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- [00:00]
A
Heads up everyone. We've got exciting news. Bits and Bips Our Macro Meets Crypto show is officially spinning off into its own podcast feed, YouTube channel and X account. If you've been enjoying the deep dives into interest rates, monetary policy, and how they intersect with the crypto markets, make sure to follow Bits and Bits wherever you get your podcasts on YouTube and on X. You'll find the links to YouTube X and other podcast platforms in the Show Notes. We'll be posting here for a few more weeks, but starting in September, Bits and Bits will launch on its own feed. For now, we will publish longer clips from the show on those accounts. Remember, go to the Show Notes now and subscribe to Bits and Bips. That's Bits plus sign Bips spelled B I P S on YouTube X and wherever you get your podcasts.
- [00:49]
B
Crypto isn't actually really banned in China. Like, that's not really true. Like, that's just kind of like a media trope that people say. But like, you know, like, if China actually really wanted to ban crypto, like it would, like, you know, China's pretty good at banning things when it wants to do it. There are. It's not that hard to trade crypto in China. So the question is, is like, why is this happening?
- [01:10]
A
Hi everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host Laura Shin. Every episode we feature comments from listeners. Today we have two comments responding to my recent interview with Basis Jesse pollock on Forecaster B926 says, quote, the intention of Basis content coin was to empower creators, but it ended up being traded like a meme. So what went wrong? The intention isn't bad, but the timing is off. It launched into a market where trust is low, attention spans are shorter than ever, everything gets Beam coined. If it were launched at a different time or in a different context, it might have been seen as an experiment. Instead, the launch felt like someone showing up to a pool party in a suit. Awkward on X ECJ writes, look at his smile, bro. Just made a ton of money and absolutely loves the chaos. Want your comment featured? Write a review of the podcast overall or leave a comment on our video on YouTube X or Foraster. This is the April 22, 2025 episode of Unchained. Need to keep up with macro. We have you covered. Every Monday at 4:30pm EST, our macro and crypto show Bits and Biffs is now streaming live on X and YouTube.
- [02:17]
B
Don't miss it.
- [02:18]
A
Crypto moves fast. It's why Bitwise launched the weekly CIO Memo, a jargon free summary of what's moving crypto markets written by one of the best in the business, CIO, Matt Hogan. Get up to speed in five minutes or less. Check it out at bitwiseinvestments.com Ciomemo Carefully consider the extreme risks associated with crypto before investing. Today's topic is what's going on in Asia, One of the areas with the broadest crypto adoption, especially in light of Trump's tariffs. Here to discuss are Emily Parker, China and Japan advisor at the Global Blockchain Business Council, and Yat Siu, chairman of Animoca Brands. Welcome, Emily. And yet.
- [02:58]
B
Hi. Great to be here.
- [03:00]
C
Thank you for having me.
- [03:02]
A
Let's have each of you give a brief description of your background, you know, in terms of your involvement with crypto in Asia. Emily, do you want to start?
- [03:11]
B
Sure. So I've been involved with Asia for most of my life. I think we've did it. I think we did an Asia show once before, Laura, and we just talked about that. But I started Chinese many years ago. Many years ago. It's still still a hot topic. So I started studying Chinese in high school. I've been invol with China pretty much ever since. Moved to Japan right after college, and basically my whole career has kind of been the U.S. china, Japan Triangle, which it still very much is. And then with crypto, I kind of came to crypto through the China angle. I'd been doing a lot of work on China and the Internet and looking at China's government attempts to control the Internet. And so when crypto was blowing up in China in 2017 and China was trying to crack down on it, I was kind of like, okay, I've seen this movie before. I'm going to go over there and see what's going on. And then I ended up co founding a crypto startup in Asia that had very much a focus on the entire region called Longhash. And yeah, and now I still spend a lot of time in Hong Kong, China, Japan, US So still kind of following the market very carefully.
- [04:11]
A
And yet.
- [04:12]
C
Yeah, so. So I guess I'm. My background is a little bit different in the sense that I started in the tech space, really in Europe. I grew up in Austria, actually have a music background, so nothing related to crypto whatsoever.
- [04:23]
B
This is why Yat is definitely like one of the more interesting people in crypto, by the way. His background is so different.
- [04:28]
A
Yeah, by the way. Yet I also heard you say you grew up in Vienna. And I love Vienna. One of my very closest friends lives there.
- [04:35]
C
So Vienna is a beautiful place. Right. And so I actually studied music, so I went to the music conservatory. So that was my original background ages ago. And maybe another interesting thing is that I grew up at a time when it was still in east and west, sort of Europe. Right. And so. So that's a different story. But anyway, so that kind of shaped me a little bit. Worked for Atari, went into gaming quite early on. You know, fast forward. Ended up in Hong Kong. Started one of Hong Kong's very first Internet service providers back in the early 90s called Hong Kong Online, which kind of catapulted me really sort of into the sort of, I guess, Internet space. Eventually did a cloud computing business that was acquired by mvm. And you know, basically with Animoca Brands, we were really a gaming company. And for in our involvement through our studio in Vancouver with CryptoKitties, got into the entire blockchain space that way. So we came in really from the culture gaming angle, not so much from the bitcoin angle. So that probably makes us a little bit different from, you know, the classic crypto OGs. And since then, Animoca Brands has really been a prolific investor. We are a global business, but of course I'm based in Hong Kong. A lot of our operations and teams are here. I advise the government in the Web3 Advisory Council in Hong Kong on Things Web3. And we're also very involved in the Middle East. We also advise NEOM and I guess by definition the Saudis on their blockchain strategies. And we do a lot of policy work. You know, we help write the papers on stablecoins and so forth. And today Animoca Brands is known as an investor. We have over 540 portfolios in web 3. And a lot of people think we're, you know, very focused on gaming and metaverse. We are, but that might comprise maybe a third of our business. Most of the other activities that we do are very much on the sort of advisory, financial services and of course, investing business.
