In Southeast Asia, Bitcoin is gaining traction as a genuine store of value as investors in the region are viewing the digital currency as an attractive investment opportunity. Among the Bitcoin companies located there, Luno (formerly BitX) and Bitcoin Indonesia have watched this growth with interest.
Headquartered in Singapore, Luno allows customers to buy, sell and store the digital currency. It operates in several countries around the world including the U.K., South Africa and Nigeria. In Southeast Asia, Luno has operations in Malaysia, one of its largest markets, as well as in Indonesia, where activity has been growing consistently.
“From our perspective, Bitcoin is slowly gaining mainstream adoption in Southeast Asia. We see this every day in the numbers we track in terms of signups, transaction volumes, etc,” Vijay Ayyar, head of Asia Pacific at Luno, told Bitcoin Magazine. “The volatility of the price makes it particularly attractive for traders. People who have bought Bitcoin as a store of value have been quite happy with the performance of the asset [as] it has been one of the best performing assets globally over the past year.”
But new trends are beginning to emerge as well, he said, noting the growing use of Bitcoin as a payment mechanism. “Cross-border e-commerce is one of the most popular use cases here since credit card penetration is quite low in the emerging markets and using bitcoin avoids the whole issue of charge-backs for a merchant,” Ayyar said.
He also mentioned that institutional interest has been on the rise, with high-net-worth individuals and private funds now looking to allocate a percentage of their funds to the asset class. He expects to see this trend grow over the coming months and years.
Bali-based Bitcoin Indonesia has also witnessed the public’s growing appetite for the digital currency. The exchange platform has seen its daily transaction volume reach up to $1.48 million (Rp 20 billion). Today, it serves over 200,000 users, up from 80,000 at the end of 2015.
According Suasti Atmastuti Astaman, business development manager at Bitcoin Indonesia, the positive trend is due to the fact that Bitcoin has successfully gained global trust. “At present, as more and more countries have relaxed their stances on digital currency, including the United States, China and Russia, more and more people are putting their trust in it,” he told the Jakarta Post in a recent interview.
While some jurisdictions have moved forward and established clear rulings on digital currencies, regulators in Southeast Asia have remained quiet on the subject.
According to Dante Fuentes, chief compliance officer at Security Bank Corporation in the Philippines, policymakers tend to move prudently because, from their perspective, digital currency is still very new.
“At Security Bank, for any virtual currency related companies, we ensure that the account is not used for virtual currency trading activities,” Fuentes told IQPC Singapore. “Increasingly, we want to know that companies dealing in virtual currency are performing some kind of KYC to avoid tainted funds, but this has yet to be firmly put in place.”
But for Ayyar, unclear regulation is what’s been hampering Bitcoin adoption in the region, often discouraging banks from conducting business with Bitcoin companies. In November last year, Maybank closed two of Coinbox’s corporate accounts without warning or notice. Kuala Lumpur–based Coinbox operates a bitcoin trading platform.
“The issue is that traditional criminal activity that takes place with fiat currency can also be performed with virtual currency. Since the banks are unable to monitor these transactions, it is a new platform for criminals to continue the same money-laundering activities and scams that they were performing before,” Fuentes said.
Luno, which is aiming to become the largest bitcoin wallet and exchange across Southeast Asia, hopes to see regulators in the region communicate more about their position on digital currencies in the near future. In the meantime, the company is working with the U.K. Financial Conduct Authority (FCA) to test its technology for cross-border money transfers.
Ayyar wasn’t able to provide specific details on the matter but said that the tests are going well and that the company has made good progress both in terms of cost and speed.
Luno was selected to join the FCA’s regulatory sandbox in November 2016 alongside several other Bitcoin and blockchain startups, including SETL, Epiphyte and Nivaura.