00:00As the U.S. moves closer to passing the Clarity Act, the digital asset industry could be entering a turning
00:06point.
00:07The bill aims to resolve long-standing regulatory uncertainty between the Securities and Exchange Commission SEC
00:13and Commodity Futures Trading Commission CFTC, while strengthening investors' protection and paving the way for greater institutional participation.
00:22Its impact is expected to go beyond the U.S., potentially influencing global markets and shaping how countries like Malaysia
00:30position themselves in the evolving crypto landscape.
00:34And to help us understand better, joining us online is Aaron Tang, General Manager APEC-Luno.
00:39Thank you very much, Aaron, for joining us. It's a pleasure to have you here with us.
00:43Firstly, take a look at the crypto industry has spent years dealing with uncertainty between the SEC and CFTC.
00:51If the Clarity Act successfully resolves this, how transformative could that be for the global digital asset industry?
01:00Morning, Nina. Thank you for having me.
01:02First and foremost, it would be really, really good for the U.S. industry because players there have, for many,
01:08many years,
01:09they have been complaining that the regulations aren't clear, the enforcement is quite strict.
01:15So it would be really, really good for the U.S. digital asset industry, first and foremost, because there would
01:20be a couple of effects that we expect to see.
01:22So, for example, we expect to see a lot more innovation happening because once there's legal clarity and compliance clarity
01:28that would happen,
01:29we do expect to see more capital going into the U.S. digital asset industry.
01:34And then over time, I think this is where we might see some of the effects in the global digital
01:39asset industry in Asia and so on,
01:42is that we might see some of the principles of how they regulate and how they do compliance.
01:47We might see them start to influence the regulations here in Asia as well.
01:53And even before a full Senate vote, markets and crypto-related stocks have reacted positively.
01:59What does that tell us about how much institutional capital has been waiting for regulatory clarity?
02:07It definitely suggests that there's a lot of institutional capital on the sidelines because, again, previous regimes,
02:15or if you rewind back five years ago and so on, there's a lot of uncertainty around digital assets in
02:20the U.S.
02:21Are digital assets going to be encouraged? Are they going to be supported? And so on.
02:25So now that we have a little bit more clarity and we have a little bit more support shown,
02:30you can see that there's a lot of institutional capital that's probably looking to get in.
02:35We also interestingly see that this is from the institutional side of things, right?
02:40It's not just retail, which has traditionally been the area where retail investors has traditionally been the part of the
02:50people
02:50who are mostly invested into digital assets. But over time, we have seen that the demand is moving towards institutions.
02:57And then I think it is a very, very good sign because, you know, as an industry matures,
03:03we're definitely not just looking at retail investors, but we are looking at institutional capital flowing in.
03:09Beyond crypto itself, Aaron, do you see this as part of a broader U.S. strategy to regain leadership in
03:16financial innovation and digital assets?
03:20Yes, definitely. I think I believe in the Clarity Act itself, there are mentions of how the U.S. wants
03:27to get back into the leadership position.
03:29And again, it's almost like playing catch up because over the past few years, again, digital asset regulation,
03:36fintech regulation, I think has been very much more advanced in many countries around the world.
03:42So, yeah, the U.S. is playing catch up a bit. And I just want to point out that even
03:46in other countries around the world,
03:49especially, for example, Malaysia, Singapore, even in the EU, we have released digital asset regulations,
03:55compliance principles and so on. We have done this for at least a couple of years already.
04:00And basically, the U.S. is, I think, playing catch up at the moment.
04:04All right. Definitely catching up with the find of safeguarding it, especially at the same time.
04:09And if the U.S. establishes a clearer framework for digital assets, could that pressure regulators in Asia,
04:16including Malaysia, to move faster or become more competitive?
04:21I wouldn't use the word pressure because I think actually many countries around the world,
04:26again, in Malaysia, Singapore and, you know, Hong Kong, Japan and so on,
04:30we've had our digital asset guidelines for quite a number of years now.
04:34The industry is maturing. The frameworks are dead and mature.
04:38So I wouldn't call it a pressure situation.
04:43Now, there are a couple of areas where we might need some further development and further innovation.
04:48So, for example, in Malaysia, currently, we have some frameworks and we have some guidelines
04:54around sandboxes for stable coins.
04:56However, we don't have a very fixed regime like in the U.S., which they have come up with the
05:03Genius Act.
05:03So the Genius Act, along with the Clarity Act, it hopes to give some clarity on about stable coins for
05:10payments in the U.S.,
05:11the Genius Act.
05:11So in Malaysia, we don't have that fixed framework yet.
05:14We do have some sandboxes and frameworks, which I think are very encouraging.
05:19And then I think in the area of tokenization as well, the government is definitely encouraging innovation and so on.
