For those of us who have the spirit of adventure, we may have come across John Krakauer’s 1996 book Into The Wild. It tells the story of Christopher McCandless, a man inspired by American philosopher Henry David Thoreau and the mantra of carpe diem, who took a walk into the Alaskan wilderness and never made it back out alive.
Anarchism — an extension of freedom and self-determination, a form of sovereignty —away from the constraints of the state, laws and regulation have from time to time surfaced in the form of figures like Star Wars character Han Solo or Timothy McVeigh (who was responsible for the 1995 bombing of a federal building in Oklahoma that killed 168 people).
In a way, this is analogous to pure crypto. The philosophy that underpins the use claims to help solve the shortcomings of the current financial system that hinders economic freedoms. It clears the marketplaces in the dark webs — and the true believers eschew the transparency and disclosure required to mainstream — as that is precisely anathema to their purpose.
Yes, there are cases in parts of the world where incumbent banks, payment systems and currency controls significantly impede financial inclusion. But as I have argued in this column, the value in the technology of blockchain and its potential applications are best separated from the ascribed intrinsic values of all manner of coins from the animal kingdom.
Irrational exuberance?
A Financial Times editorial on Nov 20 postulated that markets are showing signs of frothing over. Their flashing indicator (while conceding that there is some way risk assets have to run up still), was the string of sponsorship deals struck by crypto firms of late.
Historical parallels were quickly drawn. Fuelled by cheap money from investors enamoured with the concept of “eyeballs”, dot-coms bought 20% of TV advertisements for the Super Bowl on January 2000, three months before the bubble burst; in 2006, investment banking company Lehman Brothers sponsored the OxBridge Boat Race, while AIG paid a record GBP19 million ($34 million) to put its logo on the Manchester United jersey. Both names would be among the biggest casualties of the subprime crisis barely two years later.
This time — as always, it must be different — the cheerleaders chime. Sunny Singapore made it into the headlines when Crypto.com, unlicensed in Singapore but “Singapore based”, paid US$700 million ($958 million) for the renaming rights to the Staples Center, home of the LA Lakers basketball team in Los Angeles. AC Milan and Lazio are similarly sponsored by cryptocurrency exchanges BitMEX (who’s former CEO Arthur Hayes, also a Singapore resident, turned himself in to face US charges) and Binance respectively.
Binance founder Chaopeng Zhang, who spoke at the Bloomberg New Economy Forum in Singapore on Nov 19, did declare that “we want to be regulated”. Whilst Binance.com with operations in Singapore had been put on the Monetary Authority of Singapore (MAS) investor watchlist recently, Binance.sg — a separate entity — is working its way through and if it eventually gets licensed, the irony of agglomeration of global crypto businesses here, whilst retail investors in Singapore are “protected” from themselves by not being “targeted” may smoothen its way over time.
There will be more headlines about how these businesses are creating highly-valuable Web 3.0 jobs here, how Singapore is put on the map globally with a regular stream of swashbuckling stories of wealth creation, sports brands sponsorships or foreign regulatory clampdowns. Thus, it is sometimes a challenge for Joe Public to comprehend where we stand, and where to put their money.
As MAS approved the first clutch of licenses here (local FinTech FOMO Pay started the ball rolling in September) followed by Australian originated Independent Reserve (no, they don’t sell wine) and DDEx (DBS Digital Exchange), I still had a cousin who asked me last week how to recover the access to Gate.io, where her crypto was bought. At least it wasn’t — I hope — a Mt Gox hack moment, but just a memory lapse.
Caveat emptor
As regulations keep up with these platforms mushrooming around the world (excluding countries like China, who have outlawed it), the adoption in Asia is rising — and dare we say — unstoppable. According to Chainanalysis, transaction volume from Central and South Asia was up 706% in the last year.
Separate data points point to the same trend: One in nine Indonesians and 16% of Singaporeans are into cryptocurrency, so it is claimed by GlobalWebIndex and Finder.com respectively. Even the Siam Commercial Bank, the Thai Royal bank, recently paid THB17.85 billion ($740 million) for a 51% stake in local crypto exchange Bitkub Online.
This in essence is a great example of millennial schizophrenia. On the one hand, the purpose-driven “woke generation” is all about climate consciousness. But on the other hand, they seem oblivious to the energy consumed by mining which arguably does not produce anything, but at best perhaps could warm up your living room as winter sets in Europe, provided you can still afford the spikes in energy cost.
What do we then make of a smattering of local listed companies who have waded into the Meta? Malacca property developer Hatten Land’s plan to deploy 1,000 crypto rigs and joint venture with Hydra X to operate “eco-friendly” crypto exchanges —a plausible extension use case of unoccupied real estate — although one wonders if energy prices and the need for cooling in the tropics makes it plausible if not sustainable.
Similarly, VCPlus (formerly a Malaysian miner Anchor Resources from Terengganu), also metamorphosed as it was announced as a blockchain adviser to Thai Tree Roots Entertainment and ECXX (a yet to be fully licensed exchange) to launch a security token to raise “at least US$100 million”, and with a prospective custodial license (also powered by Hydra X) still in the making. Perhaps that could become our local Coinbase!
Interestingly, both deals also involved Hydra X taking equity in the shares of the Catalist-listed companies, as payment for services. Hydra X powers a number of other licensed digital exchanges in Singapore including DDeX. It first came to prominence after it denied it was part of the Loh cousins’ Bellagraph Nova Group, maintaining instead to have only entered “into a joint venture with a related entity”, while its CEO was very briefly an independent director of Axington, a company controlled by the cousins.
OK, boomer!
For old timers, we remember the days when a name changes to “dot-com” could lead to a spike in stock prices. Or during crypto 1.0 and the initial coin offering (ICO) rush in 2019 — before the “first levelling” — stocks popped on announcements of all manner of digital claims.
Now, let’s set aside judgement of the merit of these ventures, but one has to ponder, in this TikTok and Instagram world, gaming is now a core skill transcending the squids in our post pandemic lives as well as something to be built into financial trading platforms.
We may not have played FarmVille or League of Legends, but may have dabbled in penny stock parties with billions of shares issued.
Until one remembers that it’s real money from your own pocket at the table. And as you go on some of these potential wild rides, please remember that you may need to leave the metaverse at some point and actually digest the food you hope it will bring. For those less adventurous, it may be best sticking to the tried and regulated.
Chew Sutat retired from Singapore Exchange (SGX) in July this year. He was senior managing director of SGX, and member of SGX’s executive management team for 14 years. He serves on the board of ADDX and chairs its Listing Committee. Chew was awarded FOW Asia Capital Markets Lifetime Achievement Award this year
Photo: Guarding against more exuberance: US National Guards in front of the soon-to-be-renamed Staples Center in Los Angeles. Singapore-based cryptocurrency trading platform Crypto.com has paid US$700 million ($958 million) for naming rights of the sports arena / Bloomberg
