Spotlight Asia: Why the east is embracing web3 and what it means for your business

Transcript

[Music] All right. Um, pleasure to be here. My name is Yat. I'm chairman of Animoka Brands. Um, my talk today is about introducing Asia and the opportunity. I'm I mean part of the reason why I'm doing this is because I felt that uh most of the world didn't actually know what was really happening in our part of the world and particularly on the regulatory side and what it might mean for companies here that are building in the space. So let me first u explain first the regulatory climate in Asia is completely different than what you see particularly in US and to a lesser

extent Europe. I think Europe is obviously more progressive than the US. Japan has made web 3 in the metaverse parts of its national agenda. Obviously Singapore has been driving it forward. Hong Kong in particular has been pushing forward web 3 in a really really big way. Um and also Southeast Asia is basically sweeping really if you think about it is I think responsible for almost 50% of all the growth that we're seeing basically in the sort of general crypto web3 market over the last uh over the last two years. So these are stats that often aren't really talked about a lot but let's go into some of the details. Um and of course here India, Thailand, Vietnam and so on are amongst the largest places in which cryptocurrency is being used which are some very particular reasons uh behind that. Okay. So let's talk about Hong

Kong which is I think um where I'm based and you know what's happening in that space because a lot of people look at Hong Kong and say oh isn't it part of China you know is it sort of restricted with crypto and so on. It's actually quite the opposite. Um I'm part of the web3 task force which is basically uh designed to help bring companies into Hong Kong that are basically building in web 3. Uh just to illustrate the HKMA which is the Hong Kong monitoring authority about a month ago sent a notice to all the big banks in Hong Kong like HSBC and Standard Chartered and those guys and said you have to open bank accounts for crypto companies. It's the only probably regulator in the world that has done this for instance as an example. Um and this started really in November last year where the government

went up and said they wanted to become a leader in the virtual asset space and over the very short period of time basically has issued um tokenized green bonds has about six crypto ETFs out there. HSBC which is basically Hong Kong's biggest bank and one of the biggest banks in the world now has the ability to you know you can now buy basically crypto ETFs at HSBC for instance in Hong Kong uh is already given out licenses for exchanges. It's gone completely full-on in terms of adopting basically sort of crypto and web 3. And uh and you know the retail trading framework is also interesting because as of June this year 16 tokens have been approved for retail trading in Hong Kong not just the big ones but including some metaverse tokens like uh

SAND and AXS for instance and amongst other things. So this has been a complete about face and we'll talk about why that's so important and why you should be paying attention to this. Now this is the interesting part that a lot of people get confused about because in the same week when Hong Kong released their sort of um sort of crypto token retail trading uh Beijing released their web 3 white paper in which they basically indicated that web 3 is the future of the internet. They didn't mention any crypto but it happened just to be in that same week and where they basically were directing towards you know innovation put out budget towards basically progressing in web 3 in China and of course there was also a notice on Hong Kong because on national TV for

those of you who know about China CCTV is basically the national official broadcaster. is a little bit like I mean it's not a good example but it's like the BBC maybe in in the UK um was basically talking about the ability to buy Bitcoin in Hong Kong through sort of a regulatory manner. So every Chinese person basically in China got to see this. So this is interesting because it's not just about uh it's not really just about what's happening in Hong Kong. It's really a message that's coming from you could say high above as it were and Hong Kong wouldn't do anything without the approval of China. So there's some bigger moves happening here. Uh, and of course, just to sort of top it off, AFEST is actually coming to Hong Kong in November, just in case you cared. So, all right, now let's talk

about why Asia is so forward on web 3 and what it why why it matters so much. So, first of all, you already know this, but it's worth reiterating. Web 3 is about, you know, property rights. Basically, the whole framework is that you have the ability to own the piece of essentially the web or your digital assets or your data as it were. uh and it has with it a very strong capitalist framework and one of the main reasons why there's so much push on web 3 in Asia is partially because of the pro- capitalist narrative that exists in Asia. We can already see this narrative already in things of NFTs like last year for instance $24 billion worth of NFTs were sold in a bare market. But what's important isn't the $44 billion. What's important is that 90% or more of that value went to creators and owners of

