Asia has ‘crypto groove’ – and Korea’s mom and pop shops are helping lead the way
Asia’s blockchain and cryptocurrency projects have more vitality than other regions, says the chairman of the Cardano Foundation. But he also notes the variations within the region. How does Hong Kong differ from Vietnam and Singapore?
Asia's blockchain and cryptocurrency projects have more vitality than other regions, according to Cardano Foundation Chairperson Nathan Kaiser.
"In Asia, you do have what I call a "groove," it's a bit of a crypto groove in Asia that we're lacking in some of the places. We see that happening here in Hong Kong. There's a groove, there's a willingness to do [things]. There's very highly motivated people," said Kaiser.
The Switzerland-based Cardano Foundation is an independent organization tasked to oversee and promote the development of Cardano. Cardano is a third-generation blockchain ecosystem that uses smart contracts operating with its ADA cryptocurrency.
- "When it comes to adoption, Korea is leading with all these mom and pop stores and these solutions and POS that they can roll out to a lot more stores than other places are willing to accept. What's not clear yet with regard to Korea is how much can we learn from Korea and how much will come out of Korea to the rest of the world. So Korea is in that sense leading, but where does it go from here?"
- "Next to Korea, Vietnam is a sweet spot. You need young people who are open to using other apps, other currencies, all the technology you need. You need the fast Internet, you need an open legal framework and you need that mobile phone penetration. I think Vietnam has that."
- "The issue is, and we see it in Africa and we see it in Southeast Asia, that if the infrastructure is still developing — internet penetration, latency and so on — then the battle for a single blockchain project is too big. You have to pick your battles. If in the blockchain space we go too much into areas where the infrastructure is not ready, we're picking the wrong battles."
- "So what Singapore did is accept the best practice. Do nothing, wait, identify the obstacle and then you grab one after the other instead of creating these monster laws which are very hard to draft for a technology where even we in this space don't know where it's going to go. So don't legislate too fast, too quick, too much, but just remove particular objects or obstacles."
Cardano's ADA is currently ranked 12 among cryptocurrencies, with a market cap of over $1.26 billion according to digital currency tracker CoinMarketCap.
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Citing Singapore's removal of its Goods and Services Tax for cryptocurrency payments, Kaiser said Singapore adopted the best practice for blockchain-related regulations.
"Do nothing, wait, identify the obstacle and then you grab one after the other instead of creating these monster laws which are very hard to draft for a technology where even we in this space don't know where it's going to go. So don't legislate too fast, too quick, too much, but just remove particular objects or obstacles," said Kaiser.
Forkast.News Editor-in-Chief Angie Lau sat down with Kaiser during the 2019 SPOT conference in Hong Kong to discuss how Asian countries are paving the way for the wider adoption of blockchain and cryptocurrencies.
Listen to the Podcast
Angie Lau: Welcome to Word on the Block. This is the video podcast that focuses on topics we cover right here on Forkast.News. We're here at the SPOT conference in Hong Kong, where we're going to take the opportunity to do a deeper dive into blockchain in Asia.
Sitting next to me is Nathan Kaiser. He's an attorney in this space. He is very prolific, has been in blockchain since 2011 and has helped advise international clients from Zurich to Berlin, Hong Kong and Taipei, and really focusing on the greater China area as well. So, Nathan, welcome. You're also the chairperson of the Cardano Foundation.
Nathan Kaiser: That's right. Thanks for having me here, it's great to be here.
Lau: 2011, that was the year it all changed for you. How did you get into it?
Kaiser: I read an article or in Wired on Bitcoin, and once I read that, I was like, 'wait a second, let me think about it' and I've never left.
Lau: Where did you see it in the context of Asia?
Kaiser: Back then in Asia there was not much anywhere, but I thought there was so much to do, and the fragmented countries in Asia were kind of the practicing field for a decentralized currency. So I saw real opportunities in any country in Asia.
