First Mover Asia: Taiwan’s Dreams of Becoming Blockchain Hub Prove Elusive

Good morning. Here’s what’s happening:

Prices: Bitcoin heads lower into Asia hours, though some analysts wonder if the largest cryptocurrency might hold up better than stocks in an earnings recession.

Insights: Taiwan’s dreams of becoming a crypto hub remain elusive, despite the inevitable chatter that sprang up following a successful Taipei Blockchain Week.

Prices

Bitcoin dropping into Asia trading hours

By Bradley Keoun

Bitcoin (BTC) was dropping in early Asia hours, down 2% over the past 24 hours, to around $16,439. The CoinDesk Market Index (CMI) was also down about 2%. In a potentially unnerving development, bitcoin addresses tied to the defunct Canadian crypto exchange QuadrigaCX suddenly became active.

Trading was mostly anemic during U.S. hours, with equity markets starting to reflect nervousness over the potential for any drop-off in corporate earnings that might come with a recession. The tech-heavy Nasdaq Composite closed down 1.49%. The S&P 500 slid 0.90% and the Dow Jones Industrial Average was down 0.49%.

Crypto analysts are starting to wonder if bitcoin might hold up better than stocks if the economy turns down.

«The muted beta in crypto aligns with the idea that cryptoassets might be less susceptible to a drawdown in equities catalyzed by an earnings recession,» FundStrat’s Sean Farrell wrote Monday in a note to investors.

According to the crypto hedge fund BitBull Capital, the $20,000 mark looms as a major resistance point for the bitcoin market. On the downside, the next point to watch would be the November low around $15,500.

Insights

Taipei Blockchain Week was a success, but there are reasons Taiwan isn’t a crypto hub

By Sam Reynolds

After every successful crypto conference in Taipei, the narrative that Taiwan is the undiscovered blockchain hub of Asia invariably comes up. It never seems to have any legs.

Taipei Blockchain Week, a conference put together by Taiwan-focused Bu Zhi Dao (a play on the Chinese term for ‘I don’t know’), wrapped up Saturday. Despite being put together at the last minute because of uncertainty around Covid rules, there were around 1,700 in attendance. It wasn’t quite the star-studded Asia Blockchain Summit, but the energy was optimistic, despite the bear market.

It’s hard to say that about Taiwan’s prospects for becoming a blockchain hub. Back in 2018, then KMT-legislator Jason Hsu said Taiwan could become a “blockchain island.” This year, the Hong Kong-based investor Sora Ventures said it was moving its fund to Taiwan. But an attempt to create a Security Token Offering structure to allow crypto firms to raise money in a regulatory-friendly way never really took off, because of a low cap on the amount one can fundraise.

While there are many digital nomads in the crypto industry in Taiwan, including projects that purport to be on the island, few are actually incorporated locally as the rules around capital formation make it too difficult. Many business cards given out at Taipei Blockchain Week carried addresses in Singapore, Hong Kong and BVI.

“Rarely is Taiwan the place to incorporate a start-up company’s parent,” Ross Feingold, special counsel at Taipei-based Titan Attorneys at Law, told CoinDesk. “The traditional corporate structures are not start-up friendly because of limitations on a founder’s services as payment for shares and limitations on share transfer restrictions among other issues, as well as the corporate governance requirements.”

Authorities in Taiwan created a new company structure in 2015 that tried to address some of these issues but it’s complex to understand, Feingold explained, especially for those who can’t read Chinese at the level of an accountant or lawyer.

Those that do make the attempt to incorporate in Taiwan complain about the three to four months it takes; a company can be registered in Singapore in an average of 1.5 days and in less than 48 hours in Hong Kong. Both of those jurisdictions use common law, with a share structure more familiar to international investors, and they have more competitive tax regimes than Taiwan’s corporate tax rate and its withholding tax on dividends.

At the height of Covid, Taiwan’s digital nomad friendly Gold Card, which allowed one to make the move provided they could prove they had an income of $67,000 or more, made things look appealing. Feingold says that’s only the case for digital nomads and freelancers.

“The allure waned if the individual really needs to be in a place where the corporate headquarters is sited,” he said. “Some of the same issues that hinder Taiwan as a start-up nation existed then and remain unchanged.”

Feingold says that while Taiwan’s regulator, the Financial Supervisory Commission, has put in minimal restrictions for now, there’s always the “lingering risk that Taiwan’s financial or tax authorities become more proactive in regulating the industry.”

For what it’s worth, Thailand, another regional suitor, also has complicated and arcane company formation laws, even though Thailand’s Siam Commercial Bank, the most institutional of all investors in-country, actively invests and supports DeFi projects. That might help explain why Thai-based teams also incorporate elsewhere — much like those in Taiwan.

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