these NFTs. In contrast, something like Spotify only paid about 7 to8 billion in that same year, which basically represents a very small percentage of the kind of income that was generated. So, property rights already in the digital space demonstrate the kind of capital appreciation that you can have and the value. Now this is a narrative that has been very true for Asia and is also what we believe is true for web 3 which is the kind of countries that have low property rights have very low GDPs very low income and the kind of countries that very have very high property rights say like France or like the UK or US have very high GDPs and do typically very well and the same narrative basically would apply basically we think in web 3 where you happen to own property rights in for your digital assets you have high income

potential and if you have no property rights like with Facebook or with you know meta or those so on then you have very low property rights and no ability because you can't rent them you can't sell them you can't do anything with it you have no freedom to transact this is a very big narrative for Asian countries um in terms of why it matters to them so much because in the past I give you this example for Korea the introduction of property rights in the physical space and eventually in digital space and also introduction of sort of you could call them democratic principles has actually led to this economic miracle over the last 30, 40, 50 years in Asia. South Korea is a poster child example, but the same is true for Japan. The same is true for China, the same is true for

Southeast Asia. It's worth noting that it was only 40 or so years ago that South Korea's economy was smaller than that of North Korea because North Korea had natural resources. North Korea had a bigger population and generally speaking was just doing better. So what was different about South Korea? because they didn't have resources. They didn't have oil. They didn't have anything like this. They had of course natural resources in terms of people. They basically introduced democratic frameworks. They actually had a declaration of property rights. They introduced capitalism. And over a course of period of time, despite the little sort of bumps on the road, um you know, basically Korea is now the 12th or 13th largest GDP in the world. And if you look at Japan and if you look at Singapore and if you look at other

Southeast Asian countries, they've all experienced the same. The point I'm making here is that within living memory, people in Asia have witnessed this. Meaning my parents have come from an environment that had nothing to an environment where they were able to benefit from you know property rights and capitalism. So they understand this and they appreciate this. Uh Korea of course also as an example and this is true for Asia as well is now one of the largest gaming markets and it's basically the fourth largest gaming market in the world in the virtual digital space which I'll get to into how that relates to to Asia. Um and of course the other important thing is that for the next decades to come most of the global growth will come from the Asian region. Uh it's not just because of population growth. It's because of

basically the way that sort of growth is happening in terms of you know um the economy and of course u the you know sort of the the welcoming sort of perspectives on capitalism. So 70% of global growth this year is expected to come from the Asian region. Basically just lifting the entire sort of market up which would include of course crypto. This is in stark contrast from what we're seeing in places like America. Right? So there's a very strong negative crypto uh narrative among certain people in America and this has a lot to do with we think a lot to do with the inequity.

So even though Asia has experienced inequity as well, broadly speaking, they have benefited from the introduction of capitalism. Whereas for a lot of young Americans, they have not really witnessed any of the benefits of capitalism as perhaps their parents have over the last 20 or 30 years. It hasn't worked for them, which is why there's been this rising tide of sort of this socialist narrative that's been going on in the US. Uh and we won't go into the politics around it, but the main point being that because capitalism hasn't worked that well in the US, you know, crypto represents a kind of digital capitalism as well. And so there's a perspective around that that doesn't work so work work for them so well. Um and you know when you look people at you know when lambo and bitcoin and so on all these things translate into sort of

this sort of I guess sort of tasteless direction of the kind of wealth that they can never apparently attain. The American dream in Asia is much more alive and well than it is in America. Now this would be something unthinkable perhaps to think about 20 years ago but that's the perspective and that's why there's such a big difference we feel in places like the US and Asia uh as the first part. The second thing has to do with personal and national sovereignity. So we already know that crypto is about personal sovereignity. Owning your rights, owning your data. We don't have to go into the details. A lot of people have spoken about this. Um but the other one is about national sovereignity because what actually is happening is that almost every country in the world especially in Asia with the exception of China is dependent on US technology.

