Southeast Asia's Crypto Frenzy

The bankruptcy of the Bahamas-registered FTX cryptocurrency exchange has had a snowball effect on the whole industry.

Asian investors are unlikely to be spared, as the chilly wind cools the global crypto-mania. Robert Bociaga reports on Asia's obsession  with these unregulated financial instruments

Founded in 2018 by Sam Bankman-Fried, the FTX Exchange was a leading centralised cryptocurrency exchange specializing in derivatives and leveraged products.

Now, it is suddenly gone, exposing yawning gaps in regulatory oversight, and leaving a lot of people seriously out of pocket.

From its peak value at $32 billion, the platform has now $8 billion of liabilities it can't pay, and as many as 1 million creditors.

Since applying for bankruptcy, the various cryptocurrencies dropped in value, but quickly stabilised and began to attract new capital from speculators.

“This is the daily food for crypto activists, especially investors or traders,” says Mirza Richie, a trader from Jakarta who has been active on the market since early 2017.

“Maybe new investors would be surprised, but for those who have been living from crypto for a long time something like this has happened many times in the past few years,” he adds.

Traders like Mirza are attracted by the high volatility of the cryptocurrencies, and their low investment threshold. “Not everyone has enough capital, but in crypto you have seen people investing a few dollars and making hundreds of thousands or even millions of dollars,” he says.

Cryptocurrency traders in Singapore/ photo R Bociaga

Cryptocurrencies are defined as any type of digital or virtual currency that employs encryption to safeguard transactions. They lack a central issuing or regulating body and instead rely on a decentralised system to record transactions and issue new units. This has caused headaches for governments, that worry about the personal savings of their people, and the possibility of illicit activities receiving funding from unknown sources.

Bitcoin was the first cryptocurrency invented, and it is still the most well-known today. Much of the interest in cryptocurrencies is purely speculative. China banned this and other cryptos in 2021, while Western countries have taken a sit-and-wait approach.

But crypto trading is not for the faint-hearted as the currencies are highly volatile.   

“If you are too afraid to take advantage of opportunities and read the crypto market situation then you will be left behind,” Mirza Richie says. “The point is to use a healthy, mature mind, and manage your risk of loss according to your psychology.”

In his country, cryptocurrencies have become very popular, Mirza Richie says, “even our current government often discusses the subject of establishing applicable laws. Crypto is like a hurricane, you can't stop it,” he adds.

However, when it was initially introduced in 2008, Bitcoin was meant to be a medium for daily transactions, allowing users to purchase everything from a cup of coffee to a computer or even large-ticket things such as real estate.

That hasn't happened yet, and while the number of institutions adopting cryptocurrencies is increasing, significant transactions involving them are uncommon.

Nonetheless, several tech corporations accepted now cryptocurrency, while luxury goods and car manufacturers followed suit.

Against this background, cryptocurrency crime is on the rise, leaving the holders of cryptos with a promise for enormous profits. 

SOUTH-EAST ASIA LEADS THE WORLD

According to Chainalysis' newest "Geography of Cryptocurrency" report, Vietnam leads the globe in grassroots cryptocurrency usage. The country was one of three Southeast Asian nations at the top of the 2022 list, having led the ratings for the second year in a row.

The list is once again dominated by nations classified as "lower middle income" by the World Bank, such as Vietnam, the Philippines, Ukraine, India, Pakistan, and Thailand.

In general, these are economies where the national currency is weak and services for moving or receiving cash across borders are few.

According to the research, users in these nations "rely on cryptocurrencies to transmit remittances, safeguard their funds in times of fiat currency instability, and satisfy other financial demands particular to their economy."

Apart from that, the region's growth is driven by play-to-earn games.

"EthVietnam" is the first blockchain event series with the participation of global blockchain and cryptocurrency organisations/ photo R Bociaga

Axie Infinity, a digital pet game in which players raise, trade, and fight virtual creatures for in-game assets became extremely popular, particularly in the Philippines, where some players earned significantly more than the country's average salary.

The most successful gamers utilised their gaming gains to pay for their children's school fees and even to purchase property.

However, Axie Infinity's popularity plummeted in March after North Korean hackers stole $625 million in assets.

According to the statistics, the number of active players in September was less than one-third of what it was during the game's high in January.

Away from that, in China, decentralised cryptocurrencies do not fit the ruling party’s strategy to control its people.

Last year, the government launched a crackdown on crypto-mining, which is an energy-intensive process aimed at generating new coins in cryptocurrencies. While China now focuses on developing its official digital coin that will harness the advantages of the technology on its own terms, the move has opened up the market to other competitors in the region.  

Debt-laden Laos wants to profit from digital currency mining, and has authorised the mining and trading of cryptocurrencies. Their success in the sector remains to be seen.

MYANMAR’S FIGHT GOES ON

“November was a bad week for crypto as a whole,” says Myo Nzo, a 25-year-old Burmese girl from Yangon. “But personally, I had a couple of really reaffirming experiences with crypto”.

Nzo was able to send funds for food to her cousin who fights the military junta as a rebel in the jungle. 

In post-coup Myanmar, people's reliance on banking systems has been reduced, pushing citizens to use digital currency as an alternative payment mode.

The idea is straightforward: avoid traditional banking networks controlled by Myanmar's military government, which has dominated the country since a coup in February 2021.

Shortly after receiving their cryptocurrency, Nzo's cousin was able to buy food for his small rebel unit. / Photo R Bociaga

Since then, Myanmar's economy has been in a very poor shape, while the World Bank predicted that it would shrink by 18 percent this year.

As a result, the Myanmar kyat has lost 60 percent of its value as of September 2021. 

As support for the official currency ebbed away, the opposition National Unity Government (NUG), Myanmar's government-in-exile, launched its own cryptocurrency, the Digital Myanmar Kyat, the DMMK.

Analysts say Myanmar's crypto revolution is only getting started in its tug-of-war between repression and resistance.

Cryptos will be crucial in Myanmar's political transition, determining whether the nation will be able to restore democracy or sink further into dictatorship.

How the trust in the digital Myanmar currency is built will be critical to funding and winning the fight against the military junta.  

-Asia Media Centre