Asian region is likely led by institutional and professional investors. Most of the increased activity was driven by institutions, based on the large average digital asset transfer size, according to the Chainalysis report. The report noted, “Notably, Eastern Asia accounts for the largest share of professional-sized transfers compared to any other region studied in this report.” However, institutional investors mainly used decentralized exchanges (DEXs) and other decentralized finance (DeFi) services, while professional investors continued opting for centralized exchanges (CEXs). The report attributes this to DEXs typically offering “more arbitrage opportunities than CEXs,” due to their diverse asset coverage.

Hong Kong's Ambition to Become a Crypto Hub

Hong Kong’s efforts to become a global cryptocurrency hub are starting to pan out based on the increased digital asset activity in the region. In terms of cryptocurrency adoption, Hong Kong experienced over 85.6% growth, making it the largest year-over-year growth among Eastern Asian countries, followed by South Korea. Stablecoins have been an important part of this significant increase, accounting for over 40% of the total value received in Hong Kong. However, the growing stablecoin usage will invite more regulatory oversight, added Yusupov: “Central Banks will do what they can to limit the impact of stablecoins on fiat dominance. Also, new scam models might arise due to the growth in stablecoin usage globally. While innovators are fixated on the revolutionary tendencies of stablecoins, preparation for headwinds must go hand in hand.” The growing activity could be attributed to regulatory developments. In July 2024, Hong Kong’s regulators unveiled the first proposal for a new stablecoin licensing regime for fiat-backed stablecoin issuers.

The rise in cryptocurrency and stablecoin activity in Eastern Asia underscores their significance in emerging economies and potential impact on traditional financial systems.