Walking through Token2049, it was hard to tell that the crypto industry was going through a “winter” phase. The crypto conference held in Singapore in September attracted an unprecedented crowd of 20,000 attendees, filling the island state with an even greater number of blockchain enthusiasts who hopped in and out of the hundreds of side events across the city to avoid the costly ticket of the main event.
Over in the U.S., an ominous cloud was forming as the government’s flurry of actions against crypto titans from FTX and Ripple to Binance and Coinbase continued to chill the industry. The “anti-crypto position” from Washington regulators, coupled with the Federal Reserve’s raising of the federal funds rate and the resulting impact on broader interest rates, has “quite negatively impacted VC investment in the crypto ecosystem,” Kevin Goldstein, senior advisor to crypto investment firm HashKey Capital, told TechCrunch.
Seeking an alternative path to grow, crypto projects and investors have looked past the U.S. towards Asia. “A large number of U.S.-based crypto projects have opened offices, hired local talent and moved people to Asia over the past several years but there is clear evidence many have accelerated their growth initiatives in APAC in the past year as a result of developments in the U.S.,” Goldstein added.
The enthusiasm for Asia is attributed to the region’s growing crypto adoption and favorable policy development. The legalization of retail crypto trading in Hong Kong, for instance, drew a clutch of web3 startups to set up there in the hope of tapping the enormous investor base in mainland China where crypto is banned. Similarly, Singapore’s clarification around stablecoin regulation has been well-received. Circle, the U.S. issuer of the popular stablecoin USDC, had its CEO speak at Token2049 this year.
Paul Veradittakit, a managing partner at crypto venture capital firm Pantera, told TechCrunch that Token2049 this year had the largest gathering of U.S. crypto VCs he had seen at any Asian event.
“Things have changed quite a bit since FTX where there’s been a little bit more scrutiny around regulations in the U.S., while there have been some positive developments [in Asia] around stablecoins, XRP, or ETF possibilities,” said Veradittakit, referring to Ripple’s acquisition of a license in Singapore to offer payment services based on its XRP tokens.
“While FTX hit everybody, I think people in Asia are able to more easily forget that and really see the possibilities of being able to start a company here, being able to get a banking license and actually do things in a way where they don’t fear going to jail. That’s very, very important for entrepreneurs,” he stressed.
Beacon of hope
The 19-hour flight from New York to Singapore was worthwhile for Coco Kee, who was reassured that Asia is becoming an attractive destination for crypto projects seeking users and talent. At the event, the blockchain-focused investor, who runs Kee Global Advisors, met a founder who was in the process of relocating from California to Hong Kong where his company had received the city’s financial support to hire local staff and rent subsidized office space.
“While [crypto] projects’ teams are increasingly distributed with members located globally, projects initiated outside of the U.S. tend to postpone adding U.S. operations, mostly to avoid potential regulatory liabilities,” observed Kee.
Some of the U.S. crypto players that plan to or have started hiring in Asia include Coinbase, Galaxy, Gemini, Paxos, and CMT Digital.
For investors and founders who are still weighing an Asia strategy, the key is to grasp the distinct market opportunities in the culturally and demographically diverse region. Companies in South Korea, for example, have had success incorporating tokenomics into the fan economy. Japan has a wealth of TV and gaming intellectual property that is ripe for NFT adoption. Vietnam gained a reputation for developing blockchain games following the runaway success of Axie Infinity. Singapore and Hong Kong, as prominent financial hubs, have been leading the effort to regulate institutional crypto finance.
Just as with any international expansion efforts, having local investors or partners to help with go-to-market strategies is crucial. Thankfully, there’s no shortage of Asian investors interested in the new asset class.
“The thing to look for is just that local expertise for how to reach the users,” said Jordi Alexander, chief investment officer at crypto investment firm Selini Capital. “American or Western projects don’t really know how to find access to those [Asian] communities because there are language barriers. There are different social media. For example, they have these huge Telegram groups, so it’s a very different way to reach people. [Western firms] don’t necessarily have those. Having local investors to give them expertise [is important].”