- [06:22]
A
All right, so the reason that we wanted to do this show is actually we had started by trying to get Emily on bits and bibs to talk about the reaction to Trump's tariffs in Asia. But because she's actually physically in Asia, it was not going to work out timing wise or time zone wise. But I did want to ask, you know, ever since Trump announced these tariffs, you know, many of the tariffs are especially high on Asian countries and in particular China. And I wonder, just like Generally, what the reaction's been and whether or not the tariffs are changing the perceptions of people in Asia about crypto.
- [07:01]
B
Sure, I can. I can start real, real quick with that. So, of course, it's always dangerous to sort of say anything about what all Asians are saying or what all Japanese are, all Chinese. I mean, it's really possible to generalize. So I can only give kind of my impression. You know, here in Tokyo, the tariffs are on TV all the time. I mean, it's definitely a topic. It's of interest. Obviously, it's a huge discussion topic in China as well. It's Korea. I mean, these are. The tariffs are being talked about. These are, these are. This is a main topic as it is in the United States. I mean, again, talking about China, this is just sort of my anecdotal impression, but I don't get the feeling that Chinese people are really panicking about these tariffs. That's just not the vibe that I get. I get that there's kind of some. A lot of confidence there that, you know, China sort of saw these coming for a while. They're pretty prepared. That's generally the impression. I'm sort of feeling more panic coming from the United States. Again, purely anecdotally, as for crypto, I have, I mean, Laura, you raised this question. It's a great question about how it affects the crypto market in Asia specifically. I've asked a bunch of people that. Most people responded that it's just part of the larger global conversation. So, you know, people are asking the same questions that they're asking in the United States, which is basically like, will bitcoin be a hedge against this? Right. This is the question, you know, what. What will mean if, you know, there's a weakening dol. What will that mean for bitcoin? These are just pretty similar questions to what we're. The conversation that's being had globally. So I'm not sure, maybe, yeah, has a different take, but I haven't heard that much of a specific Asia angle for the tariffs. Obviously, there are certain things like mining. You know, we sort of talked about this a little bit this morning that could impact the mining industry. Like, interestingly enough, you know, there's talk of trying to bring the mining industry back to the United States, but there's a lot of reliance on parts from Asia and obviously, like, tariffs could impact that. So there could have all these different effects. But, you know, the tariff story keeps changing and we don't know exactly what's going to happen or what the end tariffs are going to look like or what the economic impact is going to be. So again, I think there's a lot of speculation and a lot of unknowns, but yeah, I think it's just largely reflective of the global conversation.
- [09:01]
C
Yeah. Maybe just to add a little bit on Emily's note there, broadly speaking, on the macro side, it's viewed very much for the time being, crypto as a risk on asset. So if you're going to de risk broadly, you're also de risking crypto. Bitcoin might a little be a little bit the exception, but definitely altcoins are sort of not in favor, generally speaking, when you think about the entire macro space, because there's a lot of uncertainty. Right. So that's kind of just the sentiment. That said on tariffs, the conversation is around, you know, is crypto a good hedge? Is it an alternative? And there's a lot of conversation also, especially around, you know, future stablecoins and so on around is that another way in which you can sort of, you know, circumvent tariffs or deal with them a different way? So that conversation is definitely happening. I would also say sentiment wise, anyway. You know, Hong Kong is a major. I wouldn't say it's a manufacturing hub, but the owners of the manufacturers tend to live in Hong Kong. Right. So Hong Kong can be viewed a little bit as, you know, sort of the, I guess if you have to give an American example, you know, it's a little bit like, you know, what Miami is to South America. Hong Kong is to, I guess, the Chinese in the region. People live there from the region. They go to a local school here. They might work in China, but their family lives in Hong Kong because they're in local schools and it's based on a British common law, for instance. There's certain types of securities that they have there that they feel safer than, say, in China, for instance. So there's a whole bunch of things that they prefer to live in Hong Kong. So you have a very large Chinese community here. And so there are many of the business owners, so they are definitely impacted. And there's talk about tariffs as a sort of macro, like, you know, where do I move my manufacturing? How do I deal with business? I am aware, though, of a number of very large businesses, particularly in textiles, that have, for instance, de emphasized the US Years ago. To your point, Emily, you know, many Chinese companies have prepared for that moment. So the ones that are essentially sort of dependent on, let's call it the Walmart drug, they're kind of in a Difficult situation. But the ones that have already sort of diversified themselves over the last several years because they kind of saw the writing on the wall are sort of in a much, much better place. So. So you have that inside China, at least, a commentary. And I think we kind of see this a little bit online. It's a little bit of sort of, you know, poking fun and a little bit of like, what the hell's going on? And that doesn't make sense. And, you know, you know, America's lost the plot. You know, whether it's right or wrong. That's not kind of my point. It's just the perspective in China isn't like, oh, my goodness, you know, we're shaking in our boots. It's much more like, this is a joke and, you know, we're not going to take this seriously anymore. So. So it's a little bit of that on the more national level. Obviously, businesses are concerned. And then I think the final point, I would say, is that quite a few companies in Hong Kong and in Japan, of course, and Singapore have started adding bitcoin as a play. Right? So they basically started adding bitcoin on their balance sheet. And the way that they're positioning it is as a macro hedge. And so the conversation is beginning, and, you know, some of them are very speculative, but the point is that it's becoming more of a broad conversation overall.
- [11:55]
A
So I just wanted to also zoom out, because, you know, we started this with the most recent news, which is about the tariffs. But obviously before then, we did see that the US did a 180 on crypto with the fact that the Trump administration has really embraced it. And I wondered what the perception was in the Asian crypto scene about this change in stance from the US this.
