Crypto adoption and investment may soon become mainstream in SE Asia

Photo: Unsplash

It’s now not uncommon to pass by people who are on their devices staring at the Binance crypto trading board, playing Axie Infinity, or selling non-fungible tokens (NFT) on OpenSea.

The crypto craze is sweeping through Southeast Asia and going forward, it is expected to create a paradigm shift in the technology world. Experts tracking the sector have indicated that the adoption of blockchain-powered products will become mainstream over the next few years.

Southeast Asia has already witnessed robust developments in the space, generating unicorns faster than any other sector. The year 2021 has so far spotted three “crypto-corns” in the region – Vietnam-based NFT game publisher Sky Mavis, Thai crypto exchange Bitkub and Singapore-based crypto finance services provider Matrixport. Interestingly, all these companies were founded only 2-3 years ago and attained their unicorn status in a short span of time.

“These are not bubbles. Blockchain is a very solid, fundamental technology for the next paradigm shift,” said Bill Chin, head of Binance Labs Fund, as he flashed back to the Web 1 era until today where the tech industry has global biggies like Google, Amazon and Apple.

Alongside crypto-focused funds, generalist private equity (PE) and venture capital (VC) investors are also increasingly evincing interest in blockchain companies. The likes of Singapore’s GIC and Temasek have already had several years of history of investing in the burgeoning sector.

“I wouldn’t be surprised if sovereign wealth funds around the world also allocate funds for crypto investments in the next few years,” Alex Svaneik, co-founder and CEO at crypto research firm Nansen.ai. told DealStreetAsia.

Hemant Mohapatra, partner at Lightspeed Venture Partners, also projects a four to five-year horizon before crypto exposure by fund managers becomes “truly mainstream”.

“The virtual world is becoming the real world for an entire new generation under our very noses,” he exclaimed.

The current market capitalisation for cryptocurrencies is around $2 trillion, per research by digital institutional investment platform VALK, which estimates the figure to touch $3 trillion or more by the end of next year, and at least $6 trillion by 2025.

Through interviews with experts in the industry, DealStreetAsia has identified the key trends, or use cases, powered by blockchain technology in the near future:

NFT gaming boom

Sky Mavis’ NFT game Axie Infinity, which allows users to buy NFT characters, engage in battles to level up the character in order to sell them to other players, has become a blockbuster. The game itself has amassed nearly 2 million daily active users, generating $33 million in daily transactions. In October, it raised $152 million in a Series B funding round led by US investor Andreessen Horowitz (a16z).

A spate of other play-to-earn game studios has announced funding, such as Sipher, Whydah, and DeFiHorse. The interest in these games has also led to a spike of investments into game guilds, including Yield Guild Games in the Philippines, and GuildFi in Thailand, among others.

“Play-to-earn crypto games will boom next year. We will see more games as well as more infrastructure providers,” said Bitkub founder and CEO Jirayut Srupsrisopa. Bitkub has invested in an NFT game called Morning Moon Village.

“Blockchain-powered gaming can be very powerful. It can create new incentive systems that onboard different types of people to crypto, besides the ones who were previously just investing in cryptocurrencies,” Svaneik said.

Going forward, blockchain applications are anticipated to expand beyond the use case of GameFi – the financialisation of video gaming.

“Southeast Asian users are very tech-savvy and pro-crypto. As the industry might pivot a lot of attention to GameFi, it’s a very positive signal for developers and founders in Southeast Asia,” Chin from Binance Labs asserted.

DeFi takes stage

DeFi, short for decentralised finance, refers to financial services on the blockchain that are aimed to be an alternative to banking transactions. With DeFi, the markets are always open and there are no centralised authorities who can block payments or deny you access to anything, according to Ethereum.org’s definition.

The absence of intermediaries makes it much faster and easier to transact and develop new applications, said Svaneik. “It could be even more important in parts of the world where you don’t have as robust financial infrastructure.”

Blockchain “allows a fully decentralised internet to emerge once again without having to compromise on convenience, privacy, scalability, or more,” Mohapatra echoed.

“In the future, people would be able to transact globally, instantly, in a frictionless manner, without realising that they’re using crypto as an underlying technology,” added the Bitkub CEO.

Regulators catching up

Regulators in Southeast Asia are generally seen as pro-crypto, according to experts DealStreetAsia spoke to.

“Policy tends to lag innovation by a few years and crypto is no different. We are encouraged by what we see as crypto-friendly policies in regions such as Singapore, Indonesia and Hong Kong, and are watching how other emerging hubs such as Vietnam, Thailand and the Philippines will start to shape regulation,” Mohapatra said.

And by keeping up with technology disruption, the sector creates a huge opportunity for these countries to see their businesses thriving. “It’s going to attract capital and talent. It’s going to stimulate local entrepreneurs to stay instead of moving to other countries,” Svaneik opined.

It started with the basic buy and sell of crypto coins nearly a decade ago, but the crypto world has been evolving amazingly, and to some people insanely, fast. A patch of virtual land was sold for a record price of $2.4 million last month. In June, a virtual Gucci bag was sold for around $4,000 while the real-world cost is $3,400.

“So, to understand the world of crypto, one has to wear a different hat and take a long-term view on where society is headed without necessarily passing judgment on whether or not that is the right direction,” Mohapatra said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.