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Blockchain technology redefines Southeast Asia’s tech scene | KrASIA Year in Review

Written by Stephanie Pearl Li Published on     6 mins read

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Big tech firms and deep-pocket VCs have been pouring funds into different blockchain, GameFi, and DeFi projects.

2021 was the year when “metaverse” came into the spotlight. The term, originally coined in 1992 by science fiction writer Neal Stephenson in his cyberpunk book Snow Crash, has been adopted and redefined by big tech companies to become one of the most hyped words of the year.

Mark Zuckerberg, the founder of Facebook, has been one of the main promoters of the metaverse since he decided to rebrand his company to Meta on October 28. Zuckerberg redefined the term as a set of interconnected digital spaces that allow users to do things that are impossible in the physical world. It’s a space that is characterized by an online social presence, according to Zuckerberg.

Yet, this infrastructure is currently being built, and it isn’t entirely clear how it will be used. While the metaverse remains distant from our daily reality, a slew of existing applications, including blockchain, cryptocurrencies, digital avatars, and games that utilize non-fungible tokens (NFTs), are expected to take major roles in the metaverse’s future.

KrASIA looked into some of the major events that shaped 2021’s metaverse reality in Southeast Asia, from the blockchain space to the crypto scene and more.

The rise of Axie Infinity

Created by Vietnam-based blockchain startup Sky Mavis, play-to-earn NFT game Axie Infinity is one of the world’s fastest growing video games. Players create financial value for themselves by trading digital commodities that are part of the in-game economy.

As of publication, Axie Infinity was the most traded NFT collection ever, with its total trading volume surpassing USD 3.8 billion, according to data from DappRadar. That’s more than the value traded by blue-chip NFT collections like CryptoPunks, Bored Ape Yacht Club, and NBA Top Shot.

Following Axie Infinity’s success, an array of gaming guild startups have also emerged to develop new ways of blending video games with blockchain activity, including Yield Guild Games, GuildFi, and Avocado Guild, which loans out gameplay NFTs to members and then takes a cut of the player’s in-game earnings.

Axie Infinity’s total trading volume surpassed USD 3.8 billion. Screenshot from Axie Infinity’s website.

Crypto stakeholders bank on GameFi projects

The meteoric rise of blockchain games has attracted numerous investors. On December 6, Animoca Brands, a Hong Kong-based blockchain gaming firm and an active investor in the blockchain industry, and Binance Smart Chain, the accelerator arm of crypto exchange Binance, co-launched a USD 200 million fund to invest and incubate early crypto gaming projects built on the Binance Smart Chain.

An array of other ventures have started their own funds to invest in GameFi projects, with notable names including US-based Andreessen Horowitz (a16z); Huobi Ventures, the investment arm of one of the world’s largest crypto exchanges; Justin Sun’s Tron Foundation; major crypto exchange OKEx; and SoftBank.

As of October 4, blockchain-based gaming firms raised a total of USD 1,985 million, up 4,626% from 2020’s USD 42 million, according to a report by US-based digital asset research firm The Block. The video games market is predicted to grow over USD 200 billion in value by 2023, up 29% from 2020’s USD 155 billion, according to Juniper Research.

Local crypto exchanges riding on a tailwind

Local banks across Southeast Asia have been stepping into the crypto market by investing in licensed crypto exchanges, a phenomenon that has picked up steam, particularly in Thailand and Singapore.

Thailand’s oldest bank, Siam Commercial Bank, acquired 51% of the country’s largest crypto exchange, Bitkub, for THB 17.85 billion (USD 535 million) in early November, bringing the firm’s valuation to THB 35 billion (USD 1 billion). Three months earlier, Singapore-based digital asset exchange Zipmex bagged USD 41 million in a Series B investment round led by Krungsri Finnovate, the venture capital unit of Bank of Ayudhya, Thailand’s fifth largest bank in terms of assets, loans, and deposits.

In Singapore, the city-state’s central bank also granted official approval to DBS Vickers, the brokerage arm of DBS Bank, to provide digital payment token services in the city-state in early October. OCBC Bank is also mulling to set up a crypto exchange soon, according to The Business Times.

Other crypto exchanges that have received approval from the Monetary Authority of Singapore (MAS) to launch operations in Singapore include crypto payment firm TripleA, Independent Reserve, and local fintech startup Fomo Pay.

