The impact of blockchain and cryptocurrencies in SouthEast Asian countries and how can Pakistan learn from them?

The global blockchain market is growing fast & it is expected to grow from USD 3.0 billion in 2020 to USD 39.7 billion by 2025 at an impressive Compound Annual Growth Rate of 67.3% during 2020–2025. The global fintech market has also significantly grown over the past two years and similar is the situation in Southeast Asia. The nodes connect back to the increased application of blockchain and cryptocurrency. 

With a total population of 570 million, a young demographic and high Internet connectivity, the region is promising for companies and investors – including those with an interest in blockchain and crypto in Southeast Asia. The use of blockchain in Southeast Asia has certainly come far ahead from the time when the technology was seen as another speculative commodity or a mere passing fad. 

The region’s fast-growing economies are well positioned to drive adoption of blockchain and crypto. As each country competes to stay relevant in today’s digital age and embrace emerging technologies such as blockchain and cryptocurrency, large-scale adoption is the key to success. 

Here’s an overview of where the region is headed in terms of its growing application of blockchain with respect to digital financial transactions. 

Singapore

As the financial hub for Southeast Asia, Singapore plays a critical role in supporting the region to push forward technologically and financially. With more than 490 fintech firms, Singapore certainly leads the pack when it comes to the adoption of blockchain and crypto in SEA. The republic is also home to 19 cryptocurrency foundations and 634 global crypto companies such as Binance, Litecoin, Wanchain, NEO and Tron.

Key factors that have spurred the growth of blockchain and cryptocurrency in Singapore includes the regulatory environment and well informed, transparent regulators who are willing to experiment with technology. 

The country has been the most sought after location to launch IEO (Initial Exchange Offerings) projects for global top exchanges such as Gate.ip, BX, Latoken, Bittrex and Binance. More than USD 593M has been raised in these projects to date and these account to over one-third of the funds raised on global IEO platforms. 

Even on the retail front, one sees blockchain playing an emerging role in making payments - a step up from regular credit card or e-wallet payments. For example, KOPItech has integrated numerous payment modes including Bitcoin and Ethereum to allow patrons to pay for purchases.

From charitable donations to improving liquidity for smallholder livestock farmers, blockchain is creating impact with startups like AID:tech and FarmTrek in the space. 

Malaysia

Home to global players in the crypto space such as Coingecko and Etherscan, Malaysia has witnessed an increased level of awareness when it comes to cryptocurrency and blockchain. The country has made major strides in the cryptocurrency space with the approval of Luno, London-based cryptocurrency exchange, to operate in Malaysia last year. As a digital asset exchange, Luno offers Malaysians the ability to buy, sell and store cryptocurrency on its platform.

Remittance is another area that has witnessed a significant rise in the adoption of blockchain. Early last year, Telenor Microfinance Bank joined hands with Valyou Malaysia to introduce a blockchain-based cross-border remittance service developed by Alipay, which aims to target the underbanked communities in Pakistan. The project aims to use blockchain technology to significantly boost the speed and efficiency of remittances between Malaysia and Pakistan.

When it comes to the SME sector, blockchain is now playing a major role by helping the Malay SMEs to make low-coast, same-day cross-border payments to global suppliers. MoneyMatch, a Malaysian FinTech, in partnership with Ripple, helps local businessmen convert their Malaysian ringgits to euros at a significantly lower rate in a matter of a few hours as an alternative to the high transfer fees and FX rates charged by the country’s traditional banks.

The Securities Commission Malaysia has played a major role in the push for greater blockchain adoption in the country. With “Project Castor” SCM has pioneered the application of blockchain technology in capital markets. Developed using Distributed Ledger Technology (DLT) to serve as the underlying market infrastructure for unlisted and OTC markets, Castor preserves the distributed, non-standard nature of such markets. 

In addition, Malaysian’s Ministry of Education has introduced E-Skrol, an application built on blockchain to verify the authenticity of educational degrees for both public and private universities in the country.

Thailand 

Rising from the political turmoil of the 2014 military coup, Thailand has emerged as Southeast Asia’s blockchain hub, spurred on by a government that has led by example. 

The country, now a breeding ground for blockchain entrepreneurs, is home to 26 blockchain startups (as of 2019), and it is estimated that 10% of Thais own some form of cryptocurrency — the second-highest crypto ownership rate in the world, second only to South Africa’s 10.7%.

The land of blockchain, made headway in the crypto world through the launch of its first regulated ICO portal, SE Digital that launched Thailand’s first investment token targeting Thai retail investors, institutional investors, venture capital firms and private equity funds. To date, Thailand has four approved digital asset exchanges – Bitcoin Exchange Co., Bitkub Online Co, Satang Corporation and Coins TH.

And since 2017 Blockchain technology is also used for railway management to increase the accuracy of the railway itinerary by Railway of Thailand and to improve the security of its high-value parcels shipped through its logistics network by Thailand Post. 

