In Singapore, bitcoin is challenging gold as a store of value

Full Transcript

Angie Lau: Here in Asia, gold is not only a store of value, it is a physical representation of wealth and prosperity to be worn at weddings, important events, you name it, and gifted at every opportunity. But one New York-based exchange is also betting that digital gold is taking on a whole new luster in this part of the world. 

Welcome to Word on the Block, the series that takes a deeper dive into Blockchain and the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast.News. I’m Angie Lau, editor in chief.

They call it the Lion City Singapore, and it has roared life into the crypto exchange business as it is one of the few jurisdictions where it is legal to trade. It has become an important legal hub. And now Gemini — the New York-based crypto exchange founded by the Winklevoss twins — is expanding its Singapore operations. Let’s find out what is supporting the business case. My next guest today is Eugene Ng, who leads Gemini’s business developments and partnerships in the Asia Pacific. Eugene, great to have you on the show.

Eugene Ng: Hi, Angie, thank you for inviting me.

Lau: Absolutely. So, you know what I’m talking about. The Asians love the gold.

Ng: Yeah, absolutely. Who does not like gold? In Asia, we all love our gold.

Lau: Well, it’s tongue in cheek a little bit, but now there is digital gold. Bitcoin and a new asset class that also a lot of wealthy with a lot of discretionary dollars looking to expand portfolios and diversify is also looking to. Here at Forkast, we know Asia’s leading a lot of innovation in this space. Tell us what you are seeing and experiencing and why Singapore operations for Gemini is expanding.

Ng: I guess one is what we’re seeing in Asia, in Singapore, especially given that Singapore has some very thoughtful regulations around cryptocurrency and it’s always right. It has always been a very pivotal role in Asia, driving a very thoughtful way of paving for regulated firms like Gemini to operate. And the ethos of Gemini really is to work with regulations. We like regulations. We welcome that. And that’s the reason why we feel like Singapore is going to drive this innovation in a very meaningful way. And secondly, Singapore, ideally, it has the right infrastructure. It has the skilled workforce. It’s got the right supportive regulations. And with that sort of regime, it’s going to be really healthy for cryptocurrency companies like us. 

And lastly, Gemini has always been making steps, baby steps in growing our franchise. From the U.K. launch to the Singapore launch, we have always planned to turn Gemini into a global company. So it’s always been in the works. And I think this is what we’re seeing, that we are making a commitment to Asia and cryptocurrency is really a global phenomenon, it’s a movement globally. And if you talk about gold, lastly, the way I like to tell people; bitcoin is actually gold 2.0. So it’s really easy to digest that. I think being in Singapore, it’s really allowing Gemini to help Asians to access cryptocurrency more easily than ever before.

Lau: So tell us about some of the new offerings for Gemini. I understand it’s now also supporting the Singapore dollar. So what does this mean for people? 

Ng: Gemini, being a regulated exchange, We are the first North American exchange to launch bitcoin and ethereum Singapore dollar fiat pairings. And that makes it so easy for local citizens here to access cryptocurrency. And that’s really our mission. And we also included DeFi tokens that we were very excited about. And so that’s also another initiative we’ve been pushing, and in the following weeks and months. We will be obviously launching numerous innovative products for this part of the world.

Lau: Yes, the competition, though, is intensifying there in Singapore. Recently, we reported that DBS is launching an exchange. This is a traditional Asia-based bank that is getting into the crypto exchange business. We also know that existing crypto giants like Binance and Coinbase and so on are getting into this space. How does Gemini fit into this competition and what kind of investors will be targeted to use your platform?

Ng: I’m not surprised, given that Singapore is positioning itself as a crypto fintech to hub in Asia Pacific. So you’re obviously going to be seeing a lot of new entrants and players. With DBS — yes, I think it’s a great testimony that legitimizes the entire asset class. So for me, we welcomed it. As the saying goes, a rising tide lifts all boats. So whether it is DBS or another player, we welcomed it. It’s a very nascent market in early stages. So there’s no real competition and we embrace that.

Lau: You got to embrace it because it seems that the ocean is rising, the level is rising.

Give us some insights about the market in Asia. I think a lot of people — certainly in the West — are surprised about the innovation, the speed in which things are adopted and certainly the enthusiasm and the energy, even amongst consumers.

Give us some of your observations on the level of interest from Asian institutions. What are you seeing?