Lau: Fast forward to 2019, where we are really seeing Asia becoming the pinnacle of a lot of where talent is migrating because of the jurisdictional difficulties perhaps in the U.S. and even in Europe. Talk about that a little bit. What's your experience been so far?
Kaiser: Well, what's happening is that you have all these people and these talents, as you say, and I'm not even sure if there's a migration of talent specifically because the talent is already here. So let's talk about China, where blockchain is under more pressure. Cryptocurrencies are not openly permitted, and you still have a lot of talent, and you see the same in Hong Kong. We have the finance people, you have the bankers and so on. Part of them realize that this is the next thing, decentralized finance is not going to go away. So the talent is actually already here, so what's actually migrating is more the projects and less the talents themselves.
Lau: What are you seeing? What are the kind of project migrations that are happening in Asia, and where are they coming from?
Kaiser: I think there's two things. One is existing projects who say they've been around for a while, a couple years in Bitcoin — that's like 20 years, but it's only been two — and they say, 'we can do more in Asia,' and there's a flight from jurisdictions that are not so welcoming.
Lau: Where are those jurisdictions?
Kaiser: Well, obviously the U.S., and I'm not giving a value judgment saying that's bad. It is what it is. The right way of regulating cryptocurrencies and blockchain projects is not an easy thing. So the single project will make a decision and say, 'this is getting too tight' or 'this does not allow us to grow,' so they go somewhere else or they expand somewhere else. What I'm saying is not that they are actually leaving the U.S., but they're expanding somewhere else.
Lau: Is that necessarily the smartest thing to do to either leave or expand elsewhere? Because if you take a look at what's trend-lining here in the industry, it is; if you can't meet the highest standards of regulation, then maybe you shouldn't be in the business.
Kaiser: I think it's a complex and complicated discussion, so there's no easy answer to that. But one thing is, water flows down, so I'm not saying it is a race to the bottom. There is both a race to the bottom and a race to the top when it comes to regulatory compliance. But it needs to be the right pick, so it's a much more complex decision. What do I want? What is the space I'm in? And then some companies will go down and some companies go up. But if you want to expand, and the regulation is too dense, then you will say 'we'll do this somewhere else, and this we keep here' and you start splitting up the project.
So that's actually what's happening — the decentralization that we see on a technological basis is also happening for companies. And that's maybe sort of a best practice that you say 'we do this there' with different licenses in different jurisdictions and different teams in different jurisdictions for different markets.
Lau: That's a very interesting nuance to how this industry is evolving. How is Asia taking advantage of that?
Kaiser: The truth is, when you say Asia you always have many countries. It's between China who are not liberal and then Singapore which is very liberal. So in Asia, you do have what I call a "groove," it's a bit of a crypto groove in Asia that we're lacking in some of the places. We see that happening here in Hong Kong. There's a groove, there's a willingness to do [things]. There's very highly motivated people. That's what happens in Asia, you say 'I got some friends in Singapore, let's activate them, I got some friends in China, they are really the tracks when it comes to coding, I got some friends in Japan' and so on. And so you take the different talents from different places and you put them all together.
Lau: All right, let's break it down. We're talking about, as you said, a region of communist regimes, of democratically elected governments from developed nation status all the way down to frontier nation status. But what is the promise of blockchain that all nations here in Asia see as a potential to elevate itself in the global economy?
Kaiser: Well, I'm known to answer any question, and then also known to answer them in maybe a contrarian way. So there's no common promise. I don't think there's a common will or common ambition. Maybe the only commonality is really the people. But when it comes to governance and policy responses, there is no common thread. And we have to live with it. Within our team when people say 'all this should be unified, we should have the same approach,' no, we don't. Decentralization, or the fact that you have different opinions that then don't overlap and don't find the common ground — that's a feature and not a bug.
Lau: What is important then for projects who look at Asia as they assess countries? Let's just start from the very top. Japan is a developed nation, China is still a developing nation. Japan tried to lead G20 conversations that were very crypto open and crypto friendly. Were they successful, and why did they want to do that?