05:25However, it's not like 100% fixed yet what the tokenization framework or guidelines are going to be like.
05:31So, yeah, it's not, I would say, not pressure.
05:34But I think over time, these guidelines will need to be developed and we look forward to them happening.
05:39And also, Malaysia already has oversight through the Securities Commission Malaysia.
05:44Does the U.S. momentum validate Malaysia's early approach or expose area where we may now need to evolve further?
05:53Yeah, I think some of the things that we've been doing in Malaysia since 2009, definitely, definitely validated.
06:00So I'll give you a couple of examples.
06:02So back in 2019, we already in Malaysia came up with guidelines around whether tokens were viewed as securities or
06:12whether tokens were viewed as securities, right?
06:15Digital assets, cryptocurrencies, they were viewed as securities.
06:18Now, this gave clarity, this gave clarity to the industry, it gave clarity to regulators on how do we want
06:25to regulate it.
06:26Now, fast forward many years in the U.S., there's still some discussion, some debate around which tokens are actually
06:34commodities,
06:36which tokens are actually payment tokens, which tokens are actually securities and so on.
06:41So I think we did that really well a couple of years back.
06:44And then, of course, we also move very quickly into licensing models.
06:48So we have licenses or rather we have approved companies that are allowed to deal with digital assets and so
06:54on.
06:54So I think that has validated our approach.
06:57I think in terms of where we need to move forward ahead, some things that perhaps we need to look
07:02at in Malaysia is, I think, token classification.
07:04So in Malaysia, broadly speaking, all digital assets are recognized as securities.
07:12Now, there are some caveats depending on usage and so on.
07:14But broadly speaking, digital assets are usually viewed as securities.
07:18So now this may need some refining over time because if you look at the Clarity Act, it actually defines
07:25some of it as digital commodities.
07:27Some of it is defined as investment contract assets.
07:30And then, of course, stable coins have their own genius act.
07:34Aaron, back to talking about the act, a major expectation around the Clarity Act is that it could accelerate institutional
07:41adoptions, tokenized assets and safer defined development.
07:45Realistically, what changes could Malaysia investors or consumers begin seeing over the next few years?
07:53Yeah, I think definitely a couple of innovative products that originate from the U.S.
07:59Today, they might be a little bit hesitant to put a lot of investment or a lot of innovation to
08:04these products.
08:05However, over time, because of the benefits of the Clarity Act and so on, so investors might start to see
08:12more tokenized assets, tokenized securities, tokenized funds come out from the U.S.
08:18So, for example, we've already seen some kinds of tokenized U.S. treasuries, which are very, very successful at the
08:24moment.
08:25But I think when there's further clarity, we're going to see an acceleration of this.
08:29Now, in terms of the other areas or the other what call it innovations, I think a lot of these
08:36actually going to come from the Malaysian updated regulations.
08:41So, as we know, the Securities Commission, the regulators here, they are coming up with their revised version of guidelines.
08:47It should be this year.
08:49It should be quite soon.
08:50So, we may see innovations happening in Malaysia.
08:52For example, we may see crypto ETFs.
08:55We may see a lot more assets available on approved digital asset exchanges.
09:00I think these are some of the very, very exciting things.
09:02And critics argue that as large institutions enter the space, crypto risks losing its decentralized identity.
09:10Do regulations and institutional adoptions strengthen the industry or fundamentally change what crypto was originally meant to be?
09:21Definitely, there's a little bit of change and evolution happening over time because, again, digital assets, crypto, it came up
09:27from a very libertarian, cypherpunk vision of how internet money should be and so on.
09:34However, I think if we move into the mainstream, if we want to take crypto digital assets as a mainstream
09:40asset class, definitely we have to evolve because then we need a lot more controls.
09:46We need some measures of preventing terrorism financing or fraud and so on.
09:52So, yeah, definitely there's some kind of evolution that digital assets and crypto have moved.
09:57But ultimately, I think this is for the benefit of most people.
10:02If the Clarity Act eventually passes and becomes a global benchmark for crypto regulations, Aaron, what would the digital asset
10:10landscape in Malaysia and Asia look like by the end of this decade?
10:16Yeah, always tough to predict the future, Nina.
10:19But I'm going to say that as a broad principle, we can definitely, definitely predict that the world of digital
10:25assets and traditional finance are going to be so much closer, so much more integrated than ever before.
10:31We're going to see a lot more in the area of tokenization.
10:34We're going to see a lot more in the area of stable coins being used widely.
10:39And then definitely we're going to see a lot more innovative use case for digital assets versus, you know, maybe
10:45five years ago, you could say that a lot of it was used for speculation and so on.
10:50But we're going to see so many more, much more useful use cases over the next few years.
10:54We're going to see so many times.
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