Redistribution of cryptocurrency markets: the shift of activity to the east

Abstract

At the end of 2022, the total capitalization of cryptocurrencies fell by more than three times compared to the data of 2021. This collapse was facilitated both by a crisis of confidence due to the collapse of the largest American exchange FTX, and the intensified activity of American regulators aimed at restoring order in the cryptocurrency markets. The closure of some crypto exchanges in the US led to a general destabilization of the market and a massive withdrawal of funds. At the beginning of 2023, a recovery trend followed. However, there is every reason to believe that this dynamics did not occur due to the recovery of the American cryptocurrency market, but due to the flow of funds to Asian and Middle Eastern crypto exchanges. However, Eastern markets are also not homogeneous in their attitude to the phenomenon under consideration. In a number of countries, all transactions with cryptocurrencies are strictly prohibited; in others, their use is possible either for a limited type of transactions (Iran), or subject to certain conditions (“know your customer”) - Hong Kong. In mainland China, cryptocurrency exchanges are closed, but digital yuan technologies are being actively developed. Another bloc of countries (UAE, India) is trying to extract the maximum benefit from the emerging market in the form of taxes and attracting investment. This different attitude allows cryptocurrencies to “settle” in the most friendly locations. However, the main trend in the world of cryptocurrencies is the tightening of state regulation and control.