Ng: Yeah, I think we do. When I first spoke with institutions six months ago, the response was very lukewarm. It was “we’ll take a look when we have some time.” Fast forward today, they’re actually sending us a lot of inquiries. It’s all in-bound. So that’s really a 180-degrees change. I think that’s a testimony that we have come to the inflection point where it’s not just a penny sort of asset class. It’s more than just like a token right at this moment. And I think the type of conversations, a lot deeper, a lot more thoughtful and with news like Square, PayPal, all these big giant fintech companies talking about crypto, and banks. I’m confident that a lot of the CEOs at C-level suite management are asking what’s a digital asset strategy and that’s a type of bond interest we’re seeing. And I think that’s going to continue for the rest of the year.

Lau: I totally agree with you. It is curious to also know the spectrum of knowledge. Some are really in the early phases. Some are much more sophisticated and advanced in these discussions. Where in the range would you say Asian institutions are?

Ng: I don’t think it’s a one-size-fits-all, when it comes to answering that question. It really depends on who you’re talking to. With the entire spectrum I would say that, generally speaking, the larger the institution, there is going to be a lot more of a formal processing. And they’re probably going to move a lot slower. With respect to a family office or an office where there is more discretion and they can be more nimble. So it really depends on the type of organization that we speak to. But I think one commonality is that all of these guys are aware of crypto and they do have that basic understanding of bitcoin.

Lau: One of the things that we note here in Asia in terms of the investor class is that 40% of the average Asian portfolio actually sits in cash and alternative assets. Now, that is a significant chunk of any portfolio that is essentially in play for cryptocurrency, digital assets, alternative assets. How are you seeing the pick up of interest and migrating some of these cash in alternative assets into cryptocurrency?

Ng: Yeah, that’s a great question. The tradition of popular 60-40 is not going to play out. It’s not going to work, especially with three-quarters of the bonds yielding a negative yield. That’s not going to work for any corporate treasury. So having a small allocation whether there is 0.1% to 5%, it all makes sense. And we are starting to hear and have that sort of conversations with a lot of different persons. And so I feel like that’s a natural progression in diversification and it really increases a shot ratio of that high portfolio. And with the innovation that we’re seeing in crypto space today, you don’t just buy bitcoin and hold it, there are so many other use cases, you can invest in interest-bearing product —it’s more than just diversifying and it’s becoming more of an investment. So I think that’s really changing the way people look at bitcoin in their portfolio.

Lau: That’s great insight right there. In the pioneering days in America it was, “Go West, young man. Now, it’s, “Go East”. This is where all the action is. I’m curious — and you could redact names — what are some of the anecdotes? Give us one of the most interesting conversations you’ve had with somebody — maybe six months ago, they were “meh.” And just to give us a sense of the shift in enthusiasm, can you share a story with us without necessarily sharing names? We’d love to hear it.

Ng: So one client of mine, that I know before joining Gemini, he was obviously in a very big and large organization and they were looking to cryptocurrency, but there were a lot of, I would say, resistance. And there’s obviously the guy who manages it is pushing for this initiative. But he’s getting a lot of pushback. And the poor guy, there [are] a lot of career risks especially during Covid times. You don’t want to be the guy who tries to push an initiative that may sound pretty crazy in times like this. 

Fast forward that and I remember him telling me, “It’s so hard to get things done, we move like a tortoise, and my management is telling me that, ‘don’t try to do anything that’s out of the ordinary, just do what you do, stay in the course.’” And he got so much from his colleagues and coworkers and his bosses. 

Now today, he’s essentially telling me that everybody has [been] flooding his email address. Like six months ago, whenever he sent any email to somebody to request for time to speak with them, [he] had no response  — all a very cold email back. Today, he’s getting so many people, even guys who are more senior than him, send him emails requesting for his time. But he’s literally getting so many requests to speak to him. And now, guys who were not so friendly with him are actually super friendly with him now — given that times have obviously changed. And he’s the guy who runs digital assets for an organization. So today, he’s become from a not so popular guy in the firm to a very popular guy — almost a celebrity status — because everybody wants his time. So that’s really funny and we were just having that conversation last week. So it’s still timely that you ask me this. 

Lau: It’s Guanxi, right? It’s who you know, and suddenly everybody wants to know him. Everybody wants to know this guy. And increasingly, we’re also getting a sense that, as people are flooding into the space, what are some of the questions that are still outstanding that they want to educate themselves on these family offices, these ultra-high net worth clients, private wealth managers are trying to fill these questions. In your experience, what are some of the questions that are still out there that people are still unsure about and they want to know?

Ng: I think one of the things that they really want to figure out is the custody of the assets — who exactly hold [these] assets. If I’m going to be trading on Gemini, who is it that is exactly holding. So that’s the number one concern that most investors have. It is a departure from our traditional securities where we buy a stock and it gets sent into one of our CDPs (central depository) in Singapore. But in crypto, it is slightly different. The exchange is also the carrier, It’s also the broker, It’s also the custody. So that’s a great departure and that requires a shift in thinking on this investment. So custody has always been the primary consideration when it comes to family offices and financial institutions when it falls right back to us in cryptocurrency.

