Thai megabank SCBX to manage fintech holdings through crypto crisis

SCB 10X, the venture capital arm of Thailand’s oldest bank, is holding on to its investments in blockchain and digital asset infrastructure, which it believes will serve the bank in the long term, despite a market downturn that has wiped out the giants of the crypto industry, including former portfolio company BlockFi.

“We are a serious investor, we are not tourists. We are here for the long term because we truly believe that blockchain technology is a game changer and a paradigm shift,” said Mukaya Panich, CEO of SCB 10X.

As cryptocurrency prices crashed, and with many companies facing insolvency, SCB 10X sees its role as supporting viable projects and advising its 40 portfolio companies on improving their products and revenue plans ahead of a market downturn.

“We continue to invest and actively find deals and founders to come to our incubation program,” Mukaya said. This contrasts with a slower year for most venture capital specialists in an environment of inflation and rising interest rates, conditions that have not spared even tech giants Meta and Grab from layoffs and profit pressures.

“We came from a bull market and people were just focused on building, but they didn’t think deeply enough about how they’re going to generate revenue,” she added.

SCB 10X’s fintech portfolio includes GoTo, the holding company of Indonesian super app Gojek, Swiss-based digital asset bank Sygnum and Thai payments developer Opn. But VCs have also invested in blockchain, digital assets and Web3 projects, aiming to find the next Thai unicorn. With a domestic market smaller than Indonesia’s and one not growing as fast as Vietnam’s, Thailand lags behind its neighbors in terms of startups valued at more than $1 billion.

“When we created SCB 10X three years ago, we focused on building in the area that could be global from day one, and that’s blockchain,” Mukaya said.

The vision is for the 110-year-old Siam Commercial Bank to eventually be a customer for the projects built by SCB 10X as it expands to digital asset transactions, on top of fiat currency. “If we could actually create a synergy with the bank, it could be quite powerful,” Mukaya said.

This reflects a shift in traditional banks’ thinking. They are beginning to see blockchain and its applications in decentralized finance, or DeFi, as an opportunity rather than an existential threat. In a recent report, the Singapore Fintech Association identified distributed ledger technology, central bank digital currencies and custody solutions as opportunities to integrate traditional banking with DeFi.

“We believe that in the future the bank should be able to use DeFi as back-end operation to make these very efficient and reduce the number of people and paperwork,” Mukaya said. SCB is Thailand’s fourth largest bank by assets.

Mukaya also sees an opportunity overseas to sell products built by SCB 10X portfolio companies that local banks may not be ready for, such as quantum computing developed by Vancouver-based 1QBit to detect fraud and optimize trades. “Right now the technology is probably a bit too advanced for Siam Commercial Bank, but some banks in Europe are already preparing to be quantum ready,” she said.

To find these startups, VCs organize hackathons and recruit founders for six-month incubator stops. It recently opened a 1,000 square meter coworking space in central Bangkok for its portfolio companies and incubation program.

Mukaya, who was sent to the US to study engineering on a royal scholarship, realized where her strengths lay after observing her more creative classmates at the Massachusetts Institute of Technology.

Now, the qualities she saw in those classmates are what she looks for in founders, who she said should have an experienced team and a monetization strategy, in addition to a unique and differentiated product.

“I think I can be an enabler. Either I want to work in a startup and help grow that business, or I want to be the investor,” she said. She helped build a Silicon Valley startup that was acquired by Broadcom for US$2.2 billion, before earning an MBA at Harvard Business School and working as a portfolio manager.

In June, SCB 10X developed a merger of two of its portfolio companies, Singapore-based crypto analytics platform Nansen and DeFi portfolio dashboard Ape Board.

“Our goal in building is to create a startup that can become a unicorn,” Mukaya said. Thailand has just four unicorns, including crypto exchange Bitkub, whose acquisition of SCB fell through in August after the market turned and regulatory scrutiny intensified. SCB launched digital asset trading on its own securities app, InnovestX, less than two months later.

SCB 10X invested in the US$50 million Series C round of BlockFi, the crypto lender that filed for bankruptcy in the US last month. “BlockFi was less than 1% of SCB 10X’s portfolio exposure,” Mukaya said, adding that the VC wrote off its investment in BlockFi in August.

Remaining portfolio companies “all have a runway of more than four years,” she said.

“They have raised enough money during the good times, so they have a long runway to survive the crypto winter. And there are many good opportunities right now in the market for acquisitions, she said.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing collaboration with the Nikkei.