The financial world is experiencing a technological revolution with the growing adoption of cryptocurrencies. In the Association of Southeast Asian Nations (ASEAN) region, two countries, Laos and Indonesia, have taken significant steps in this area. “Laos has been testing its own digital currency, while Indonesia has become the first country to launch a state-backed cryptocurrency exchange,” explains Nicolás Caputo, businessman and former Argentine consul in Singapore.
Each of these nations has taken significant and unique steps that reflect their respective approaches toward cryptocurrency adoption and regulation.
Laos and its digital currency: the Digital Lao Kip
The central bank of Laos took a significant step towards financial modernization by collaborating with Japanese financial technology company Soramitsu to successfully test a prototype digital currency called the “Digital Lao Kip.”
This initiative has the main objective of increasing financial inclusion among the unbanked population of Laos.
“The Digital Lao Kip is based on a blockchain system and its focus is on allowing people to make payments and money transfers using a QR code, regardless of whether or not they have a bank account,” says Nicolás Caputo.
“This is an essential measure,” he adds, further clarifying that “almost 70% of the population of Laos, which exceeds 7 million inhabitants, does not have access to bank accounts, and cash transactions remain the norm.”
One of the implications of this digital currency is its ability to reduce the costs of remittances from abroad, which represented approximately 2% of Laos’ GDP in 2021, totaling $435 million. These remittances are an important source of income for the country’s economy.
Furthermore, the Digital Lao Kip has the potential to transform Laos’ digital economy, which had lagged behind due to a lack of investment in digital infrastructure.
Nicolás Caputo mentions that “in 2020, only 43% of the population of Laos had access to the Internet, compared to the average of 70% in the rest of the ASEAN region.”
The high cost of internet, which averages $53 a month, compared to $33.17 in Cambodia, has also been a barrier to the adoption of digital services in the country.
The Digital Lao Kip, by offering accessible and affordable digital tools, could boost the digitalization of local businesses, particularly small and medium-sized enterprises (SMEs), which are the backbone of the Lao economy.
Additionally, if Laos manages to establish connections with China, Cambodia and other countries in the region, it could encourage an increase in cross-border settlements and improve overall trade.
Nicolás Caputo: “The coal industry in Indonesia is at an economic crossroads”
Indonesia and its state-backed cryptocurrency exchange
Indonesia made history by launching the world’s first state-backed cryptocurrency exchange about a month ago.
Nicolás Caputo highlights that “on the Indonesian stock market there is a notable selection of cryptocurrencies available, with big names such as Binance, Ripple, Ethereum, Tether and Bitcoin, all of them authorized companies that contribute significantly to the supply of cryptoassets on the stock market.”
This diversity of cryptocurrencies not only provides investors with a variety of options, but also reinforces the legitimacy and credibility of the exchange.
Through this initiative, the Indonesian Government demonstrated its firm intention to strengthen the regulatory framework surrounding the burgeoning cryptocurrency sector.
The goal is to create a cryptoasset trading environment that is characterized by unwavering security and fairness. Government oversight and the active participation of local companies in critical roles, such as clearing and storage, reinforce confidence in the state-backed exchange.
This move also highlights Indonesia’s commitment to proactively regulating the cryptocurrency market, rather than banning or restricting it. In doing so, the country seeks to foster the sustainable growth of the cryptocurrency industry and take advantage of the economic opportunities it offers.
Based on data provided by the Commodity Futures Trading Supervision Agency, the Indonesian nation hosts approximately 17 million users who venture into the world of cryptocurrencies, a figure that attests to the growth and relevance of this financial phenomenon in the region.
Implications and consequences
Laos’ adoption of cryptocurrency and the creation of Indonesia’s first state-backed cryptocurrency exchange, IndoDAX, has profound ramifications for both the ASEAN region and the global financial landscape.
These developments are driving a change in the way finance and digital assets are approached.
There are other countries that are already joining these efforts, such as Vietnam and the Philippines, which are also investigating the potential of digital currencies backed by central banks.
“The ASEAN region is emerging as a hub of innovation in the cryptocurrency space. Laos and Indonesia’s efforts to adopt and regulate cryptocurrencies demonstrate a strong commitment to blockchain technology and digital assets. This trend could attract investments and technological talent from around the world to the region, which could boost economic growth and technological development in ASEAN,” emphasizes the interviewee.
Despite the benefits that cryptocurrencies offer, there are significant security and privacy challenges that need to be addressed.
The decentralized nature of cryptocurrencies makes them susceptible to manipulation and fraud. Additionally, user privacy may be at risk if adequate cybersecurity and data protection measures are not implemented.
“Therefore, it is crucial that governments and companies work on implementing robust security standards,” concludes Nicolás Caputo.
Singapore: leader in the transition to industry 4.0
On the other hand, the rapid growth and volatility of cryptocurrencies may have implications for financial stability.
Drastic changes in the value of e-currency They can affect investors and the financial system as a whole. Therefore, regulators in the region are already working closely to establish regulations that protect investors and maintain financial stability.
To address all these challenges, ASEAN must work together to establish common regulatory standards in the cryptocurrency market.
Regional cooperation is essential to ensure that regulations are consistent and effective across the region, avoiding regulatory gaps and ensuring market integrity.
Laos and Indonesia are leading the way in cryptocurrency adoption in ASEAN, marking a critical turn in the region’s financial landscape. However, for this transition to be successful, it is imperative to address the challenges that new technologies present.
Regional collaboration and the implementation of common regulatory standards will be crucial to ensure ASEAN fully leverages the potential of cryptocurrencies while protecting investor interests and economic stability.
Collaborator at ReporteAsia.