Kaiser: I think what happens is that the companies themselves say, 'let's use China for the labor and the know-how. Let's use Japan for the regulation and learn in Japan. They'll do different approaches in different countries and take their learnings from them. And if you can succeed in Japan when it comes to regulation, AML, and so on, Japan is leading in a good or in a bad way — you can see that either way — and say if you can succeed in Japan when it comes to regulation, you can go anywhere else.
In China, you will leverage the people because that's what they have. They have a lot of smart people, a lot of engineers, a lot of coders, you can leverage that part. But there's no one jurisdiction against the other. From a crypto company perspective, for a crypto project perspective, you're actually saying, 'I don't see the borders, I'm just picking things,' and that comes also to jurisdictional issues.
Hong Kong is very strong for some things, but there's also weaknesses, and I will call one weakness is the banking, which is the historical strength of Hong Kong. But right now, when it comes to cryptocurrency businesses, it's actually not easy to bank in Hong Kong. And that's unfortunate. But the crypto projects that will say maybe Singapore is more welcoming when it comes to banking and so on.
Lau: You talked about the weaknesses, what are the strengths in Hong Kong?
Kaiser: Hong Kong is playing old strengths in crypto as well. So the geographical location, the proximity to China, the language so that the fact that you can really serve a English speaking international world, you can do the Mandarin or Chinese speaking a greater China world, which includes in that sense, Singapore. You can do this in Hong Kong. And I think even when it comes to Japan and Korea, which are two very important markets in Asia for crypto, you can actually serve the Korean and Japanese market from Hong Kong to a certain extent or Hong Kong can be that link also with Korea and with Japan.
Lau: Talk about Korea, the strengths, weaknesses.
Kaiser: I don't want to play the game of playing different jurisdictions one against the other because it's not a winner takes it all [situation]. But I think what Korea does is, they have on the ground movement, which is extremely strong.
Lau: Real life adoption [in Korea], it really comes from the masses. There's enthusiasm about retail cryptocurrency that doesn't necessarily exist in the rest of Asia. Do you think that's driving crypto and blockchain projects faster than other parts of Asia because there is that real world interest?
Kaiser: Yeah, I think you're right. I think when it comes to adoption, Korea is leading with all these mom and pop stores and these solutions and POS that they can roll out to a lot more stores than other places are willing to accept. So I think that's definitely helping. What's not clear yet with regard to Korea is how much can we learn from Korea and how much will come out of Korea to the rest of the world. So Korea is in that sense leading, but where does it go from here?
Lau: It's almost as if it lives in a little bit of a vacuum because to the point of Facebook's Libra, well, actually Kakao also has a very similar digital asset product with mainstream corporates in Korea. But there was not a lot of news coming out of that project.
Kaiser: Right. I think that some of the struggles that we have in several Asian countries is the fact that they're bubbles on their own. I think that's maybe a weakness of Korea, which is again, a strength in Hong Kong. So how much do you tie yourself in, and the answer to how that's going to play out even in the mid-term is not so clear.
Lau: Do you think it's because Hong Kong and Singapore are so international that whatever happens here, it's because of the makeup of the talent and where everybody is from? That's our bet at Forkast.News, it is what we're experiencing ourselves.
Kaiser: Right. I think we need to keep the eye on the ball both in Singapore and in Hong Kong and keep that strength and keep playing it. Because if we lose this in Hong Kong, then what's left? So I think you're right. That is a strength both in Singapore and Hong Kong. And so let's not forget about that. Let's stay on that international focus. Let's be open and remain open. I think that's very important.
Lau: Part of our reporting also has taken us through Southeast Asia and also emerging markets like Vietnam. Interesting thing in Vietnam is that there's a lot of developer talent there, maybe not so much the infrastructure of business or the infrastructure of financial support, but certainly talent when it comes to developers. What are your thoughts?
