Regulators in the Asia Pacific have become increasingly uncomfortable with the growth of cryptocurrencies such as bitcoin.
The latest to sound a warning was the Bank of Japan Governor Haruhiko Kuroda, who predicted the surge in bitcoin prices “unnatural” at a press conference on Thursday. His comments echoed warnings created by his counterparts in significant economies in the area, such as Australia, South Korea and Singapore.
At the end of November, Japan, South Korea and Vietnam contributed 80 percent of bitcoin trading activity internationally, the Wall Street Journal reported, citing data from research company CryptoCompare.
Bitcoin's cost has climbed by over 1,500 percent this past year. Prices have diminished in their peak, and there are fears that a deeper dip may revolve around monetary markets.
Despite this, the race to introduce financial products linked to cryptocurrencies has intensified with the likes of Goldman Sachs planning to put up an electronic money trading desk, and CME Group and CBOE launching bitcoin futures contracts.
By comparison, Asia Pacific markets are less composed of cryptocurrencies, together with many authorities issuing some of the strongest warnings.
China – Requires Full Control
China was quick to clamp down on cryptocurrencies, with authorities banning bitcoin trading and initial coin offerings (ICO) in September. Its central bank, the People's Bank of China, said the unregulated market could pose significant financial dangers to the planet's second-largest economy.
Despite the nation's tough position on privately-issued, decentralized virtual monies, Beijing is actually in favor of using digital currencies. The PBOC said it was looking into issuing China's own sovereign digital money and has set up a team to create one.
Japan – “Unnatural Growth”
Japanese lawmakers in April let the usage of bitcoin and several other cryptocurrencies to make obligations and in September formally recognized 11 cryptocurrency exchange operators. The country, however, has no plans to issue its digital money.
Lately, the Bank of Japan joined the chorus of warnings regarding the rapid rise in the price of bitcoin. Governor Kuroda said Thursday the price increase was “unnatural” and also bitcoin is “being traded for investment or speculative purposes,” not functioning as a way of settlement or payment.
India – Worries About Prohibited Use
The Reserve Bank of India has repeatedly warned of the risks in trading binary currencies. Regulators will also be concerned that cryptocurrencies could possibly be used by individuals to evade tax, launder money or finance terrorism.
Last week, authorities widened their probe into possible wrongdoings connected to cryptocurrencies.
South Korea – Monitoring Financial Institutions
South Korea has banned its own financial institutions from dealing in virtual monies, including buying, owning or holding them as security. ICOs are also outlawed, the Prime Minister's Office said in a statement earlier this month.
Approximately one million South Koreans, many of them small-time investors, are estimated to own bitcoin.
Australia – Bitcoin is a “Speculative Mania”
Reserve Bank of Australia's governor Philip Lowe called the the fascination of virtual currencies a “speculative mania” and added that bitcoin is far more likely to be attractive to those transacting in the illegal market, than customers.
The central bank chief also talked down the chance of issuing an electronic variant of the local money in the near term.
New Zealand – “Bubble Fears”
Grant Spencer, acting governor of the Reserve Bank of New Zealand, said the cost movements in bitcoin are extremely volatile and a “classic case” of a bubble.
He said cryptocurrencies may have a part to play in the future, but not in the form of bitcoin. The central bank is looking into demand for the New Zealand buck and analyzing whether to replace it with a digital alternative at a certain point.
Southeast Asia – Reeling in the 1997 Crisis
Southeast Asia has been the region most affected by the 1997 Asian financial crisis, and authorities there have issued some of the most powerful warnings about the potential downsides of cryptocurrencies.
Indonesia, the region's largest economy, has plans to prohibit cryptocurrency transactions starting from 2018 in an attempt to protect its regional currency, rupiah, the Jakarta Post reported. Its smaller neighbor, Vietnam, will also ban payments with cryptocurrencies next year.
Singapore, a major global financial center, said in a notice earlier this week which investors “run the risk of losing all their funds” given the insecure nature of cryptocurrency investment. The city-state's opinion was shared with Thailand, where the local stock market said there's a probability of bubble forming in the digital currency space.