- [12:17]
B
Is a really interesting question. I think about this a lot. I think that a lot of these jurisdictions, Hong Kong, Japan, they do watch what's happening in the U.S. pretty carefully. And there's a lot. Not just the U.S. the U.S. and Europe. There's a lot of looking at mica, you know, in terms of what they're doing with stable coins. So people are definitely paying a lot of attention to what's going on in the United States. Now, again, this is an area where it's sort of hard to, like, pinpoint specific data to say, like, okay, because this happened in the US this had this specific impact on Asia. But there's definitely been some vibe changes in Asia that I think you could maybe attribute to some of the changes in the United States. Like, if you look At Japan, for example. So there's some very interesting things happening in Japan right now, and we can get to this in more detail a little bit bit later. But one of the biggest obstacles to crypto adoption in Japan is taxes. This has been the case for a very long time. Taxes for crypto can go as high as 55% in Japan. And this has been the case for a while. For the first time, there's actually starting to be some very serious discussion about changing it and bringing it down closer to 20%, which is kind of what's used for stocks. And when you talk to people and again, you can't really like nail this down. But there is some sense that the changing winds in the US Might be sort of having an impact on the conversation here in particular, because lowering the tax rate is one way to pave the way for an eventual, eventual bitcoin ETF in Japan. So that again, was something that even when I was here, like, I don't know, less than a year ago, and was talking about a bitcoin ETF with people who are in a position to really be influential on that, I kind of had the feeling that there was no chance that it was going to happen. And that's not the case now. I mean, it will take a while. I mean, we're looking for something like maybe two years out if, if, if even that. But there's serious discussion about that. And I do think that that's something that maybe was influenced by the sort of, you know, so called crypto friendliness in the United States. China also, again, this is all sort of in the sort of methodology. It's a little bit of a rumor, but yeah, I don't know if you've heard this as well, but I've definitely heard various people say to me that sort of, you know, since Trump was making these statements about how like, you know, we can't let China win in crypto, which is a sort of weird thing to say because China is not exactly friendly to, to crypto. But since he's been saying that, that actually caused China to look at crypto more seriously. I've heard that from actually a few different people. I don't know if that's true. I don't have any evidence of that, but it's interesting. And then another interesting example is Korea. So d spread, which is like, they're a great organization in Korea. They do a lot of research and data. I was asking them about this and they noticed a very noticeable surge in like crypto investors. And just like a Basically a huge surge in market sentiment between October and November of last year, basically from the election. Now again, can you say like 100%? This is because of the election, but it did correlate basically when Trump was elected. We just saw, we kind of saw the immediate impact on Korean market sentiment and they attribute that to Trump winning the election and this idea that we were sort of, you know, entering a crypto friendly era in the United States. So there's definitely a lot, like anecdotal evidence abounds.
- [15:09]
C
Yeah. Just to supplement, definitely from a Chinese perspective, there was widespread jubilation in the crypto communities, particularly the Chinese crypto communities were like, oh, Trump's winning. Our, all our bags are going to go up. You know, all that kind of stuff. Right.
- [15:23]
A
And just to understand when you say Chinese, because like, technically crypto is banned in China, so how are you defining that?
- [15:30]
C
Yeah, so quick distinction here. First of all, trading of bitcoin would be not allowed, but owning a bitcoin in China is actually not allowed.
- [15:39]
B
And trading of crypto is happening all the time. I mean.
- [15:42]
C
Yeah, and, and, and, and to be clear, I think China is very well aware that especially during sort of both the changes or the addition of Article 23 in Hong Kong and the sort of COVID sort of crisis that that Hong Kong had a lot of that Chinese capital that was involved in some form of fashion, crypto moved to Singapore. And that's actually one of the drivers, I think, where Hong Kong also decided to be much more pro crypto with of course, the blessing of China. Like nothing happens on those type of policies front without the approval of China. And you know, it's also important to remember that, you know, Xi Jinping in his address did say, you know, blockchain and web 3 is strategically important. He didn't mention crypto and certainly isn't talking about trading. But that, that has been already more than hinted. You know, last, I think it was at last year or the year before, I don't remember when there was a sort of a big, I think it was fintech week in Hong Kong and there was a show in China about bitcoin on cctv. Now you just have to sort of understand that when something is shown on CCTV, that doesn't just happen without the blessing of basically multiple sort of ministries and so on. Right. And a show that discusses bitcoin in Hong Kong. So it's very much correlated between that. So, so yeah, widespread jubilation, at least, you know, at the time. Not sure at this moment in time, a Lot of people like, oh, my goodness. But certainly at the end of close of 24, everyone was super optimistic. The other thing to understand is that the youth, particularly in Hong Kong, and particularly in Hong Kong, tend to be very, very pro. Pro Trump to begin with. Right. And so. So that kind of sort of added on top of it. They are the majority of the crypto owners, and they also happen to be pro Trump because they agree with his general perspectives, which is kind of funny because I don't think they really look at it from an American sense. They just look at it from the perspective of, you know, how does it impact me in sort of me in Hong Kong. Right. And it's not just in crypto, but in terms of policies towards China. They think that Trump might be better for them. Not sure they think that anymore, but at the time, that's certainly, you know, what the sentiment was.
- [17:45]
A
And wait, I don't understand. What is it about Trump that they felt like would be better for them? It's not related to crypto. It's.
- [17:54]
C
No. So. So if you look at, for instance, what happened in Hong Kong with the Umbrella movement, which is largely passed, right. And it's. I wouldn't say it's the majority anymore, but there was very much a sentiment towards trying to keep Hong Kong, sort of Hong Kong enjoyed this very special status which it has lost because of the US but we get into that maybe later. But at the time, Hong Kong was a special status, and there was a hope that amongst a certain group of people in Hong Kong which tended to be demographically younger, that Hong Kong would somehow splinter off. If you remember, there was a whole Umbrella movement thing. And that obviously sort of is gone and no longer an issue which is actually good for Hong Kong. But broadly speaking, that sentiment that. Let's call it sort of sort of we need someone who is tougher towards China, so to speak, sort of, that sentiment sort of persists. Having said that, you know, I think there's an ignorance there. And the ignorance is, of course, that, you know, this administration doesn't really care about China or Hong Kong. And in fact, the decision to place Hong Kong within the same sort of framework as China and removing its special status basically is just a way for sort of the US Government to basically try to strangle the sort of international finance arena that. That China has through Hong Kong. Right. And so to understand the entire sort of, I guess, crypto and sort of blockchain lens of China is to think of it as how it navigates through Hong Kong. Right. You can't look at it from within China. You have to look at the policies that are happening in Hong Kong as that proxy. Right. When they look at their stablecoin regulations, when you look at the exchange licenses, all of these advances are happening with, of course, the blessing of, you know, of China is essentially the way that Hong Kong has already navigated today. When you think about things like dim sum bonds, the whole sort of Chinese bond market is exporting to the rest of the world through Hong Kong. And when you think of that from a sort of geopolitical standpoint, what happens in a world where more sort of countries are starting to buy essentially dim sum bonds more than they're buying, for instance, U.S. treasury bonds as an example, or there's a balancing act, you can totally see why that would be something that the US Might not really be very happy about. So it's very much at the center of geopolitics.
