When it comes to crypto regulation these days it helps to have been through a financial crisis or two. 

Su Yen Chia has that part covered with her background in financial services with firms such as Barclays, Credit Suisse and the International Swaps and Derivatives Association. Now, Chia is the co-founder of the Asia Crypto Alliance where she’s using her experience to champion blockchain startups to regulators who are more familiar with traditional finance then the wild world of web3. 

“Decentralized finance can come across a bit unwieldy to a regulator who is more familiar with supervising centralized finance, as they have done for the last half a century,” said Chia, who speaks with a calm, yet authoritative voice. “So obviously, there are going to be elements within decentralized financial services that could pose a bit of a conceptual challenge. That is what the Asia Crypto Alliance is about, trying to bridge these conceptual gaps.” 

Chia started the Alliance with co-founder Vivian Khoo, who was previously the chief operating officer and interim chief executive of crypto trading platform BitMEX. The impetus was conversations with crypto startups in Hong Kong and Singapore that wanted an organization to make their case and address the regulatory challenges they faced. 

The alliance acts as a dialogue partner, a conduit of sorts, communicating developments, feedback and concerns from members to the regulators, policy makers and various stakeholders and then relaying responses back. It is a delicate dance. 

“Sometimes our members may forget this, because to them crypto is all and everything,” she said, but “the challenge invariably would be that they would say technology solves everything. We don't always necessarily believe that. We recognize DeFi is a growing industry. We recognize a lot of wonderful benefits, but we also recognize it is still considered a very small proportion of the larger financial sector. If you are a regulator, and you are regulating traditional banks or broker dealers, crypto may only be 1 percent of the daily work. So I think one needs to also have  a sensitivity to the prioritization [of] both parties.”  

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It is this pragmatic approach that has been welcomed by the regulators who Chia describes as “extremely open and engaging with us.” 

The recent stressors on the global banking sector, such as rising inflation as well as the failure of notable banks Silvergate, Signature, Silicon Valley Bank and Credit Suisse have led many of the world’s financial regulators to reiterate the need for greater consumer protection. They’re also bearing down on both traditional and decentralized institutions and entities to ensure compliance and transparency. Since January, the U.S. federal government and some states have aggressively gone after several crypto exchanges and companies, issuing fines and warnings. 

Chia echoes the approach of Keith Choy, the interim head of intermediaries at Hong Kong’s Securities and Futures Commission. Choy recently reiterated Hong Kong’s commitment as a web3 hub that supports innovation, and said he views “DeFi activities through the same existing regulatory framework that applies to the financial activities we regulate. As such, as long as a DeFi activity falls within the scope of the Securities and Futures Ordinance (SFO), it would be subject to the same regulatory requirements applicable to a traditional finance activity.” 

Reflecting on these developments, Chia said, “we first of all need to recognize that regulators only pay attention to it because there's a market appetite for it. And this market appetite for digital assets and crypto has been growing. When growth comes, there’s obviously always the flip side, right? There’re going to be abuses in the system. Therefore regulators need to pay attention because they need to do their job.”

With so many different countries, political systems and economies in Asia there will be a mix of regulatory approaches across the region, Chia said. 

“For example, Singapore has publicly said that they don't think it's necessary to have a digital representation of the Singapore dollar,” she said. “Now, why is that? Well, because it's very well banked, the payment systems here are so well developed, do we really need it? Versus perhaps another country, like Cambodia, that can leapfrog a lot of these issues.”

While the Monetary Authority of Singapore is not considering a Singapore digital dollar for now, it is exploring a retail central bank digital currency system by identifying potential uses for one.

Read more: Hong Kong Passes Crypto Law Requiring Firms to Register as City Races With Singapore, Korea and Japan

If the next decade in Asia will be about creating a more digitally-driven economy, the fundamentals of cloud computing and blockchain can’t be ignored, Chia said. “If you think these fundamental integral building blocks are going to exist, and as long as you have blockchain technology, you will always have permissionless, blockchain technology that allows for innovation, you will always have crypto, you will always have digital assets. And that's something you need to accept and know how to regulate,” she said. 

On the other side of the world, the U.S. is undergoing a similar debate about how to regulate digital assets. 

“There are many complexities when it comes to the US financial markets,” Chia said.  “The depth of their capital markets, the diversity of the banking sector, they have so much more to lose. If anything goes wrong, the margin of error is quite narrow, so I think it's understandable. Also the culture of how they provide supervision, where you have federal and state and the different agencies does not lend itself easily to creating regulatory frameworks. So I think as much as we say the U.S. sounds a bit aggressive, we need to see what is driving that narrative.”

It’s about balance and having experienced the free fall of a global economic downturn to know the rules are there for a reason, Chia said. 

“I am a great believer in blockchain technology and permissionless blockchain so that innovation and creativity can occur,” she said. “But I'm also mature enough and have been through many financial crises to realize that there also needs to be some guardrails.”