The Evolving Asian Crypto Landscape: Regional Overview and Outlook - TOKEN2049 Singapore 2023

thank you guys for being here um it's a pan of with a lot of friends um Odin knew and some of them I actually never met in person but had heard a lot of good things um so today we are having this panel um evolving Asian crypto landscape Regional overview and Outlook and um next to me is Calvin KO the co-founder and CIO of Spartan capital and Jason Kam founder of folius Ventures and Sierra Sun founder and managing partner of c squared Adventures how about start with the round adventure of yourself sure um hi everyone my name is Calvin KO I am the co-founder of Spartan group and at Spartan we have in the crypto space investing for the last six years and we have several lines of business we have our investment management business which consists of three funds we have a long short fundamental crypto hedge fund um we also have two Venture funds including a fund that's focused on decentralized finance as well as a fund that's focused on gaming in a metabus and we're still actively investing out of these funds uh despite the market environment that we are in because we're in this for the Long Haul and we're here uh building with everybody in the ecosystem the other piece of uh Spartan Group which is also very important is our advisory business where we are the top three advisor globally we work with many of the top Founders in crypto to help them raise Capital do M A as well as do restructuring so think of us as an investment bank but serving predominantly crypto companies right and in the past we have worked with some illustrious projects such as block stack where we help them raise Capital back in 2019 we also helped the team at Solana to raise one of the earlier rounds during the last bear Market which then allowed them to continue building also helped the guys from Dapper Labs raise Capital when they were launching the flow blockchain but they had very few Believers at that point and there are many other deals that we've been involved with over um the past few years I mean the last piece of Spartan is Spartan Labs which is our very own Venture Studio as well as incubator where we work with many of these startups that are still ideating um to co-bill with them and smiling Labs will be launching some of their products in the coming months and we will help hopefully Advance the industry going forward thank you Jason please yes hi I'm Jason I'm the founder of fully Adventures we started off two years ago and actually before we started the firm we asked Kelvin Forest advice on on setup and many other things I think we are a slightly different in three ways you know we tend to focus around APAC Founders and APAC projects we spent a lot of time looking for folks who are coming out from Shanghai from Shenzhen and sort of building businesses within web free I think most of our backed startups came from this region as part one uh part two is that we're a hybrid structure you know we invest in public and private Investments and on the private side typically we cut a half a million to four million dollar checks predominantly in C and 360 startups so very early stage and then lastly I would say we are a bit more business model oriented versus Tech oriented and that has led us uh well first of all a good place to be in Asia and secondly to a lot of centralized exchanges applications SAS businesses gaming products and so on and so forth many know us but as the lead investor in stepan but we have also done other projects such as scroll such as dbank and many games that you'll probably see coming up in the next six months and Sierra hi everyone I'm Sierra Sun founder and managing partner of Cisco inventors we are a early stage web3 investment firm we just actually started last year we officially launched in Singapore during token 2049 last year and it's our first year anniversary here very happy to celebrate with uh line up with my really good friends here and we aim to provide not just Capital but also operational expertise to the founders that we like and we help them shape their DNA and help them with the cryptos out of the things and prior to fund c-square Ventures I was the VP of hobby group so I had sub listing investment Global markets retail grows and institutional business work will be for a few years and joined crypto in 2017 of all time prior to that I was doing traditional Finance Management Consulting at BCG in New York and I actually got into crypto because I was still doing liquidation for Lehman Brother in 2013 and found out about the BDC web paper so we're very glad to be here and talk about my fairy topic Asian crypto landscape thank you all and my name is Mabel Jang I'm the chief remedy officer at fine Satoshi lab which is the mother company of steppen the web3 fitness app that many of you may have known and more the non-custodial multi-chang anti-marketplace as well as the upcoming strategy game called gas hero so I'm very excited to have this conversation the first question I would like to ask all of you obviously I think crypto is all Global you invest in global primary Market but a lot of the focus since like you guys are all based in Asia has been the Asian primary Market what has been the trends and the observation that you had with the regional with the founder that's based here and also how is your fund being adapting to these observations and trends maybe let's start with Kelvin oh sure so spawn group primarily has its base here in Asia so we have a big team here in Singapore itself but personally myself and many of the members of the investment team are in Hong Kong and we also have other members scattered around the region uh but as an organization we invest globally um and we also work with Founders on a global basis on the Capital Market side so our focus is global um but obviously being in this part of the world we try to um also be active in terms of supporting the founders that are here and one of the things that I think a lot