Thai crypto exchange unicorn Bitkub seeks to expand SE Asia footprint

Thailand’s largest digital asset exchange Bitkub, which recently struck a deal with the country’s oldest lender Siam Commercial Bank (SCB) at unicorn valuation, is seeking to expand its regional footprint by taking its brand to Vietnam, Malaysia and the Philippines next year, a top executive with the firm told DealStreetAsia.

SCB acquired a 51% stake in Bitkub for 17.85 billion baht ($537.17 million) last month. The deal is expected to be completed by the first quarter of 2022.

Founded in 2018, Bitkub has so far been focused on its home turf, garnering 95% share in the crypto exchange market. Bitkub founder and CEO Jirayut Srupsrisopa said the startup is drawing up plans to expand both “horizontally and vertically.”

Bitkub will replicate its crypto exchange model across select SE Asian markets while, in Thailand, it will invest towards developing new product offerings to create more use cases.

Bitkub is looking to enter only those SE Asian markets that are still fragmented with no clear market leaders. “We won’t go into Indonesia, where Indodax [crypto exchange] is a clear winner,” Srupsrisopa said.

For platform businesses such as Bitkub, it is a winner-takes-all market. “The network effect and the economy of scale maintain the protective mode against new entrants into the market,” Srupsrisopa said.

Bitkub has five businesses under its fold – Bitkub exchange, Bitkubchain NFT marketplace, open education platform Bitkub Academy, Bitkub M Social, and investment arm Bitkub Ventures.

The company will subsequently look at replicating traditional capital market models on the blockchain with new products such as Bitkub Index or Bitkub Rating.

Bitkub is not the only player seeking to ramp up operations in SE Asia. Hong Kong Digital Asset Exchange has recently announced its plan to expand in the region starting with Thailand. It is seeking relevant Thai licences, and is also looking at acquiring a local licenced exchange company in the country.

Srupsrisopa, a big believer in blockchain, calls it “one of the most important technologies for the next decade of development.”

Bitkub recorded total revenue of 3.3 billion baht and net profit of more than 1.5 billion baht during the first three quarters of 2021, per SCB’s notification to the Stock Exchange of Thailand.

The crypto marketplace business enjoys a high-profit margin that can enable entrepreneurs to chart a high-growth trajectory without cost concerns, he says.

“One year in the crypto space is like 10 years in other industries,” Srupsrisopa believes. “It’s limitless. We can do a lot more beyond our imagination.”

Thailand’s oldest lender has tapped into this new technology with the investment in Bitkut to create “new growth value in the long term amid a new financial world,” SCB said in a statement after the deal.

The deal is likely to lead to a part-exit for Srupsrisopa, his fellow co-founders and early employees who will seek to “monetise some of their equity (either in the near term if there was a cash component to the acquisition, or down the line following a lock-up period if it was an all-stock deal),” Paul Ark, a partner and head of ESG at Gobi Partners, wrote in his Medium blog.

“We might see several of them become super-angels, launch VC funds, or start new ventures, forming a Bitkub Mafia,” said Ark, the former managing director at SCB’s venture capital arm Digital Ventures.

On Bitkub’s expansion ambition, Ark told DealStreetAsia, “just a handful of Thai startups have achieved a real foothold into other markets.”

Hurdles to cross

As Bitkub chalks up its regional play, it is looking at markets where regulators are either exploring options of legalising cryptocurrency or have already drawn up legal frameworks for the new technology.

Thailand is considered one of the most pro-crypto legal environments in the region. “We are the first in the world to be a regulated exchange, having a licence from the Ministry of Finance since 2018. The Bank of Thailand is one of the earliest explorers of blockchain use cases too. They are launching the Retail Central Bank Digital Currency in Q2 next year,” Srupsrisopa said.

According to Alex Svaneik, co-founder and CEO of a16z-backed crypto research firm Nansen, the plus point of the blockchain world is the elimination of intermediaries, which means trust is limited to the network, or the blockchain itself. “At a fundamental level, blockchain is a much better system than using banks or payment processors,” he said.

However, he acknowledged the legal hurdle for an exchange or a fintech solutions provider that is eyeing cross-border expansion. Furthermore, there are challenges of integrating into the local system as well as having local market knowledge. Svaneik added, typically companies expand through obtaining licenses, partnering with a local bank, or acquiring a local payment processor.

Tokenised economy

Looking ahead, Srupsrisopa sees Bitkub joining other tech companies to humanise the blockchain at the back-end so that users will feel they’re transacting on a financial service app.

“People would be able to transact instantly, globally, in a frictionless manner without realising that they’re using crypto as an underlying technology,” he said.

Srupsrisopa also predicts an integration between the digital and the physical economy where physical spaces “would start to embrace NFT to bring in traffic by doing treasure hunts or digital collectibles.”

As adoption began with crypto investing, the industry is developing fast to soon become a meaningful part of the economy, especially in parts of the world where a robust financial infrastructure has yet to be formed, Svaneik said.

In the near term, Srupsrisopa expects a play-to-earn crypto game boom that will pave the way for more games as well as the infrastructure surrounding them. Bitkub has invested in Thai game publisher Morning Moon Village and plans to invest in more NFT gaming platforms.

“We’re still at the very early stage, we haven’t found a Binance of NFT yet,” Srupsrisopa 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.