- [20:08]
B
Also, just to. Just to add one thing, and on one level, it's actually also incredibly simple. I mean, you know, there are different, like, prices for bitcoin in different countries in the world. So there was a very obvious Trump bump, you know, when like, he got elected, there was a lot of a widespread view that, you know, his election was good for bitcoin specifically. And of course, that just translated all over the world. So bitcoin investors all over the world are going to, you know, react to this news. So that's just, you know, on the most simple level, it's just kind of about price and Trump's impact on price, which reverberates throughout the world.
- [20:38]
A
Yeah, And I did also want to ask, like, when Trump established the strategic bitcoin reserve, did that have any impact in Asia where people felt like maybe they either wanted their government to do some similar things or there was even, like, political chatter, maybe, at least from.
- [20:55]
C
A Hong Kong perspective or Singapore perspective. What I know, there was no conversation around, oh, look at that. Let's add bitcoin to this. I can tell you that the. At the Advisory council, the discussion of other industry leaders, not myself, who've been trying to sort of suggest that Hong Kong should have a bitcoin reserve has been sort of, you know, has been pushed and the reactions generally are like, you know, noted. Right. Nothing much further than that. But there are Asian countries like Bhutan, for instance, who have made a fairly big deal around the sort of bitcoin outside of the sort of mining process that they have, but sort of continuing to invest in bitcoin and trying to bring that crypto community into essentially sort of their new, I guess, satellite nation that is supposed to be constructed in a crypto friendly way. I will maybe also add one other thing, which is that for a while, places like Hong Kong and to an extent Singapore and of course Dubai have really benefited from this kind of regulatory arbitrage. And I think people saw that as an opportunity. Because the US was so hostile towards crypto, Hong Kong actually decided to take that direction as well to bring in talent. And it really helped in a couple in the beginning. I think this obviously changes and the conversation has framed itself a lot more into, you know, realizing that the US is becoming much more competitive, that it's trying to become, you know, the crypto capital of the world is trying to bring that talent back or retain it, which it had lost. And so there is sort of thinking around that and the conversation there. So which I think is good because it just means more competition and more choice for entrepreneurs to choose the most ideal places they want to work from.
- [22:31]
B
Although I think it's important to add a really important footnote here, and this is something that Laura, I've seen talked about on your other shows. You know, one of the main issues with the us, and we've talked about this a lot, is not just like friendliness to crypto or lack of friendliness to crypto, it's a lack of regulatory clarity. Right. And that's something that Asia generally has. I mean, you can, you could argue that a lot of Asian jurisdictions are too strict, but they're generally pretty clear. I mean, there's a lot of things you can't do, and they're really clear about that. And in terms of the us, I mean, clearly there's been a really big vibe change, but like, in terms of regulatory clarity, that there's not that much of a difference. Right. I mean, we're not seeing, like, I mean, I know that maybe, maybe we're working towards that. I don't know. But like, that's not something that we've seen since the election really, you know, So, I mean, in that sense, I mean, depending on how you define competitiveness, if competitiveness is just, you know, politicians saying, we love crypto, okay. But if competitiveness is actually having rules where, you know, what a security is and what a security isn't, you know, and you have like clear, you know, rules of the road, so to speak, I don't necessarily know if the US has really like increased its competitiveness in that area thus far.
- [23:34]
C
Yeah, I think the US's biggest advantage is of Course, the fact that it has access to the most capital. So in other words, that once the regulatory framework, and I think some of the very big players are still waiting to see, you know, what is that clarity in terms of, for instance, defining securities and utility tokens that's up and coming, or the stablecoin regulation that's about to happen. We hear about it and we expect it to happen in, you know, maybe the next quarter or something or before, but we don't know for sure. And so that's going to sort of, sort of dissuade the larger entities to go into that for the time being. But once that done, once that happens, I think you'll see a lot more activity. Whereas for instance, in Asia, I mean, for instance, you know, like in Japan, right. They were actually one of the very first, if not the only country for the longest time that actually had a regulatory framework for listing utility tokens. I mean, that's something that most people don't understand or appreciate that, yes, it takes a while, but you have a totally complete compliant legal framework by the GFSA to do that. Whereas other countries though, I think are going to sort of do away with that. So this thing that was an advantage in Hong Kong, sorry, in Japan is now maybe potentially a disadvantage because other places like Hong Kong and Singapore may follow a view driven somewhat by the US from a competitive standpoint to say, okay, if you're a utility token and you're defined on these broad parameters, it is not considered to be under the purview of the, you know, of, of the SFC or whatever, securities regulator. And therefore it opens up, you know, a different sort of competitive landscape because you no longer need to have an approval. You just kind of launch it as long as it fits these parameters. You know, the local governments have already made sort of quite clear that NFTs, for instance, are not in that category. Right. I mean, in the US the SEC was like NFTs, yeah, it could be a security. You know, they went after stoner cats and they went after Yuga and they went after opensea, whereas in Asia they didn't do any of that. They actually were fairly clear that they wanted more like sort of industry self regulation as opposed to sort of, you know, regulate from a security standpoint. So that already has been happening and has been helpful in building out the ecosystem in at least our part of the world.