of Asian Founders struggle with is number one language number two understanding you know the Western culture and how to approach VCS for instance and thirdly they generally don't get enough visibility compared to some of the other projects in the US so oftentimes we work with a wide network of Partners around the world other VCS for instance where we introduce the portfolio companies we invest in in this part of the world to them right and we help the founders craft the message to um I know so that they can better connect with the other investors which then helps them to fundraise similarly because of this reciprocal approach our partners in the US and Europe will also then you know direct deal flow to us so that's you know one observation the second observation I would say is I think having invested in a space over the last six years we've seen a lot of strong infrastructure projects but predominantly those have originated from Europe or the US in Asia we tend to see less infrastructure or successful infrastructure projects but at the application layer I think that is quite different right we've seen some strong D5 projects being launched out of Asia and in a gaming space particularly I think there will be a lot of strong projects coming out of places like China Japan as well as Korea because you know those places already have an existing ecosystem they have very strong ipn content um and we're spending more time you know looking at those projects in Asia yeah I wanna I wanna Echo kelvin's point which is uh English um I think a lot of the founders we talked to um the joke the joke I give is that of the deals we've done like the three we've done recently two of the founders were divorced like recently and they are now a free man to like explore crazy stuff um English is a problem for a lot of them not only because most of them have a background of mostly kind of building within Chinese web 2 businesses but also they sort of never delved their products never delved out of China you know they were always competing against each other in China so I think a lot of times we look for Founders that have international background maybe they study in the states or they worked in Uber or something so to know how things should look outside of the states but also have international growth experience uh and once they have that experience you know I think it's much easier to build their product for let's say southeast Asia or for the rest of the world and we want to make sure they have that before we even back them and when they do you oftentimes see them having you know almost ruthless practices them when it comes to paying Solutions not very decentralized oftentimes don't really care about Optics so and sort of where we come in is like well actually yes you are building a consumer product uh you probably should be aware that within web free a lot of things are financialized and for things to be financialized there's expectations on a lot of things so there's a bit of legitimacy issue that you have to really think about when communicating with the community or even kind of when you think about building a product so so I think where we come in is sort of really giving them the bridge of how do you sort of do this properly almost a bit of investment relations uh guidance and sort of helping them avoiding the pitfalls in going through this journey of you know leaving Shanghai and Shenzhen and moving to Singapore Hong Kong and expanding in the region I think that would probably be the biggest value yet so I do agree for a lot of the Asia Founders Going Global is one of the biggest challenge right so back at exchange it was really hard for us to onboard especially Western customers because we are lack of the knowledge of understanding their trading Behavior you know tailored a product for them UI ux but I think is uh reversely speaking it's the same thing right for Western customers really get Mass adoption of Asia users it's really hard for them too so it actually worked quite well in the last bull market for the exchanges and then a lot of the applications for example the users are more Asia focused anyways and then they're more you know adapted to technology itself such as you know China they're like so used to F2 applications already and they they trade by themselves it's not like you know compared to more established economies like um like the states or Europe they hire a financial advisor to to help them with manage their assets so we see a lot of buying power from both China and you know chinese-speaking countries overall and also Korea and I think on the on the other side for Chinese Founders one advantage we see is that they really understand how to operate users in detail and we see successful Mass adoption of applications happen in Asia that led the way in web 2 such as tencent WeChat Tick Tock it was all just Asia Founders and we see that happen too in web3 that's why a lot of the exchange Founders are all Asians right like Asia backgrounds and very successful applications like Stefan black axi they're all Asia Founders as well so that's why we're very long Asia in terms of investment in testicles especially because I think the next bull market is going to come with Max adoption actually happens and then I think in terms of talent acquisition Asia is also happening very fast as well giving the regular tree landscape has been booming very very fast for Asia you know now Hong Kong is giving a retail exchange license classified nft as a commodity they're approving ETF and then Japan and Korea as one of the leading markets they also approved exchange license years ago so they they are most they're one of the most active markets in the space so that's actually as a fundamental fundamental and Foundation to actually acquire very good talents from traditional markets I think Asia also has the edge thank you all um I wanted to follow up on what Sierra mentioned about you know a lot of the exchange Founders were Asian obviously and then we also know