From China to Singapore, Asian countries are increasingly uneasy with the rise of bitcoin

His comments echoed warnings made by his counterparts in major economies in the region, including Australia, South Korea and Singapore. Their worries are not unfounded as Asia accounts for the bulk of trading in bitcoin, the largest cryptocurrency by value. 

At the end of November, Japan, South Korea and Vietnam contributed 80 percent of bitcoin trading activity globally, the Wall Street Journal reported, citing data from research firm CryptoCompare.

Sharp volatility in the price of cryptocurrencies is a particular area of concern for regulators. Bitcoin’s price has risen by more than 1,500 percent this year. Prices have declined from their peak, and there are fears that a deeper plunge may reverberate around financial markets. 

Despite that, the race to introduce financial products linked to cryptocurrencies has intensified with the likes of Goldman Sachs planning to set up a digital currency trading desk, and CME Group and CBOE launching bitcoin futures contracts. 

In contrast, Asia Pacific economies have been less welcoming of cryptocurrencies, with many authorities issuing some of the strongest warnings. CNBC provides an overview of what some regulators have said: 

China was quick to clamp down on cryptocurrencies, with authorities banning bitcoin trading and initial coin offerings (ICO) in September. Its central bank, the People’s Bank of China, said the unregulated market could pose major financial risks to the world’s second-largest economy. 

Despite the country’s tough stance on privately-issued, decentralized virtual currencies, Beijing is actually in favor of the use of digital currencies. The PBOC said it was looking into issuing China’s own sovereign digital currency and has set up a team to develop one. 

  

Japanese lawmakers in April allowed the use of bitcoin and several other cryptocurrencies to make payments and in September officially recognized 11 cryptocurrency exchange operators. The country, however, has no plans yet to issue its own digital currency. Recently, the Bank of Japan joined the chorus of warnings about the rapid rise in the price of bitcoin. 

Governor Kuroda said Thursday the price increase was “abnormal” and bitcoin is “being traded for investment or speculative purposes,” not functioning as a means of payment or settlement. 

The Reserve Bank of India has repeatedly warned of the risks in trading virtual currencies. Regulators are also worried that cryptocurrencies may be used by people to evade tax, launder money or finance terrorism. Last week, authorities widened their probe into possible wrongdoings linked to cryptocurrencies. 

South Korea — Monitoring financial institutions South Korea has banned its financial institutions from dealing in virtual currencies, including buying, possessing or holding them as collateral. ICOs will also be outlawed, the Prime Minister’s Office said in a statement earlier this month. 

The country accounts for some 20 percent of bitcoin trading worldwide, AFP reported. About one million South Koreans, many of them small-time investors, are estimated to own bitcoin. 

  

Reserve Bank of Australia’s governor Philip Lowe called the fascination with virtual currencies a “speculative mania” and added that bitcoin is more likely to be attractive to those transacting in the illegal economy, than consumers. The central bank chief also talked down the possibility of issuing a digital form of the local currency in the near term. 

  

Grant Spencer, acting governor of the Reserve Bank of New Zealand, said the price movements in bitcoin are very volatile and a “classic case” of a bubble. He said cryptocurrencies may have a part to play in the future, but not in the form of bitcoin. 

The central bank is looking into demand for the New Zealand dollar and assessing whether to replace it with a digital alternative at some stage. 

  

Southeast Asia was the region most affected by the 1997 Asian financial crisis, and authorities there have issued some of the strongest warnings about the potential downsides of cryptocurrencies. 

Indonesia, the region’s largest economy, has plans to ban cryptocurrency transactions starting from 2018 in a bid to protect its local currency, rupiah, the Jakarta Post reported. Its smaller peer, Vietnam, will also ban payments using cryptocurrencies next year. 

Singapore, a major global financial center, said in a notice earlier this week that investors “run the risk of losing all their capital” given the speculative nature of cryptocurrency investment. The city-state’s sentiment was shared by Thailand, where the local stock exchange said there’s a risk of bubble forming in the digital currency space.