- [25:35]
A
Yeah, I did actually want to ask, because I saw this stat. I believe Asia has perhaps the largest crypto adoption in the world. I saw this CoinDesk report that estimated that the region has 22% adoption. They did a survey, I think it was, of 10 Asian countries, and worldwide adoption's at 7.8%, they estimate. So I wondered why you thought that was. I don't know if it's because of these regulations that you were talking about or what all the reasons might be.
- [26:03]
B
I'd really have to look at that data. For example, like, what countries are they talking about and how do they define adoption? Do you know what I mean? Do they. Is adoption defined as like people who have like the number of crypto accounts on exchanges or are people actually using it as a form of payment? You know what I mean? So I don't know. I'll turn that over to you. Yeah, but I, I'm kind of like, I feel like that some of those terms can be a little bit murky.
- [26:22]
C
Yeah. And I think it also, to your point, crypto adoption, different countries will be different. So it's like, you know, it's like saying European crypto adoption or, you know, Pan American crypto adoption. It's like Asia is defined very differently. For instance, I would imagine that crypto adoption in Japan is notably smaller than places like the Philippines or for instance, Korea, broadly speaking, because of, you know, not just the tax situation but also the relationship with money. So generally speaking, what we've seen, at least from the perspective of product and product adoption just anecdotally as well and sort of stat wise as well, is that places like Philippines and Indonesia, for instance, and Malaysia as a ratio are fast adopting because they essentially are in Vietnam, for instance, because they're essentially means in which you have new income sources and you have new economic opportunities. And that's something that, you know, you couldn't really see before in these places. And it also opens up international markets. Right. So that's obviously one area of growth. But the other thing I would also say, remember if you look at sort of particularly sort of that Asian territory growth, Japan exempted. These are countries that have had nothing in the last sort of 40 years ago and today have become somewhat economic powerhouses or in some cases really significant. So take South Korea an example. Forty years ago, South Korea's GDP was smaller than North Korea. I mean, let's just let that sink in for a moment. Okay. And now it's the 12th largest GDP in the world, and it doesn't have resources or oil or anything like that. It's pure human raw potential. But it also was really around the fact that it embraced a capitalist framework and it had Property rights. And it had, you know, quasi democracy. I mean, they had all these topplings and overthrowing and every president seems to go to jail. But still there is a democratic framework around the protection of property rights around the jurisdiction as sort of a legal framework which allowed essentially for capitalism to thrive in, you know, whatever complex manners. And that thinking is in living memory of that generation. So my parents generation, for instance, had nothing in China, like they would not have any ability to own anything. And that generation that grew there became wealthy from ownership of things and from having a stock market suddenly they didn't have before. Right. So they appreciate the benefit of sort of these, let's call it, capitalist values. And I can say this as a Chinese person and certainly my peers, when we go all over the world, we always like to compare real estate prices and we always like to look at different things and we always quantitate things in value because that's how we've been brought up. So our relationship with money, which is essentially sort of much more friendly and more open and more welcoming, is therefore much more compatible with crypto. Coming from the European lens. You know, I grew up in Austria and we don't talk about money. In fact, money is something you just, you know, it's like rude to talk about it. Right. And so, so, and especially in the circles that my mom was in. And therefore, you know, we know nothing about it and we're critical of it and we're fearful of it. And so you have that sort of dimension where therefore these places that tend to be critical of money, generally speaking, and are also critical of crypto. So is it therefore a surprise that, you know, financial centers like Hong Kong and Singapore were amongst the fastest growing crypto markets from an adoption standpoint? I don't think it's a surprise at all. It's because it relates to money and we need to be comfortable with that. And I think the places that are comfortable adopt faster. So I subscribe to this view that generally Asia would grow faster than the rest of the world because of that. I think there was a saying, I don't know who said it first, but I think the American dream is much more alive and well in Asia than it is in America.
- [29:53]
A
Actually, before Emily speaks on this, I just wanted to mention about how you were saying that across the region adoption is really different. That same CoinDesk report had adoption amongst Internet connected people in these different countries. And you're right. So Thailand they estimate, is at 43%. UAE, 37%, India, 32%, Philippines 31%, South Korea, 28%. But the Japan is only at 12%, China is at 17%. They had Australia in there as well, and that's 18%. But yeah, I, I think, you know what you were saying about how for some of the poorer countries, this is like a way for them to make money that wasn't available before. Which. Yeah, would explain why we see such huge differences across the region.
- [30:45]
C
Sorry, I want to add one more point about South Korea, for instance, and I think there's some distinctions here. Right. So in South Korea, you don't have a defi market, which is very different from other markets. So South Korea, all of the activity is in the exchanges for the time being. And I think there was a stat that Mr. Was saying something like the, I think 60% of the youth under 30 basically own most of their assets in some form of crypto, but it's for predominantly speculative purposes, which I think is the reason why sort of the Korean trading market is so active and frankly crazy at times, but it doesn't roll over into defi activities which you would see elsewhere around the world. Right. And just going quickly around sort of the Japan conversation, you know, the anecdote here would be, and I think Emily would, can probably comment on this far better, but Japanese have a relationship with money much like the Europeans do, which is that it's complex, but it's not something that you openly talk about. And you know, and it can be sometimes critical for people who make too much money in contrast to other places. And therefore, I think crypto adoption is also maybe related to financial literacy or at least to comfort with finances.
- [31:53]
B
Yeah. And I think with Japan, again, it depends on how you define adoption. But I mean, if adoption is like, you know, trading on exchanges, I mean, you know, as I mentioned, this tax issue is a really big one because why are you going to sell your crypto if you're going to get charged, you know, 55% in taxes? I mean, that's a pretty big disincentive. But also, I think, you know, with Japan, and this is a conversation that's happening around the world, there's, there's the use case question. You know, what are the use cases? For example, you know, one of the headlines about Japan that I don't think got enough attention in the rest of the world was that Japan was perhaps the first major economy to actually have comprehensive stablecoin regulations, but it took a really long time to actually get stablecoins into Japan. USDC just launched in Japan, but it's basically it's taken a really long time. And part of it is because the regulations are very strict, but the other part of it is there are just sort of questions about like, okay, Japan has a lot of different forms of digital payments, you know, like, what exactly is the use case for stable coins? I think people are still sort of grappling with that and still figuring that out. And I think that's a question just all over the world, Right. It's like, what, what are the use cases here? Like, what do we actually need that's for other than trading and speculation?