there's like a huge Dynamic change in terms of um I think back in 2017 or even earlier we can kind of say like China or generally Asia has been dominant in mining industry right and also like we've seen a lot of the exchanges coming up from China so how are you given your past experience I'm sure you're very familiar with this history um can you maybe share with our audience about the change of this history and how you're seeing the power Dynamic changing now towards for mining um for mining for exchanges and all of these things that you know previously Asian has been dominant about yeah so uh two separate questions so let me talk about exchange first so my view on the exchange landscape right now is that centralized exchange non-regulated ones market share for them is at Peak their market share would just be these crazy scenes today and I said it last year actually after FTX happened um I think it's absolutely Peak for the market share of central exchanges that's not regulated and whoever is going to take their market share is going to be regulated once and then decentralize exchanges does have a very good audible experiences and UI ux that can onboard and facilitate institutions to trade with good liquidity so that's why we backed orderly that's um order book infrastructure cross chain and I think that's going to be the future for exchange landscape and hopefully that application will come fast and can onboard really good users not just institutions but also retail you know get them to onboard into F3 that's a Gateway exchange trading is the most used applications anyways in crypto um and given that I think Chinese Founders or Asia Founders overall still have the edge because that's still a very in detailed exchange businesses like in detailed operational skill sets they understand the user's Behavior they understand how to run all of the campaigns and also serve them with 24-hour API support customer service and I think that's uh that's the key there and then for mining we know in 2021 May China shutdown mining business so all of a sudden 51 of mining power in China just is gone and then slowly it's very painful for all of the mining Founders they have to migrate all of their business to outside of China to different countries around the world and that's been a huge Challenge and I think that's also why Asia has been losing a lot of power for actually setting the price for Bitcoin is not just because of exchange but also because all of the margin coins virgin coin mined are now you know moved away I think one of the other challenge for mining right now is uh how to be friendly to the environment Green University environment overall but still mining is a is a key and it's a very important aspect in our business and I'm very curious to see how that last game is going to change in the next few years thank you and um I want to follow up with Jason on something separate not on the previous topic so you guys invested quite a bit in application layer and you've thought a lot about user onboarding um in terms of like the game design as well as like maybe Fiat and also stable coins and a lot of other things can you maybe share some of the insights that you've been studying through all of these portfolio that you've invested in about how we can really ignite or get the Next Generation or next wave of mass adoption into the industry okay uh that's a very loaded question right um because there are two parts is that what are the pain points and what would a good idea your product look like uh when it has web3 features enabled um I might answer the second question first which is uh what would the web 3 features kind of look like and my view had been that there needs to be sort of three things in there one is that while it probably needs to have a really strong usage of stable coins in one way or another you know there are certain grayer use cases that you can't use a Fiat US dollar rail so usdc usdt probably necessary um I think for a lot of entertainment applications the cost to get to critical scale and network effect has been just astronomical when it comes to cash cost so as much as people throw shade at the recursive way of growing through what three as experienced by accident stepin um I thought giving away sort of network economies to the folks that make the network successful it's a pretty good way of not spending any cash while getting to certain you know sizable Dau account um the second part and the third piece is you know it probably wants to have a deep enough economy that the tick rate on it is sustainable for supporting the recursive way of growth so I I think that's what it looked like and it's sort of when you put that into an application there are only certain types of applications that could be viable whether it's extremely high R proof guess your uh extremely high RP SLG game like gas hero it could be a you know game that everybody likes like shooters or MOBA it could be a fitness app or it could be something like a browser but I think the barrier to that point uh it's just really painful to play with the account it's really hard to get dollars in and dollars out because apple is not really that supportive and uh nobody wants to pay a gas fee every time there's a transaction so to the extent that we can have vendors that seamlessly aggregate via on off-ram channels to the extent that we can have a layer one layer two or any solution that completely abstracts away the gas fee or it can if we can have a service provider that just you know makes the account more uh like a web 2 wallet I think these pain points would just go away and I think the conversion from onboarding could drop from point one percent today for most what three games to maybe 10 and all of a sudden the cash cost starts making sense um we probably see that in the next 24 months hopefully can I also had a few points today yeah so I think it's still difficult in general right as Jason mentioned to onboard users into crypto or crypto games applications and part of