Thailand’s National Electronics and Computer Technology Center has developed a blockchain-based voting system which will be applied to national, provincial and community elections. The voting system is designed to eliminate the need to travel to polling stations and allow the citizens to vote through an email. Upon the completion of voting the results will be tabulated ‘immediately’ and the data will be sent to the election controller where candidates can view the results electronically. The result will be prevention from fraud, and saving of time and labor.

On the other hand in 2019, the Electronic Transactions Development Agency (ETDA) embarked on the Digital ID Project to develop a nationwide digital identification platform aiming to use blockchain-based timestamping to authenticate and verify the digital identities of every citizen.

Efforts by the Trade Policy and Strategy Office (TPSO) are also underway to incorporate DLT in the agriculture sector to track agricultural produce and monitor the quality of exports. In terms of cross-border exchange and remittance, there is significant progress as well. One example is Siam Commercial bank creating a mobile application powered by blockchain.

Philippines

Now having 16 Cryptocurrency Exchanges approved by Philippines’ central Bank, the country has recorded a sharp increase in crypto adoption over the years. 

With 7 out of 10 people without a bank account, the Philippines offers a lucrative opportunity for cryptocurrency to thrive. Coins.ph, a leading cryptocurrency exchange platform is one example. Developed in 2014, it has to date acquired over five million users to its platform. The digital wallet and payment application provider allows the nation’s predominantly unbanked population access to financial services. However, remittance remains one of the largest use cases in blockchain for the Philippines. 

Indonesia

With 15 cryptocurrency exchanges in the pipeline to open up in the next 24 months, Indonesia continues to skyrocket in the blockchain space.

In 2019 the Indonesian government announced the creation of legal frameworks in which cryptocurrencies and digital asset futures will be classified as trading commodities after successful use of blockchain verification for 13% of 193 million votes casted in President Joko Widodo’s re-election campaign. The announcement was followed by the government’s multimillion dollar partnership with Singapore-based blockchain firm PLMP Fintech to improve the logistics industry using blockchain technology.

To demonstrate commitment to the adoption of blockchain technology in the country, Tokocrypto became the first regulated cryptocurrency exchange approved by Indonesian authorities for the trading of digital assets. The Indonesian government is also actively pushing for adoption in the private and public sector by engaging with the Indonesian Regional Banks Association to study the possibilities of using blockchain to prevent fraud. 

Where UAE based Halal Chain launched in Indonesia providing blockchain-based Islamic financial services that comply with Sharia principles, PundiX became the first Indonesian company to implement blockchain-based POS (Point of Sale) systems in the region.  

Vietnam

Aiming to increase its e-government ranking to be among the top 4 ASEAN countries by 2025, the Vietnamese government has passed a resolution to develop a complete e-government platform to improve the effectiveness and efficiency of the state’s administrative infrastructure and services.

After Saigon Hi-Tech Park Incubation Center signed an agreement with CBA ventures from South Korea regarding blockchain training and support, Ho Chi Minh City authorities announced the development of a blockchain infrastructure to power smart city construction initiatives, mitigate risk and streamline processes. 

Other than remittances, among many applications, the use of blockchain by manufacturers to keep track of the entire process from manufacturing to supply chain and agricultural sector is propelling.

Cambodia 

With “Bakong”, Cambodia has surpassed its Southeast Asian counterparts to become the first nation to launch its own digital currency. The Cambodia Blockchain platform will serve as the national payment gateway for the country aiming to unite all players in the fintech ecosystem.

What’s Next for Pakistan?

The examples above reflect one trend: government-backed coins and corporate coins will dominate the world of finance in the near future. But the question is, with so many initiatives running concurrently in Southeast Asian countries, what does the future hold for blockchain technology and cryptocurrency in Pakistan?

In 2018, Telenor Microfinance took the initiative by partnering with Alipay (powered by blockchain) for the transfer of remittances. Although this puts Pakistan in the list of few countries in the world that have launched international remittances using blockchain technology, this is not enough. 

If Pakistan has to reap the benefits of blockchain like its Southeast Asian counterparts, both public and private sectors need to step up. Where the large scale adoption of the technology by the industrial sector is of high importance, the initiative by the government to formally launch Pakistan’s own cryptocurrency is critical.

With companies like Blockstack venturing into Pakistan, the tech landscape of Pakistan is ready to dive into blockchain and cryptocurrency.

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References:

https://asia.nikkei.com/Editor-s-Picks/FT-Confidential-Research/Southeast-Asia-ready-to-embrace-blockchain

https://www.asiablockchainreview.com/malaysia-blockchain-landscape-report-the-5-features-of-a-must-read-industry-resource/

https://blocks99.com/features/adoption-of-blockchain-and-crypto-in-southeast-asia/

https://www.asiablockchainreview.com/thailand-the-land-of-blockchain/

https://govinsider.asia/transformation/thailands-vision-for-a-self-sovereign-digital-id/