- [32:55]
C
Yeah. And if you look at places like Hong Kong, Taiwan, Singapore, for instance, which have a large, let's call it labor sort of export market with, you know, basically the domestic helper industry here in Hong Kong, for instance, you know, you have a perfect use case here, which is remittance, Right. For a fraction of a cost, you don't have to, you know, you don't have to pay anything. In contrast to using something like Western Union, where from a percentage standpoint, it's significant relative to the money that they're sending back. Right. And so the use cases are much more apparent in those places. And frankly, I think it's also one of the reasons why it's attractive for places like in the Middle east, not just in uae, but, you know, basically all of the sort of overseas workers that are working there literally in the millions. You know, this becomes a very, very simple use case. And stablecoins is probably one of the most obvious ones, which is also one of the reasons why Hong Kong has started to regulate around this and soon, hopefully will come out of sandbox mode and launch actual live stablecoins in Q3 this year.
- [33:57]
A
All right, so in a moment, I will follow up with Yad about how he said Koreans aren't using DeFi, which I found interesting. But first we'll take a quick word from the sponsors who make this show possible.
- [34:05]
B
Hi, I'm Matt Hogan, CIO of Crypto Asset Manager. Bitwise, look, crypto can be confusing.
- [34:12]
C
There's so much noise and the space changes so quickly. That's why every week I write a.
- [34:17]
B
Five minute memo on the biggest stories impacting crypto.
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C
In plain English, why is bitcoin up or down? What are people missing?
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B
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C
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- [34:46]
A
Did I mention we love hearing from our listeners on Apple podcasts? Stavorelli wrote best info through the bear market. This pod kept me alive. We're happy to hear it. And on our interview with Guy Young and Carlos domingo about Converge, PrecisionLedger wrote, awesome interview. Lays it out perfectly why LT roadmap is the most advantageous. Again, if you have something you want to share on the show, please write a review or leave a comment on an episode on YouTube, Farcaster or X. Back to my conversation with Emily. And yet, so, yeah, you said something super interesting. You said, in Korea, people aren't really using defi, they're only using like exchanges and trading. Why is that? Like, it's not like, I don't know, I don't think that defi protocols have cut off access to Korea. Or maybe they haven't. I didn't know.
- [35:29]
C
Well, first one is a regulatory one, the opposite of what's going on in Japan, which is essentially sort of no taxes. And one of the interesting things about trading in Korea has become such a hot topic for the youth because so many people have it that various political parties, in order for them to get elected, are effectively agreeing to defer the whole tax discussion, which they've been trying to tax sort of, you know, basically crypto trading, but they haven't. So that's kind of one incentive. So if you make money and then you basically create gains or of course lose them when you're trading, you don't basically have to sort of, there's no sort of taxes in the same way.
- [36:04]
A
Okay, wow.
- [36:05]
C
Right. So that, that's, that's actually, it just kind of demonstrates what, you know, what, what policies do to a market. Right. And what kind of impact they can have in a macro sense. But the other two factors we probably shouldn't forget is what happened with Terra Luna. Right. Terra Luna was probably the biggest potential sort of defi play from a Korean perspective and its spectacular collapse and everything else that of course we all know about sort of shied away a lot of people from this idea of building on chain. A lot of companies were sort of doing stuff, you know, back then, you know, on Terra. And the other one, of course, was that the other sort of big story at the time was Clayton, which has since merged. Right. But at the time, you know, the whole cacao framework was very hopeful, but wasn't able to sort of bring sort of that kind of adoption and didn't really work out the way that people hoped. And so you've had more sort of, let's call it somewhat failed sort of, I guess, Defi and on chain experiments. And unlike other parts of the world, Korea has a fairly insular economy from a language and culture standpoint, by design originally, but that created a very domestic online culture, right? I mean, you don't have Google there for protectionist reasons, right? You don't have Facebook there for the same reasons. But that means you have. People are navigating and searching things differently. When you use Naver or use NHN or you know, when you use sort of, you know, cacao, there's a different cultural context to where you use it than you use it in the rest of the world, creating different type of norms and cultural sort of meanings. And therefore the adoption of, let's call it, you know, Western approaches is not the same. So you do have that sort of, sort of, I guess, semi isolation that sort of impacts that as well. So all these different forces essentially are making it harder for Defi to adopt. That said, one of the hopes that we have with Mochaverse and with skplanet is that we can basically create enough incentives in the Korean market for people to go on chain. Because at the end of the day, if you can make better yield, if you can get better rewards, if there's long term, better benefits, then what's the difference between being an exchange or basically doing it on chain? So that's kind of the goal. But it is going to be a much longer road. It's not going to happen overnight.
- [38:15]
A
Wow, that is so interesting. I don't know how I forgot that perhaps Terra Luna might have had some effect on that market. So I actually want to circle back to something that we started to discuss which was stablecoins. And we're in this situation where 99% of all stablecoins in the world are pegged to the value of the US dollar. But I wondered, I don't know if there's any demand for local fiat denominated stable coins. And then both of you have kind of referenced the different stablecoin legislation in some of the different jurisdictions and I wondered how any of that is affecting, you know, the way entrepreneurs are approaching this area trading activity or just even uptake of usage of stablecoins.