that is the on-ramp issue that Jason talked about I'm hopeful that that's gonna start changing because usdc is obviously um uh regulated right and increasingly starting to permeate across more different channels um recently they announced a big expansion into South America we're starting to see visa for instance also announced you know settlement in usdc on the ethereum blockchain and the Solana blockchain so over time more people should have usdc in their wallet right it doesn't matter what wallet they have it could be a metamask wallet it could be an in-app wallet it could be on a telegram wallet but most people should have usdc in their wallet at some point and once you have the usdc and you can easily move that usdc into a new application then that sort of speeds up the onboarding process um the second point I want to make is notwithstanding the still somewhat cumbersome onboarding experience you know if you look at the applications that we have today and compare with what we had say four years ago you know I think some of you who have been in the space for a few years would remember some of the early applications like ether Delta for instance where it was you know even if you're the most Ardent D5 fanatic you know you wouldn't trade on it right because there was no liquidity the transactions took forever and the user interface was just terrible right but today you have things like unit Swap and you have you know dydx and other applications um that frankly from a UI ux perspective is much much better gas fees are lower and you know moving money around is a lot faster right so the experience of a four-year time frame is really Leaps and Bounds you know over what it was just a few years ago and obviously that will continue the the improve and then the last point I I should also mention is you know at this point about sort of incentivizing uh the the early users of the application you know I think that's um not necessarily a bad thing right because um I mean if you think about and it's not a New Concept either right if you think about um Uber right which we all use today um when Uber first started you know they were aggressively giving out rebates to to onboard drivers and to onboard users right but they make it a no-brainer for anybody to actually use the app and uh you know even if you are not an existing customer the fact that you're paying only half the price you appear on a taxi just made it more compelling for people to test it out right and they kept giving these subsidies for a long long time and all of that funded by you know their VC backers right but what what it meant was that they were able to achieve this hockey stick growth um and to be able to onboard you know billions of users over time right and and then over time they sort of took away those subsidies but it sort of become second nature to using Uber um also because it's a better product that they were able to retain those customers right so think of these airdrops that these projects are giving out these web3 projects as a way to entice users to experiment with this app right and over time sort of achieve the same sort of growth hockey stick that you know Uber lived in its earliest days thank you um I want to Pivot a little bit talk about regulatory environment because I think um back in the day when I was an investor and even like up till today I got one of the most asked questions to me was oh I heard Hong Kong become like you know very friendly to crypto I mean like a few of you are actually wrestling in Hong Kong so how is actually that so I'm curious what's your take right now in terms of the general regulatory environment in Asia maybe we can start with Kelvin yeah sure so the last six months since Hong Kong announced its uh opening and sort of rolled out red carpet towards the crypto industry I've had multiple requests from you know friends and funds and and project founders all across the world you know wanting to basically get up to speed with what's going on in Hong Kong um I think Hong Kong really is opening up um to crypto and uh I am personally connected with um uh the people that are making these rules and regulations um and they really want to turn Hong Kong into the fintech and crypto Hub of Asia right so that ambition is very clear um and they are providing or they are committed to providing a very clear regulatory framework um for exchanges to be able to offer products to users um and for liquidity providers market makers funds to be able to operate in a legal uh uh in a you know legal way and I think that's a good thing obviously it takes time for for these regulations to to come but I think it opens the door the door to institutional participation in a way that you know hasn't happened before in the crypto industry right I think Singapore is also quite similar in terms of this approach and we're starting to see places like Korea as well as Japan um you know starting to push the envelope that way as well and Europe is also largely handing that right in the same direction right the only place where it is still very hostile to crypto Founders and investors in general is the US right but obviously you know being investors in this part of world uh you know it's a great thing for us right and it just makes our lives easier as investors and it also makes the life of Founders a lot easier when it comes to things like raising Capital now I have a background in finance I spent 20 years in traditional Finance before I came into the crypto space and so that regulatory Clarity is very good for the future of the industry right because it allows the industry to be able to continue to develop and grow and frankly the the industry standards are high but um once people are aware of what these industry standards are um it really isn't that difficult to comply you know so what I tell a lot of people that are coming into the space is that don't be afraid of regulations right and embrace regulations because that's the only way that the industry is going to grow over