They depend on Google they depend on Facebook they depend on Apple they depend on all of these platforms. Now when you think of this from a national sense that's actually a problem because what happens if Facebook does something or what happens if Apple blocks apps from a certain country it's actually very very detrimental to the national security of that country. So pushing the web3 narrative is pushing a new technology paradigm away from I guess US hele money. Uh and that's actually another big agenda item which is why Japan, Korea, uh China, all these places are pushing web 3 in a really big way because they see that as an opportunity to break away from basically US dominant technologies. uh which also represents the opportunity for builders like yourself, not just for funding, but also for people who want to basically sort

of, you know, build new products and services that can take advantage of sort of a new market that isn't there because, you know, web 3 is still early early days. This is a major thematic particularly for places like China, but it's irrelevant, which is ddollarization. It's a common thematic. It's another reason why web 3 is being pushed in these places. Um less dependency on the dollar. The dollar is of course as we know the global currency of the world. uh one may argue it is also partially weaponized or fully weaponized depending on which camp you sit on. But the point being that pushing a crypto narrative is a way in which you basically have less dependency on the dollar. And again for certain countries this is very very important especially when you think about sort of you know you know and this has nothing to do with sort of

legalities of zone has everything to do about national security. So these themes are all very important as to why these countries are pushing pushing web 3. Now the other thing is that Asia is particularly interesting because it is a digital first culture. So if you don't know this, these are beggars and they don't beg asking for cash. They ask for basically money to be given to their digital wallet. It's probably the only place in the world where that happens. And this has been happening obviously for years and years and years. The point being that in Asia, people are already very digitally native, which means that they're naturally adoptive towards digital technologies, crypto, and so on because this is just another extension, except it's one that is more free, which I'll go into a little later. Um, so, so as as an illustration, the largest

amount of time that people spend online happens to be on aggregate in Asia. When you think about people spending time online and doing different activities from playing games, from being on social and so forth and so on and of course virtual identities in Asia with gaming and with avatars and what they call homepiece and so on started actually first in that region. Um you know massively multiplayer online online games uh free-to-play gaming models they all actually emerged from the Asian space. So they may first appear to be sort of um you know I guess pop culture icons but really it's about virtual identities about virtual characters about sort of avatars and designs. Again many people actually in Asia are very comfortable with that form of

expression. Emojis and emoticons actually really became mainstream in Asia with things like line and WeChat before they even emerged in things like Facebook Messenger or WhatsApp or even Telegram. So again this sort of virtual identity digital first culture is already very dominant in Asia. And then half, actually more than half of all gamers live in Asia. And one of our big thesis points at Animoka Brands is that we believe that gaming is going to be one of the main vectors of mass adoption for crypto because again gamers understand virtual ownership or at least they think they should because they already think they own the skins that they have. And virtual currencies have some kind of similarity to crypto as well. And Asia is amongst sort of, you know, the biggest markets in the world.

And again unlike what you see in America, the Asian game companies are all embracing crypto. So for instance, whereas in a company like an EA for instance or an Activision would be somewhat hesitant towards that. uh not necessarily because they are because their consumers are in Korea or in Japan for instance, Square Enix, the creators of Final Fantasy for instance or um you know the create craft on the creators of PUBG or Net Marble, Nexxon, all of those major game companies um are all adopting web 3 and coming up with NFT strategies. So completely different. So if you look at the US narrative, you think NFTs are dead. You look at the Asian narrative, you think NFTs is growing, right? Right.

