Amid frenzied trading of bitcoin and warnings of a bubble bursting, regulators in Asia are on the back foot. At least one country is considering new taxes on digital currency profits.
As bitcoin futures trading began in the U.S. this week, it emerged that small Asian investors are driving the frenzied buying and selling of bitcoin, as «The Wall Street Journal» (behind paywall) reported.
The trend underscores growing wealth in Asia, where an emerging middle class increasingly wants to invest for retirement, for example, as well as spend. Bitcoin fills an investment niche for this segment of wealth, which probably cannot afford overheated property prices or want to buy stocks at current, rich value.
Almost 80 percent of global bitcoin trading volume originated from Japan, South Korea and Vietnam at the end of last month, according to CryptoCompare. China had accounted for the bulk of trading, until regulators put the kibosh on cryptocurrency trading earlier this year.
Crypto Tax?
At least one regulator is already moving: South Korea is mulling a capital gains tax on profits made from trading cryptocurrencies, and Australia has warned on the «speculative mania» that has fueled bitcoin's phenomenal gains this year. The currency began the year around $1,018; on Wednesday, it traded north of $17,000 – an irresistible lure for the autonomous Asian investor.
Asian investors in general are more keen on cryptocurrencies than the rest of the world, Etherum founder Vitalik Buterin told the newspaper. «They are the cool new things that young people are excited about,» he said.
In Hong Kong, a «Bitcoin Bubble Bash» organized by trading platform BitMEX to celebrate the currency's surge drew an audience of 200 people, including teachers, insurance brokers and equity traders. In Korea, investors use platforms like Bithumb, Coinone and Korbit to buy and sell cryptocurrencies.
Stark Warning
China has warned investors in extraordinarily stark terms, evoking the specter of «bitcoin's dead body» floating past onlookers. South Korea's PM, Lee Nak-yon, said he expects «some serious distorted or pathological phenomenon» if the current surge continues. Korea has also said it won't authorize any crypto exchanges, or roll out bitcoin futures trading.
The warnings are of little use to the glut of Asia investors looking for exposure to cryptocurrencies, and the sheer volume of Asian trading has the power to heavily skew prices in this asset class.
The U.S. accounts for just one-fifth of cryptocurrency trading, which means Europe's share is marginal. In Singapore, authorities are flirting with coin schemes, but don't wish to tarnish their reputation with fraudulent coin offerings, an official said last month.