time I thought it was pretty safe but anything wanted to add feel I I already uh give kind of a summary of what's happening in Hong Kong right so the retail exchange license where hash key already got it and then nft is classified as a commodity so you don't technically need a license it's like selling selling a book selling flowers right and then they're approving ETF entp Hong Kong has its Edge because it's connected to Shenzhen that's to Jason swine the best developers are there there are the tencent developers while we're developers you know there is a kind of zero zero seven working my side in ancient gen right people are very very talented and hardworking and capitalized I think it's stuff it's the foundation that can actually onboard institutions and uh I think the last program was because institutions actually got on board I hope you we saw institutional trading volume percentage grow very fastly from only about 17 to 75 percent in 18 months and that's how much the customer customer structure has changed and that strong of buying power and tvl in the industry can actually push for a bone Market to happen and one more country I want to mention is Vietnam is also a very very interesting Market it has been um you know across all all big exchanges top five market in terms of users um ftts and Dau for for all of the big exchanges and it is the top three market for metamask for defy users as well so Vietnam is very interesting they have one of the biggest wallet 20.98 and they're now working very closely with tomochan they have really good Builders and I think that's a very interesting Market as well I think Vietnam is also working on the regulatory framework for crypto I think once that happens it's going to be another very strong raising star for Asia and crypto Sierra is doing a very good job even on the stage she's showing for her portfolio it's portfolio now for this one but not forces so one other point to add also is you know I think the other thing about regulation is that it holds Founders accountable right because um you know in today's environment where frankly it's a wild west right people can sort of build an application and you know if they raise a lot of money and if the founders are dishonest they can sort of rock pool their users right and we have seen a lot of these things you know happen in crypto and that sort of makes crypto a bad experience for users that you know put their money into these applications and they're hoping to try it out and then they lose you know tens hundreds you know thousands of dollars right so once you have regulations then these these Founders um you know it's harder for them to to cool off scams like that regulations will also mean that you know it would be harder for you know these hackers also to to um uh constantly um attack these uh these applications and protocols um or at least the the law enforcement will go after them and as we have seen you know recently so it gives users and uses the confidence to actually interact with these apps right because in in the world of web 2 you know when you download an app from from Apple or Google Play Store you don't expect that you will you know you you experience something like that right and so that hopefully all the time will also bring new users into the ecosystem cool another hardly discussed topic was about I think a lot of you probably observed the L1 success especially the ones from Western Market come to Asia to look for applications right they go to Japan they go to Korea they go to Shanghai like back in 2017 or whatever like it's kind of been like a one set you have to go through the whole thing obviously we also have a lot of D5 protocols not just the social entertainment applications that are being developed in Asia so what has been your observation in terms of the kind of L1 blockchain or maybe some Roll-Ups right like the L2 that the application layers has been looking for in terms of like what they want to optimize for maybe start with Sierra sorry okay let's Circle you're looking at me but you pointed her I'm looking at him and then uh well a fair disclosure we invested in Scrolls so like I was going to show it as a ideal it's okay sorry it's okay I I think I think one of the biggest challenges for um when I think about the apps with real production value like def sunk five million dollars already into the product they're gonna sink 15 million dollars more and they're now trying to put actual assets from the product onto a a chain and I think the reluctance uh we hear is um we're not going to put it on something that's only been live for a month like for example like oh like polygon has been live for however many years we we know it's sometimes problematic at places but we know kind of where the potholes are so we're still going to do it versus yeah like this is a shinier optimistic roll up by Caldera great but I just don't know how it's going to break and uh what about all the infrastructure of Fiat on off ram and so on and so forth so I think the ruthless practice pragmatism for the Asian devs with production value actually really show through here which is kind of like well let's just pick one that works and kind of work with them really good customer support and if it's less you know decentralized so be it because we can migrate it to somewhere else that's more stable and decentralize later on um that's kind of the observation you're laughing I guess it's because like you're speaking my mind yeah I guess and we also think about where are the uscc and usct obviously yeah yeah I'm done okay um Sierra yeah so we are Chang Gnostic fund a lot of the layer ones almost all of them were my past portfolio and we listed them and there are some of them are my office and we don't like favor one or the other but I can more generally speaking I think when teams looking for a chain to deploy on build bias um first of all you know when you think about a technology Implement implementation power and ability to actually Implement and make things