Southeast Asia, a diverse region with an expanding population and growing incomes, is emerging as a popular destination for cryptographic entrepreneurs and investors looking for high-growth startups in space.
More than 600 cryptocurrency 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 companies, which have attracted nearly $ 1 billion in funding in 2022 alone to date and are on track to surpass a total of $ 1.45 billion. of dollars in 2021, di. the report.
Investors from around the world are attracted to the region’s vibrant web3 scene, with the United States, China and Singapore being the most active, according to the report.
While much of the deep and fundamental research and infrastructure development in the blockchain space is still taking place in the United States, Southeast Asia is ideal for web3 startups that offer consumer-oriented services, Amy Zhao, leader of the investment firm, told TechCrunch Cryptographic Ocular.
“The demographics of Southeast Asia are very favorable for web3,” the investor said. “[It has] new populations inherently understand technology and are more willing to try new things. It is [mostly] developing economies, so the financial side of cryptography offers a lot of incentives for people to get involved. “
Southeast Asia, with a population of nearly 700 million, has one of the fastest growing populations in the world. 480 million of them are active internet users and more are connecting. It is estimated that by 2040 Asia will account for half of world GDP and 40% of world consumption, much of it from the Association of Southeast Asian Nations (ASEAN), which is ten members, according to a report by Pinebridge Investments.
Like other developing countries, large sections of the Southeast Asian population still have limited access to banking services despite the region’s great advances in financial inclusion over the decade. More than 70 percent of the adult population remained “underbanked” or “unbanked,” according to a 2019 Bain & Company report.
Lack of access to formal banking, in turn, gives way for alternative funding related to cryptography to grow. Decentralized finance, or DeFi, has flourished in the region as it uses distributed logging technologies to process transactions and promises to allow users to perform and access capital without the hassle of traditional financial intermediaries. Blockchain games that allow users to make money playing (GameFi) are also popular, such as Vietnam-based Sky Mavis’ Axie Infinity, which has big fans in the Philippines and Indonesia.
Cryptocurrency adoption rates in Southeast Asia averaged 3.56% in 2021, but Singapore stood out with almost 10% of its population owning cryptocurrencies, ahead of the US. UU. with 8.3%, according to White Star Capital. In terms of DeFi adoption, Vietnam and Thailand were only after the United States in 2021, Chainalysis discovered.
Each country in the region has its slight advantage in cryptographic innovation, Zhao noted. 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 international talent pool.
Indonesia is “catching up” on the web3 probably because the huge talent still lies in its web2 industry, “the investor said. Pintu, who recently took more than $ 110 million from his Serie B round.
They are not just national entrepreneurs courting web3 users in Southeast Asia. After spotting the region’s appetite for blockchain services, New York-based cryptocurrency exchange Gemini announced a roadmap for entering the region last year. San Francisco Coinbase had plans to hire in Southeast Asia as part of its global expansion before freezing hiring amid the current market slowdown.
In addition to consumer demand, Southeast Asian countries such as Singapore are also attracting entrepreneurs with their relatively open attitude toward cryptography, which is largely banned in China and has been under increasing regulatory scrutiny in the United States.
“Singapore has always been very pragmatic. Regulations may not seem as lenient as Dubai, which has attracted many big bags to move there from Singapore. But Singapore’s approach has been to build more long-term confidence to protect consumers here,” he said. Zhao.
In January, the Singapore Monetary Authority (MAS), the city’s state financial regulator, said the trade in digital payment cards or cryptocurrencies is very risky and therefore should not be promoted to the public.
“And in terms of innovation, it’s very supportive, like establishing sandbox regulators,” the investor added.
For example, MAS has worked with industry to build a blockchain-based payment network. Temasek, Singapore’s sovereign wealth fund, has been an active investor in new cryptocurrency companies, supporting companies such as the cryptocurrency asset management unicorn Amber.
“We are waiting for the regulators to come in [Southeast Asia] to further develop its regulatory frameworks governing digital assets in the coming years. “Sudden shutdown” regulations seem less likely as digital asset adoption increases, as it would slow down a vibrant sector with prospects for the future, ”White Star Capital writes in its report.