As crypto adoption takes off around the world, Southeast Asia has become a hub for crypto users. Local digital asset exchanges are springing up to meet meteoric demand across the region.
Global crypto adoption was up 881% in the second quarter of 2021, with Vietnam making the most progress, followed by India and Pakistan, according to a report released by blockchain data firm Chainalysis on Wednesday. The report also ranks Thailand and the Philippines among the top 20 countries in terms of adoption.
“In emerging markets, many turn to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions, while adoption in North America, Western Europe, and Eastern Asia over the last year has been powered largely by institutional investment,” the authors of Chainalysis’ report said.
Despite the surging demand, Southeast Asian governments have turned their screws on the world’s largest crypto exchange, Binance, as it has failed to acquire the relevant licenses in various countries. This, however, offers a chance for local, licensed exchanges to fill the gap.
Singapore-based Zipmex is one exchange that offers trading to both retail and institutional investors. It is licensed to run an exchange in Thailand, and operates in Singapore, Indonesia, and Australia according to local regulations. The company logged over THB 62 billion (USD 1.85 billion) in trading volume in the first six months of 2021. While the majority of the trading came from Thailand, the transaction volume, which Zipmex expects will rise by 310% by the end of this year, has edged close to Thailand’s total crypto trading volume of USD 2.5 billion recorded in 2020.
The robust growth in this space has piqued the interest of investors. On Tuesday, Zipmex said it has raised THB 300 million (USD 9 million) from two Thailand-listed media giants, Plan B Media and Master Ad. This investment came just seven months after Zipmex bagged USD 6 million from Jump Capital in January.
On the same day, the Philippine Digital Asset Exchange, or PDAX, also said it secured USD 12.5 million from an undisclosed UK-based VC firm and Hong Kong-listed BC Group, the operator behind crypto trading platform OSL. This was six months after a broad crypto selloff that crashed PDAX’s system. “On February 16, 2021, our system was hit by an unprecedented surge in transactions, which caused it to experience significant maintenance issues,” the firm said in a statement to local news publication Manila Bulletin.
“PDAX transactions grew to 70x over the past months, and we note that at this pace, other exchanges such as Coinbase and Kraken have also experienced recent outages. The pandemic has led to massive shifts in online financial behavior beyond what our growth models predicted, ” the firm said in the statement.
Crypto exchanges crash when a swarm of investors scramble to enter or exit the system at the same time. It usually leads to a suspension of trading services, which may lead to incurred losses when transactions are blocked. In May, Binance suspended withdrawals for over an hour as the price of bitcoin and other cryptocurrencies dropped drastically.
Despite the market volatility, decentralized finance has gained traction in Southeast Asia. This is especially the case in Indonesia, the largest economy in the region. With around 6.6 million crypto investors in the country as of June, crypto assets have become the most popular investment class, according to the Ministry of Trade. Pintu, which bagged USD 35 million in a Series A+ funding round in August, is one exchange that is capitalizing on this growth. During the first half of 2021, downloads for Pintu’s app grew 3.5 times, and the platform saw a 400% increase in the number of active traders.
With the crypto industry riding on tailwinds, other local exchanges have also joined the fray. These include Thailand-based Bitkub, UK-headquartered Luno which was reportedly in talks with Lipp Group to form a joint venture in Indonesia in June, as well as Indonesia-based Indodax and Tokocrypto, which is mulling an IPO over the “next two to three years,” according to multiple media reports.