happen right and you know to to work studentsly with the engineering team and I think secondly more importantly sometimes is to be able to build a various healthy and stable ecosystem so it's a it's about uniting the community power and really provide Hands-On help just like uh species right we also provide all the helps that we can including filling our projects on stage you know if uh ecosystem and a chain can do that really Hands-On support for for the developers and I think that's the key for them to choose who to work with um and I want to also talk about uh one thing that you know we were talking about offstage is about D.A right I think there are still fundamental problems with the current da Solutions right now that the data Integrity cannot really be verified or or we're backed by the current storage solution right so the ability to do instant audit on a data and to um to improve on the story storage layer for all of the different layer one alerts who I think is is the key for the industry to work on for the future problem and scroll working on that so it's good thanks yeah rising star from Asia showing someone else's portfolio nice job again please go ahead yeah so I have a few perspective the first is that obviously we saw a big sort of wave of investment in these layer ones right back in 2016 17 18 and then that investment shifted to the application layer right where we saw in 2020 after D5 summer happened a lot of capital came into bill and the these D5 protocols right and in 2021 when x infinity happened Plato earn so it became a big thing we saw a lot of capital start to fund these gaming applications right and now we're sort of back to you know building the infrastructure again I think inherent in all of this and why we're seeing this trend is the fact that number one you know even with all of the new layer 1 chains that launched back in you know 2020 2021 um when we had all of these applications start launching um all of these new layer ones themselves also experience an increase in gas price right and we start to experience some infrastructure constraints and we have only barely scratched the surface in terms of what kind of applications can be built on the blockchain right so we have defy now we have gaming we're starting to see social uh in identity but there's going to be many many other different types of applications that will come you know in the years ahead so this infrastructure Bill ultimately is going to be needed if we're going to onboard all of these applications and we're going to onboard you know hundreds of millions of of users you know into into the onto the blockchain so that's Point number one point number two is that we have had as I mentioned the last two years a lot of money going into into infrastructure and frankly I think there's a bit of froth in that segment of the market on the other hand at the application layer companies and startups are having trouble raising capital and many of them are running our Runway if they had race Capital you know two to three years ago right so at some point I expect that um some somebody will have a breakthrough application that will then excite the industry just like you know what happened with D5 summer and what happened you know with vaccine fairly and then the capital will rotate you know back to the application layer to fund the growth that is to come right and not to mention some of the other new verticals you know that will also emerge and then the third observation I'll say is that um for the first time you know for applications that um are actually getting user traction um they now have a choice in terms of which networks they want to deploy on right and so the bargaining power at some point will swing to the application layer as well um and with you know all of that Network you know being interconnected with uh you know different messaging protocols that allows assets to be moved between one blockchain to another you know I think we will have um really a you know a more robust and more well-connected interconnected web which eventually then become obfuscated right where the end users will come in and they will not have to be worried on what they want to have to worry about what chain the application is built on right and hopefully you know four years from now or three years from now when we are having a conference people will not be talking about you know layer one chains anymore we're talking about applications and uses and growth and so on and so forth absolutely um a panel back question I would just like you guys to have a brief short answer given the time limit um what has been one or a few the most underrated asia-based thesis that you've been having let's start with Sierra an FC Marketplace mining business what did you say an ft Marketplace oh yep oh she said what I want to say but enemy oh really yeah yeah yeah can you elaborate a little bit like maybe with one or two sentences yeah so back to my point about running changes nft Marketplace is also about in detail user operations and also selecting the best assets for your users to trade and protect them and also have the most stabilized uh system and a security level and that's all the things that Asia already had in the past few years 10 years in crypto and I'm just very very surprised to see there isn't one killing and leading in a few Marketplace from Asia yet so I think that's definitely going to happen yeah it's gonna happen and I think the nfts will look differently than pfps I think game assets you know different type of Cs go skin things I it'll look different but I think an Asian is gonna when that wave happens some Asia is going to probably figure it out how about you Kevin yeah underreated yeah I would agree lastly you know I'm a big nft collector and very bullish about the long-term applications of nfts and how big that you know the collector base eventually will be and the different types of applications that will be used in thank you all very much and thank you all for listening