A second one would be, “What else besides bitcoin? What else can I invest besides bitcoin? So that’s also another very commonly asked question that we get. 

Then lastly, I would say, it’s, “Where can you exactly buy your bitcoin?” And a lot of these financial institutions feel very much comfortable with Gemini, because of our regulations and the fact that we play by the rules and so many a times they will say, “Hey, look, Eugene, we want to be buying bitcoin from you guys because you guys are obviously a very regulated and secure exchange.” So that’s the answer to the question to how secure you guys are. Do you guys actually have compliance policies in place? How do you look at security, how do you look at KYC/AML? So these guys are actually looking at these things and we answer those questions for them.

Lau: Bitcoin, as we know, is a gateway crypto for lack of a better characteristic or characterization.

But look, a lot of volatility this month reached a number of new all-time-highs after sitting at its oldest all-time-high for three years.

And now, depending on when you’re watching it, definitely the volatility has been expressed. For those who have been in this space for a while.

How do you assess bitcoin’s volatility in January and in the first quarter of this year as it relates to, more the traditional volatility moves that we’re seeing in traditional equity markets?

Ng: It’s a great question. Whenever anybody asks me about volatility, I say, “Hey, look, take a look at some of the crazy stuff that we are seeing in today’s market. You have GameStop that’s trading like bananas.” And so it makes bitcoin volatility look very simple [and] very minute. I feel like with any new asset class, volatility is something which is not uncommon. You see volatility in many of the very nascent asset classes, the early formative years of asset class. So for me, I like to tell people, “hey, look, if you’re going to be buying bitcoin, look at it as a generation of bet. Look at it as a long term investment. If it stretches on the chart over 10 years, that volatility is just a small blip in the chart. So that’s how I look at volatility and it’s how institutional investors are starting to look at it.

Lau: So a long term view versus a short term view. You don’t want to catch that falling knife as it were.

Ng: Exactly.

Lau: But it is also very interesting that as a gateway crypto, family offices, ultra-high-net-worth clients are talking about, “Hey, what about altcoin? What about other crypto?” We’ve seen the rise in ethereum as a result of this frothiness that we’ve been seeing with vitcoin.

But what about the other altcoins out there? What’s the narrative? You think that’s evolving?

Ng: With bitcoin’s success and a great marketing grant for cryptocurrency as an asset class, it has generated a positive spillover to the other tokens. And I think that’s going to drive the asset class. I would say to people, “The stock market is more than FX.” So many other stocks out there, just like cryptocurrency, there’s so many tokens out there. And obviously with any new asset class, there are going to be some that will eventually go, a majority of these tokens going to zero. And it’s obviously some that are going to hit know 10x, 100x, 1000x. So I think it comes down to really understanding what you’re investing in. 

And the next narrative, I would say, there’s a few narratives that are playing out, I guess one being DeFi (decentralized finance), I think that’s a great use case and that’s such a promising space. It’s really breaking down the whole centralized finance narrative. And a second narrative I would say, NFTs, non-fungible tokens, that is such a great narrative. I think it’s going to gain a lot of momentum this year. 

And a third narrative I would say it’s really the top five tokens you get. You will start seeing greater inflow of money coming to these top five tokens because institutions come in, they will likely buy the top five tokens and then subsequently look into the others. These are my three narratives for the coming year.

Lau: Here in Asia, real estate, art, these are physical assets that are absolutely valued in terms of ownership. Do you see that also becoming an NFT or digital asset? And what is that migration or trend line looking like for you?

Ng: Yeah, I think that’s already happening. We have NFTs in the form of art and we have always seen crazy options going for this.I feel like that’s the narrative where we’re transiting into a digital economy, and truly digital.

When I’m talking about, like things in digital form. So whether it is your favorite whiskey, your favorite art piece, I think they’re all going to be on the blockchain in a matter of time.

Lau: Well, gold has a significant symbol of wealth in Asia — of course, tongue-in-cheek started off this conversation with that. But how much has gold changed as an investment in the eyes of investors in the Asia-Pacific region? Do you also see that it cannot be replaced? Or do you think that there’s starting also to be a transfer of wealth to digital gold?