So it's again two different markets, two entirely different narratives around sort of the potential growth for digital assets and ownership there. Now into the opportunity why I think you should pay attention. Asia leads the world by internet users by far. But Asia's penetration for internet users is still very low. So what that represents is growth, right? So when you think of places not just like in North Asia but you think of places like Southeast Asia, it just means that there's more people coming still that are not online despite the fact that they're already in terms of adoption and gaming the leading markets in the world just because of numbers right um all right so I've been given time so I got to go really go even faster the other reason uh I talked about this before is

security flexibility and freedom in the crypto in the crypto era this is something we all know about basically helping sort of uh do business with the unbanked But again in living memory Asia had gone through a lot of wars in the last 30 40 years because of the cold war and so that has basically led to people having a sense of sort of concern about the securities concerns about the freedoms. So in other words, they are much more looking for things in which they can have sort of leverage in other ways and crypto is perfect for that right whereas again in the west there's more safety you you know America hasn't had a civil war in hundreds of years right people aren't worried about losing their property for instance whereas in Asia in living memory they would still remember a time when they had nothing or things

could just be taken away because there were dictatorships in place so again crypto is a very positive narrative there so I'll skip this here I'll close with this and then maybe if there's some questions later first um this sense of security also comes in in a different way which is that because of the wars there's a huge amount of Asian diaspora that is spread throughout the world for better opportunity and also for safety and security to give you an illustration there are more Chinese uh diaspora than there are citizen then there are people living in France right so so just to give you an idea of just how large that scale is and of course you have Indian and you have Japanese and you have Korean and all of them were pushed out into the world but they're still have connections back into back into their

original sort of I guess you know countries cultures. So for instance, you know, for those of you who might remember in the early days, the spread of Hotmail, which was the first free email service provider happened because of Indians um because people in India needed to communicate with the Indians who were working in Silicon Valley who were basically building Hotmail as an example. So those were the avenues in which growth of these platforms started to build across across cultures and we see this happening very much now today also in crypto. Meaning that even if you're building a product for the address addressing the Asian market, you're not just addressing the market that is in Asia, you're addressing the market of Asians overseas who have become influential, who have more income perhaps, but are also tied to that culture and tied to that understanding.

Uh so you can see this for instance in the NFT market where Asian-Americans, for instance, proportionately the group are higher involved in crypto than perhaps other groups in America. All right. So Asian crypto hotspots, I'll just jump in I won't jump into that. I've already discussed it. It's growing. You should pay attention to it. And um thank you. All right. Thank you. I would just take one question. All right. Thank you for the very interesting presentation. How do you see like the adoption of crypto in in Asia for example when we know that governance there is very tight like from the

government side right like regul regulators there they have a very strict uh grip um control over the people so it always have to be top down rather than bottom up like the rest of the world so our view is that regulation is generally a positive thing I mean obviously there can be very strict regulation versus more flexible shall we say? But the reason why we think it's good is because it makes it legitimate. When you look at what's happening with the US, Ripple case aside, of course, which has been good overall, is that um what the SEC has been doing is destabilizing crypto because they're not willing to put forward a regulation. So that means for most people is a barrier to mass adoption because they're like, is it re legal? Should I do it? I don't

know. Right? But the moment you regulate it, you know, no matter how tight you do it, you are acknowledging that it is real, that it is serious. So we think that is a positive. Then you have to look at the type of regulation that takes place. So for instance in the case of Hong Kong, we think the regulation is very positive because they've now allowed for retail trading for crypto. And that by the way the parameter in which you can get your tokens traded on retail in crypto is it just has to be listed on two major indexes. Right? So it's not a difficult I mean it's not a it's not a hugely difficult parameter. If it gets listed on two major indexes, it means it has certain liquidity, volume, and certain parameters, which means to us, it's the pathway for Hong Kong to allow for retail trading for

crypto for like, you know, dozens, if not hundreds over over time. So, they've got that structure. Japan, as an example, is perhaps the only country in the world that allows for a legal IO that is approved by the JFSA, which is the financial regulator. Again, most people don't know that. You can actually go through application. It's actually a little easier than your classic sort of, you know, reggg offering. uh and then you can list a token and you can raise money from the token um in a legal manner in Japan for instance. So these are all things that happening in this market that people don't know because they're not in there but they've already have those laws and so to us that's actually a positive.

Thank you. [Applause] [Music]