The limits of the loophole playbook

Every loophole has a clock. The winners aren't the smartest operators, but the fastest ones who see when that clock is about to run out.

Read from your browser Sunday Newsletter Welcome to Tech in Asia's Sunday newsletter, your weekend brief on the biggest moves in Asia's tech and startup world. Subscribe to this newsletter or send story tips to editors@techinasia.com. Ensure our articles appear in your Google searches: IN FOCUS Peter Cowan on why every loophole in business closes and who wins when they do. The Philippines' digital banking backdoor is closing. India takes the nuclear option for AI power. Hello Betamax, Sooner or later, all loopholes close. While relying on those loopholes isn't a defensible business strategy, figuring out how to adapt to their closures is. Look at the end of the "Double Irish" taxation loophole as a classic tech example. For decades, US tech giants routed profits through Irish shell structures to pay almost nothing in tax. By the time it had shut in 2020, the smart money didn't flinch, as Big Tech had successfully lobbied Ireland to set up new incentives to keep patents and royalties onshore, and the effective tax burden barely moved. The loophole closed, yes, but the winners were those who started playing a new game. Two of our top stories from this week deal with loopholes and how different businesses will have to navigate their closures. My colleague Elyssa's story focuses on how the lack of new digital banking license issuances in the Philippines pushed hopefuls to find another opening. Foreign fintech firms, backed by deep-pocketed investors, figured out that acquiring a rural bank was cheaper, faster, and came with a ready-made license to fuel their digibank ambitions. The central bank is now making moves to curb this workaround by proposing capital requirements that would level the playing field between digital-centric rural banks and digital banking licensees. The well-capitalized will likely be able to adapt, but for smaller rural banks trying to go digital, it may already be too late. We also looked at ultra-fast fashion giant Shein, which tried to use an identity loophole to fuel its growth for years. While its roots and supply chain are in China, its headquarters are in Singapore, allowing Shein to position itself as a global company. The effort was a bid to access Western capital markets without the political baggage of being a Chinese firm. Shifting geopolitics shut that loophole - if it was ever really open - and Shein now finds itself forced to embrace Beijing if it ever wants to go public. The winners won't be the ones who found the gaps, but the ones who saw them closing first. Peter Cowan, engagement editor EDITOR'S PICKS 1️⃣ PH reins in 'backdoor' digital banks with proposed cap. Who pays? The rural banking sector in the Philippines was intended to serve farmers in remote areas. Three decades later, rural banks have become a backdoor for foreign-backed fintech firms in their quest to become digital banks. Regulators are now aiming to close that backdoor by introducing new requirements for rural banks. But some analysts fear that the proposed fix may accelerate consolidation and leave the foreign entrants as the winners. 2️⃣ Shein tried to shed China. Its IPO now hinges on embracing it Shein failed to go public in New York and London as Western markets grew uncomfortable with its Chinese origins, despite the company's best efforts to present itself as a Singapore-based global brand. Now, to secure an IPO in Hong Kong, Shein is making a homecoming to its Chinese roots. The move may finally end the use of offshore restructuring as a strategy for avoiding political scrutiny, with far-reaching consequences for other Chinese firms. 3️⃣ The power problem behind India's AI ambitions My colleague Samreen looked at India's push to become a major AI data center hub. There's a mismatch, though, as the country generates around 20% of the world's data but has only 3% of its data center capacity. The power grid to support a serious buildout simply doesn't exist yet. The solution is turning out to be nuclear. SHORT CUTS 1️⃣ 2008 all over again? A Reuters report has indicated that spooked investors are selling software loans held in collateralized loan obligations (CLOs) at discounts amid AI-driven disruption fears. A CLO bundles loans and sells pieces to investors, similar to the tranches of housing loans that sparked the 2008 financial crisis. It's too early to panic, though, and CLOs are generally seen as safe. But as history shows, even "safe" assets can suddenly go sour, and investors are already adjusting their bets. 2️⃣ Full throttle, but still in the red Vietnamese EV firm VinFast reported just under 200,000 deliveries for 2025, a 63% jump from the year prior and hitting its ambitious goal. Despite this, the company reported a net loss of US$3.9 billion for the year, up 26% from 2024. Its struggles say more about its own unusual model than the region's EV prospects. Southeast Asia's real opportunity may be less about building the next big EV brand and more about picking up the supply chain pieces as China's EV giants expand abroad. 3️⃣ iBolt Wang Xingxing, founder of Chinese robotics firm Unitree Robotics, believes that one of the firm's humanoids will be able to outpace Usain Bolt's 100-meter world record time of 9.58 seconds by mid-year. Putting aside the question of whether or not the world needs robots that can run that fast, it goes to show how rapidly the industry is advancing. Only recently, videos of robots tumbling over were the norm. ONE VISUAL STORY YOU SHOULDN'T MISS The limits of clean power If India needs more power for its AI ambitions, how about clean energy? Wouldn't that avoid having to rely on the politically fraught nuclear option? Well, our data for the country's cleantech sector shows there isn't much investor appetite to go that route, with deal value dropping precipitously since hitting US$2.95 billion in 2023. What's more, most of the money in the sector is going to EVs, not renewables. This perhaps explains why nuclear is back on the table for India's data center push. Solar and wind can't guarantee the uninterrupted power that data centers need. Nuclear can. WEEKEND DEEP DIVE Inside China's robotics revolution Speaking of robotics and China, this Guardian long read dives deep into an industry that is treading a fine line between hype and reality. On a trip to 11 robotics firms across five Chinese cities, writer Chang Che paints a picture of choreographed spectacles and government-backed ambition on one side, and humanoids still struggling with basic tasks on the other. With billions spent and yet more committed to the robotics industry, its rise may seem inevitable. Tellingly, though, the missing secret ingredient is enough data to train robots to navigate the unpredictability of the real world. Preparing a robotic dance performance impressive enough to go viral is one thing. Actual utility is another. EVENTS HAPPENING You can also check out our curated list of trending tech events and Tech in Asia's signature events. Southeast Asia is shaped by the generosity of ideas! The spirit of Hari Raya reminds us that generosity strengthens communities. In business, the exchange of ideas can shape industries. This June, leaders from across Southeast Asia will gather at the Asia Economic Summit (AES) to discuss the forces driving the region's economic future. From capital flows to emerging industries, the conversations at AES influence how the region moves forward. In this same spirit, bring your circle to AES and get 20% off when you purchase two delegate passes. Secure your spots here. ADVERTISE | SUBSCRIBE | HIRE | FIND JOBS P.S. 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