- [39:01]
B
Yeah, I mean that's a, that's an interesting question. So I mean, Hong Kong, like different stablecoin regulations are different. So Hong Kong stablecoin, they're allowed, it doesn't have to be an HKD stablecoin. It can be, you know, different. It can be backed by different fiat currencies. So that's sort of explicitly laid out in the regulation. So you know, we'll see what happens. Right. Like once, once that actually becomes law, you know, we could easily see non HKD stablecoins. That's allowed. Japan's an interesting story because Japan, you know, you can have JPY backed stablecoins, you can have USD back stablecoins. You know, so far we really have the only kind of widely acknowledged stablecoin right now is usdc. There are some very specific barriers that are preventing JPY stablecoins. So, so for example there's this is again in the regulation if you're a JPY stablecoin there are certain restrictions on how you can sort of invest the reserve assets and it basically has to be in bank deposits and that's basically no interest. So there's not really a business model there. Whereas like for the US dollar back stablecoins you have a little bit, you're more exposed to kind of like US dollar interest rates as opposed to jpy. So it's a little bit, there's a little bit more like fluidity there. So that's like one specific example of why we're probably, there's probably some delay on JPY stablecoins in Japan. But yeah, I mean I think like, I think that prob of the reason why at some level Japan wanted these stablecoin regulations was to see kind of like a JPY stablecoin, you know, come into play at some point or, or other. So yeah, I don't know. Yeah. If you have anything to add to that.
- [40:25]
C
Yeah. And maybe just to add on the Japan front, you know, one of our key shareholders is, is MUFG is you know, one of the largest banks in the world and they explicitly cannot do stablecoins for the time being. Although I think there wasn't hopes and ambitions to do that. So there, the, you know, the regulatory framework for them is, is a little bit more prohibitive for the time being. Whereas in Hong Kong we have a joint venture with Standard Chartered which is a note issuing back in Hong Kong to basically issue a stable coin. And right now it's in sandbox mode. And so it's quite different from that perspective where you have a large major bank in Hong Kong basically partnering with a Web3 company which is kind of interesting. Right. It's kind of like imagine what would happen if there was a big bank partnering with not an exchange necessarily, but like a Web3 operator of some sort of, to basically launch something for you Know, the fusion of these two markets which is basically bringing Web2 users into Web3. And for bank, it's of course important because they can basically do all of their sort of transactions over a stablecoin. The current framework is a Hong Kong dollar based stablecoin, but because it's HKMA licensed and this is kind of again a differentiator, most of the stablecoins, if not all of the stable coins out there are a combination of different licenses from different regions, you know, put together for like payments or for custody. But this is a specific stablecoin license which perhaps the US will do as well. But that possibly makes it the first jurisdiction that has a sort of stablecoin issue license from a central bank. Right. So that's kind of interesting as well. Right. I mean it's, it's, I think it hasn't happened before and so that's unique as well. And so you think about what's the opportunity and why is that important. So first of all, Hong Dollar is a safe way to do it because Hong Dollar is maybe you could describe it as the OG Stablecoin, Bitcoin because it's pegged to the US dollar and that was strategically done so. Right. And it was pegged to the US dollar because it was the clearinghouse for international markets. And you know, when you talk to the hkma there's absolutely zero indication that will ever change. A lot of people are speculating, oh it's going to, you know, change the peg to renminbi and whatever. Not going to happen. At least not going to happen until sort of, unless Hong Kong doesn't want to be an international clearinghouse. And just to be clear, Hong Kong's strategic role for China is that, that it's the one thing that Hong Kong can do that nowhere else you can ch you can deal with in China in terms of basically trading foreign assets, trading shares, bonds and all that kind of stuff. Right. And I think there was a recognition and I think in the US they recognized strategically at least the current administration that the stablecoin is a different way of extending dollar hegemony. And I think they wanted to continue to do that. And especially in a market where with Pan or China or other places selling off basically their T bills precisely because they have to manage the market or because they need to have less dependency. Stablecoins is actually the way in which you can further the trade and the value and the importance and influence of the dollar. So if you're China, how do you respond to that? Nobody's going to Trust the CBDC in China, I mean they're obviously doing that, but people aren't going to be holding that. And I think the one thing that you can sort of recognize about China is that they're quite pragmatic and practical. So issuing a stablecoin out of the one market that is trusted in the international financial markets from a clearinghouse standpoint is Hong Kong, right? I mean Hong Kong I think is the largest sort of non Chinese sort of renminbi clearinghouse. I think we do over, I don't know, it's like two or $3 trillion of renminbi a day. So that's like 200 to 215 or $20 billion a day in renminbi trading through Hong Kong. I mean people, you know, it's of course much smaller than US dollars overall, but from an influence standpoint you can kind of see where that's going to go. And especially in light of what's happening with tariffs, it becomes even more important. So you can expect that the stablecoin in the future isn't just going to be Hong Kong dollar based, which again is safe because it's US dollar pegged. It can extend into other currencies. And I think the big opportunity sometime in the future is probably CNY flows. When that happens. Don't know. There's a lot of work that has to happen but I think that's the real opportunity.
- [44:12]
A
And you kind of referenced this earlier but I want to dig into it a little bit more because I. So first of all, Emily was like, just because trading crypto is banned in China doesn't mean people aren't doing it. And then you talked about this special on bitcoin on CCTV which being a journalist I just have to point out that media encrypt in China is very much top down. It's coming from the government. Somebody might use the word propaganda for it. But I did want to ask just you know, does it seem like there's been this theory floated that China is using Hong Kong as this testing ground for crypto policies that it could potentially bring over to mainland China? And I wondered like if you thought that was a legitimate theory or how you're reading any of these signals for what it means.