Kaiser: Actually, I see the promise or the opportunity less even in the talent, though that's also there, but I see it in a sweet spot of young people with a high mobile phone penetration. And so, again, the adoption, because I think one of your questions will eventually be what is holding everybody back?
Lau: You're asking yourself!
Kaiser: I need to come to that, because when I have presentations, I'm always saying, "guys and girls, what is holding everybody back?" And it's adoption. That's where I see next to Korea, Vietnam is a sweet spot. You need young people who are open to using other apps, other currencies, all the technology you need. You need the fast Internet, you need an open legal framework and you need that mobile phone penetration. I think Vietnam has that. When we compare that to China, we have more restrictions. When we compare it to, for example, Myanmar, the mobile phone penetration is lower. So I think Vietnam is a sweet spot for adoption.
Lau: I also think Myanmar is very interesting. They do have blockchain interests. They have a foundation, they have a group, there is emerging talent. And to your point, in Myanmar owning a SIM card used to cost ten times your yearly salary. Now it is so affordable and people are obviously migrating to the technology that they can now afford. This technology also connects us to a greater economy, which is ultimately the promise of blockchain.
Kaiser: The issue is, and we see it in Africa and we see it in Southeast Asia, that if the infrastructure is still developing — internet penetration, latency and so on — then the battle for a single blockchain project is too big. You have to pick your battles. So that's why I say you need a sweet spot. If in the blockchain space we go too much into areas where the infrastructure is not ready, we're picking the wrong battles, that's my personal impression.
Lau: That's a great point, real life infrastructure, but also regulatory infrastructure. Where do you think it exists most here in Asia?
Kaiser: Again, I don't want to pick any winners because that's too hard.
Lau: All right, let's put it this way. If you want to describe what best practices for any nation would be to be the leader, what do you think the characteristics of that regulatory infrastructure would look like?
Kaiser: There are entire books written about this and conferences just playing on tech versus law, and tech and law, and tech in law, or law and tech. My personal opinion is that the legislator needs to go first very slow. So that 's my first trick. Best practice for the regulators is go slow and not go too fast. And then, and the reality is much more complex than that, I would start with removing barriers, not drafting new laws.
So Singapore is a great example. Singapore has removed the goods and services tax on crypto payments. So that's sort of VAT for the purpose of simplicity. And this was an obstacle which they eventually removed. So what Singapore did is accept the best practice. Do nothing, wait, identify the obstacle and then you grab one after the other instead of creating these monster laws which are very hard to draft for a technology where even we in this space don't know where it's going to go. So don't legislate too fast, too quick, too much, but just remove particular objects or obstacles.
Lau: And also, they are beholden to the very people whom they serve. And so for a long time, especially in 2017, the ICO speculation really kind of devolved this conversation and reduced it to scams and threats. Do you think that regulators need to also be conscious of protecting the individual?
Kaiser: I think you have to unpack a lot of stuff there. So first of all, we're all happy that 2017-18 has passed, we've moved on. I think when it comes to scams and protection of individual interests and investors and so on. We do have existing frameworks, and this is almost a cultural misunderstanding between the crypto industry and maybe the establishment, because we do already have laws in place where the idea of protecting investors' interests is hundreds of years old, going back to the tulips.
And so I don't think the regulators need to throw themselves at protecting the interests simply because they do that already. So I don't think there's a need for action because the regulators and the government administrations, including the courts are already doing this. So there's no need to act because they're already acting. But also from the crypto industry, there's no need to fight the regulators, or think they have to bypass existing laws, because they're there for a reason. But this is a deeper conversation.
Lau: Potentially for the next time. Nathan, very illuminating. Thank you for joining us here in Hong Kong. That was Nathan Kaiser, and thank you for joining us right here on this episode of Word on the Block. I'm Angie Lau, Editor-in-Chief a Forkast.News, until the next time. See you then.