In Southeast Asia, a thriving cryptoscene – TechCrunch

Southeast Asia, a diverse region with a growing population and growing income, is emerging as a popular destination for crypto-entrepreneurs and investors looking for high-growth start-ups in the area.

More than 600 crypto or blockchain companies are now headquartered in Southeast Asia, according to a new report from venture capital firm White Star Capital. Much of the recent growth in venture capital funding across the region has come from crypto, blockchain and web3 startups, which raised nearly $ 1 billion in funding just in 2022 to date and are on track to surpass the total of 1.45 billion in 2021, reports say.

Investors from all over the world are attracted by the region’s vibrant web3 scene, with those from the US, China and Singapore as some of the most active, the report shows.

While much of the deep, basic research and infrastructure development in the blockchain area still takes place in the United States, Southeast Asia is ideal for web3 startups that offer consumer-oriented services, said Amy Zhao, head of Ocular, a crypto fund under Openspace Ventures. TechCrunch.

“The demographics in Southeast Asia are very favorable for web3,” said the investor. “[It has] young people who inherently understand technology and are more willing to try new things. It is [mostly] developing economies, so the economic aspect of crypto provides many incentives for people to participate. “

Southeast Asia, with almost 700 million inhabitants, has one of the world’s fastest growing populations; 480 million of them are active internet users and more are coming online. By 2040, Asia is estimated to account for half of global GDP and 40% of global consumption, much of which comes from the 10-member Association of Southeast Asian Nations (ASEAN), a report from Pinebridge Investments found.

Like other developing countries, large sections of the population in Southeast Asia still have limited access to banking services despite the region’s great progress in financial inclusion over the decade. More than 70% of the adult population remained “underbanked” or “unbanked”, according to a 2019 report from Bain & Company.

The lack of access to formal banking, in turn, allows for alternative cryptocurrency-related financing to grow. Decentralized finance, or DeFi, has flourished in the region as it uses distributed ledger technology to process transactions and promises to allow users to earn returns and access capital without the cumbersome traditional financial intermediaries. Blockchain games that allow users to make money by playing (GameFi) are also popular, such as Vietnam-based Sky Mavis’ Axie Infinity, which has large followers in the Philippines and Indonesia.

Crypto-adoption rates in Southeast Asia averaged 3.56% in 2021, but Singapore stood out with almost 10% of the population owning crypto, ahead of the United States at 8.3%, according to White Star Capital. In terms of DeFi adoption, Vietnam and Thailand were only after the United States in 2021, Chainalysis found.

Each country in the region has its small advantage in crypto-innovation, Zhao observed. Vietnam is a source of “hardcore engineers”, while the Philippines loves entertainment. Thailand, on the other hand, has a vibrant financial market. Singapore is likely to produce more SaaS products given its pool of international talent.

Indonesia “probably” acquires “web3 because the huge talent pool still rests in their web2 industry,” said the investor. B-round.

It’s not just homemade entrepreneurs who are courting Southeast Asia’s web3 adopters. After discovering the region’s appetite for blockchain services, the New York-based crypto exchange Gemini announced a roadmap for entering the region last year. San Francisco’s Coinbase had plans to hire in Southeast Asia as part of its global expansion before recruitment was frozen in the midst of the current market downturn.

Aside from consumer demand, Southeast Asian countries such as Singapore also attract entrepreneurs with their relatively open attitude to crypto, which is largely banned in China and has been increasingly investigated in the United States.

“Singapore has always been very pragmatic. The regulations may not seem as lenient as say Dubai, which has attracted many large stock exchanges to move there from Singapore. But Singapore’s approach has been to build more trust in the long run to protect consumers here, ”Zhao said.

In January, the Monetary Authority of Singapore (MAS), the city’s state financial regulator, said that trading in digital payment symbols or cryptocurrencies is very risky and should therefore not be promoted to the public.

“And when it comes to innovation, it’s very supportive, such as putting out regulatory sandboxes,” the investor added.

For example, MAS has worked with industry to build a blockchain-based payment network. Temasek, the sovereign wealth fund in Singapore, has been an active investor in crypto startups, supporting companies such as Unicorn Amber for managing crypto assets.

“We expect regulators to come in [Southeast Asia] to continue to develop its regulatory framework that governs digital assets in the coming years. ‘Sudden-stop’ regulations seem less likely as digital asset adoption increases, as it would put a brake on a vibrant sector with future prospects, White Star Capital writes in its report.