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Binance continues to be subject to regulatory scrutiny across Thailand and Malaysia, as well as in some of the major economies in the world, including Japan, the US, and the UK. Photo by Executium on Unsplash.

New regulations reshape the crypto industry

As China stepped up its crackdown on crypto mining and trading in May, some major crypto firms founded by individuals of Chinese origin turned to Singapore, with major crypto firms such as Binance, Huobi, and Bitdeer setting up a local entity in the city-state.

However, it has not been smooth sailing for some of the major exchanges in the city-state. In September, the MAS added Binance Exchange to its Investor Alert List, which includes unregulated individuals and businesses that “may have been wrongly perceived as being licensed or regulated by the MAS.” Although Binance’s subsidiary, Binance Asia Services, has been able to operate a local crypto trading platform under license exemption, the entity announced it would wind down its Singapore operations by February 13. Binance will refocus Binance Asia Services’ operations in Singapore to create a hub for blockchain innovation, according to the company.

Huobi Global also announced on November 9 that it will no longer offer services to crypto traders and holders in Singapore, while Huobi Singapore, a separate legal entity, is set to start offering digital asset trading services by the end of this year. Huobi Group is currently relocating its spot trading business to Gibraltar after it decided to leave China and is targeting expansion in regions such as Southeast Asia and Europe.

In Indonesia, the nation’s top body of Islamic scholars, the Indonesian Ulema Council, issued a fatwa on November 11 indicating that using crypto as a means of payment is haram, or a non-permissible activity under Islamic rules.

Over in Laos, the local government is looking to develop its own crypto mining and trading industry by allowing companies to use hydroelectric power to mine crypto. The move is expected to generate over LAK 2 trillion (USD 187 million) in annual revenue for the country, but the legal framework remains unclear, according to analysts.

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Ripple announced a partnership with Bhutan’s central bank on September 23 to develop a retail central bank digital currency. Photo by Pema Gyamtsho from Unsplash.

Central banks explore CBDC 

While crypto trading has gained popularity in Southeast Asia, the volatile nature of many tokens makes it difficult for consumers to use them to pay for goods and services. This has prompted central banks in the region to explore central bank digital currencies, or CBDCs.

In the second quarter of 2021, the Bank of Thailand (BoT) began tests for a retail digital baht after enlisting the services of German payments giant Giesecke & Devrient. Indonesia’s central bank is also considering its own CBDC. The bank is conducting research and assessments for its CBDC as a facet of its sovereign currency. Other major economies in the region—Singapore, Malaysia, Laos, and Vietnam—are also exploring similar initiatives.

So far, Cambodia’s interbank CBDC project is the only project that has reached the implementation stage in the region, according to a report published by PwC in April.

Local artists promote regional adoption of NFTs

While NFTs trading volume worldwide hit USD 10.7 billion in Q3 of this year, up 704% from the previous quarter, in Southeast Asia, language barriers, costly transaction fees, and the lack of localized NFT communities have hindered adoption. This has motivated local artists to launch online communities such as MetaRupa, Malaysia NFT, and NFT Asia.

An array of crypto art events have also emerged across Southeast Asia in partnership with local NFT communities, among them Art Moments Jakarta, Art Fair Philippines, and CryptoArt Week Asia.

Southeast Asia as the next crypto hub?

Although the crypto market remains nascent in Southeast Asia, the region is ripe for innovation, with Vietnam, the Philippines, and Thailand ranking second, third, and fifth, respectively, in terms of crypto adoption across 55 countries in 2020, according to data from Statista. Nigeria is currently the country where people are more familiar with crypto, as 32% of the Nigerians have used or owned crypto as of 2020.

While regulators across the region are formulating ways to oversee the industry, some individuals have come up with innovations to skirt formal financial controls. Over in Myanmar, a group of Burmese launched a cryptocurrency project with the hope to create a financial system to circumvent the central bank’s control and the junta regime—the Myanmar Dollar.

Although the initiative is unlikely to reach a significant scale, as Myanmar’s junta is likely to restrict the adoption of the MYD, the initiative is an example of how the decentralized nature of crypto and the blockchain could shift the balance of power away from established financial institutions, opening up more possibilities for local communities.

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