Ng: I think bitcoin is the better version of gold. It is the gold 2.0. Its digital scarcity, its portability and its divisibility — these [are] three things that gold does not have. For me, I don’t think bitcoin is competing with gold. I think bitcoin is a digital solid value that represents something slightly different. And a gold investor can also be a bitcoin investor and a stock investor can also be a bitcoin investor, but not a gold investor. So I feel like bitcoin is not really competing with gold, but rather it stands on its own.

Lau: There’s no doubt about it. Also standing on its own a very strong two feet, first in the New York market and now internationally is Gemini.

So when Cameron and Tyler Winklevoss, your bosses there in New York, have been making comments in the market of potentially going public. Are we going to see this in SPAC form, a reverse-listing? Are we going to see a publicly-listed Gemini exchange soon?

Ng: Yeah, great question. I wish I can answer that [but] it’s beyond my paycheck so I don’t think I could comment on that.

Lau: You’re a better fly on the wall than I am. So I got to ask.

Ng: You have to ask, right? It’s your job to ask. Like I said, it’s beyond my pay grade. So I am going to be politely declining that question.

Lau: But there’s no doubt that the growth in the international markets, specifically in Asia, is going to be critical to the trajectory of Gemini. How much resources, how much capital is going into the Asia expansion?

Ng: I think Jeremy [Ng] was the first hired — he’s the managing director for APAC. He joined us from Leonteq where he was sitting as a CEO. Twenty-five years of experience. So we got him last June and fast forward that six months, today, we have got six employees in Singapore and we should be tripling the hit in the next 12 months. So we are putting in a lot of resources for this region. It’s actually all of the region on Gemini. Singapore being the epicenter. We want to be here positioning ourselves.

Lau: What’s the projected revenue growth in terms of percentage, if you are, starting January 2021? What’s your anticipated growth for this year in terms of percentage increase? And then what’s your projected market reach over the next few years?

Ng: I think it’s still early days in the sense that we haven’t really got, we don’t really put that number out and say, “Hey, look, this is a number that we’re going to be projecting. This is a number that we want to be getting into.” I think it’s all about going to the right market, seizing the right opportunity and then getting the most impact with whatever resources that we are given. So that’s how we look at different markets in Asia that we want to be strategic. We want to play by the rules. Even if the market is this big, we have to ensure that we are going with the right set up in terms of regulations, in terms of security compliance. It is not simply to grow at all costs, but really to grow in a very thoughtful manner. That’s how we look at Asia: “How do we grow our business?”

Lau: As we look at the business as well, we got to take a look at the addressable market here in Asia. In your view, what is Gemini’s Asia addressable market that it hopes to target? What’s the size and scope of it?

Ng: Like I said before, we offer fiat on-ramp honkey dollar and Aussie. So it’s a matter of extension for our APAC expansion. So I think those two markets are going to be really interesting for Gemini in the short term. With Asia being such a large part of the world, we are sizing up the opportunity very carefully with which, we go to market strategy, depending on the regulation, depending on the sophistication of the users, depending on the type of institutions that are actually having that sort of interest. So it really depends on the variety of factors. But if we look at Asia, it’s such a diverse part of the world. And so I think Hong Kong [and] Australia, [we’re] very likely to put more resources into those two parts of the world.

Lau: So we will see the footprint expanding. Well, Eugene, thank you so much for giving us some insights into your growth projections for Asia and certainly what we’re already seeing in the space. And before I let you go, a lot of our audience is learning about this asset class. A lot of our audiences have been here for years. In your view, your top three best practices for wading into a new asset class if you’re unfamiliar.

Ng: Yes, so number one, buy only as much as you’re willing to lose, never invest more than you should, never take a leverage on the type of crypto that you buy. The second is, have a long-term perspective. If you are buying today hoping for a 50% increase in price, bitcoin is not the right investment for you. Another thing I would say is custody. Ensure that you are safekeeping your assets in a very safe and secure manner. So these three things.

Lau: And if you have a cold wallet, don’t forget your password and put it somewhere safe where you’ll remember it. That’s that’s probably one, too.

Ng: Yeah. Angie, look at you. You’re an expert.

Lau: We just are reporting in this space and we just know that poor guy who has probably one last chance to get at his bitcoin [back].

But it’s certainly a new asset class. It has been one we’ve been watching for a while. And certainly you see the prescience of this industry, including your friend, who is now the most popular guy in the company.

Ng: Yes. Thank you. 

Lau: Eugene, it was great talking with you. That’s Eugene Ng here from Gemini Asia Pacific, talking to us about expanding Singapore operations. It’s great to have you on the show, Eugene.

Ng: Thank you Angie, thank you very much.

Lau: And thank you, everyone, for joining us on this latest episode. I’m Angie Lau, Forkast.News editor-in-chief. Until the next time.