- [45:07]
C
I've heard that many times. So I think first you gotta understand what is the Chinese lens overall and the Chinese lens overall. And I think the most of the west misunderstands this deeply. It is not sort of, you know, sort of conquest of the outside world, you know, that kind of sort of stuff, Right. It is mostly as generally around stability and harmony within the. It's. It's within China. You have to understand that China sort of. It's a homogeneous society, more broadly, Han Chinese, but historically has always been ruptured from within, like histories of revolutions. Typically when you look at dynasties, you know, there's a flood, there's a revolution, right. That's kind of sort of the history around sort of, you know, what happens in China. And it very much shapes their policy and thinking. So it is about internal stability. So the one thing we should not expect, therefore, because it's inherently unstable, is when you have speculation that is fairly rampant, right? So in a classic sort of trading world, in crypto, it's going to remain speculative and volatile, and that's what China does not want, which is the reason they talk about blockchain and they talk about Web3, but they're not going to talk about trading and speculation. So I think this idea that people are going to start trading crypto the way that we do in the rest of the world, it's a bit of a pipe dream. I mean, you know, it's a nice narrative, but I don't think it's going to happen. But it can and will happen through Hong Kong. And that to me is, you know, sort of what Hong Kong's role has always been, because Hong Kong is contained. It also has a very, very high financial literacy rate. People kind of know what they're doing, and there's a legal system that deals with this. If people are upset in Hong Kong, they know what they're getting into to. If you have a whole bunch of people in Western China getting accepted or losing money, they're not going to understand this. It's totally different situation. So we have to wait until those markets become much more financially literate overall, which will take a while. China has lifted 4 or 500 million people out of broad poverty in the last 20 years. The one thing they don't want to do is create something much more unstable overall. And we can agree or disagree in the method in which they've done it, but take a look at what they did, for instance, in terms of policies around. And if there's stock market instability, literally, CEOs can't leave the country and they can't spend certain things. This can never happen in the West, Right? And it's not because they're worried about people sort of taking money out per se. They want to make sure that people are accountable and that they're trying to solve the problem because of the fact that they want stability in the country. When they went after, for instance, the tutoring companies, I mean, this is the other story that perhaps people in crypto don't know, but they basically killed all the tutoring companies in China. Why did they do that? Because it was a hugely, hugely profitable business because every Chinese parent wants to make sure their kid is well. But what they did was they basically outlawed it because they sensed that it was creating great inequality. The people who are able to basically pay for better education can then send them to better schools and then create a more unequal society which creates sort of these pay differences. And they basically went after that. And from an economic standpoint, it was a disaster in the sense that companies went to zero, investors lost money, but broadly speaking, they felt from their policy standpoint that that was a better, more fair outcome to ensure long term stability. Again, we can agree or disagree, but that's their frame of mind, right? And so therefore I don't believe that the way that we hope, some people hope crypto speculation and trading will happen in China will happen anytime in the, maybe even distant future future. But Hong Kong will be that playing ground as it is already today in other financial sectors for Chinese.
- [48:32]
A
But then just finish the thought on when you talked about how they showed that bitcoin show on tv, like what, what interpretation do you have of that?
- [48:41]
C
Well, first of all, it's to acknowledge Hong Kong, right, as a center. And one speculation would be that I think China already knows, as most people know, that there's a large number of very wealthy Chinese that own bitcoin coin, right? So that's not a, that's not a secret really. And, and it's, it's a little bit like sort of the classic sort of, sort of, I guess, sort of thing around, you know, let's own some real estate overseas, let's own some assets overseas, let's hedge ourselves, right? And during COVID and because of what happened earlier in Hong Kong with the protests and the sense of sort of insecurity, a lot of that money had moved to places like Singapore. So you saw a flood of basically sort of, I guess call it that our capital moved to Singapore for that reason. And that's just another way to say it's okay to do it in Hong Kong, right? And if you're thinking about owning crypto, maybe you can do this in Hong Kong and don't move it away from a place like Singapore in which China has zero influence on. Right? So that's kind of one aspect. But the Second thing was also really, you know, they didn't talk about other tokens. They specifically talk about bitcoin. I think there is a recognition that bitcoin is something the thematic overall for the. The last couple of really not capital years, but more than just a couple of years, is a broader theme. And this isn't just Chinese around de dollarization. And de dollarization doesn't mean to say that we want the dollar to go away, not at all, but rather de dollarization is more around making sure that the dollar can't be weaponized the way that it is. And there are basically counterbalances. And that's very much thematically there when you think about bitcoin as a potential force around that. And I do think that people recognize that. So you can't trade. And again, as I said earlier, owning bitcoin in China is not the problem. Trading it is the issue. Right. So if you want to own it somehow, some way, somewhere that in and of itself is. Is not illegal.
- [50:23]
B
I have a slightly different take on this. So. So, like, I definitely agree with what. Yeah, I mean, the idea of stability. Yes, that is absolutely true. Like, that is a cornerstone of sort of everything that goes on in China. But I've sort of argued for a long time that crypto isn't actually really banned in China. Like, that's not really true. Like, that's just kind of like a media trope that people say. But like, you know, like, if China actually really wanted to ban crypto, like it would, like, you know, China's pretty good at banning things when it wants to do it. There are. It's not that hard to trade crypto in China. So the question is, is like, why is this happening? It's not. For example, here's the problem with. Here's the problem with the Chinese market is that we don't have a lot of data. It's a black box because there aren't, like, exchanges openly operating in mainland China. When there were, you know, back before the crackdown in 2017, we could see that China was like the largest market in the world. Now, we don't have that exchange data to point to, but sometimes that data leaks out. And the last time it did was I think, you know, a couple years ago. I think it maybe 2023, when the wall Street Journal had access to binance data in China, they did a big report on it, and they found $90 billion of trade in one month in China. Okay. Now there is no chance that this is happening. And Chinese authorities don't know about it, like, absolutely zero. Like, that's just not. You know what I mean? If there's this huge thing in the Wall Street Journal, like, that's, there's. That's just not happening, right? So the question really is, is like, why is there this sort of, like, de facto ban and yet there are people trading and China is, you know, letting it happen to a certain degree. Basically, what China did is this. And again, I agree with that fundamental argument about stability. It's all about stability. What China didn't like was what was happening in 2017, where, like, everybody had an ICO. Like, like, it was just like a ridiculous. I mean, it was totally out of control. It was like an ICO mania. And like, yeah, they weren't into that because again, what they didn't want to happen was that, like, the average mom and pop user life lose their life savings in crypto and then they go to, like, you know, go. Go to Beijing and complain about it. That's like the last thing that China wants, right? So that's kind of when the crackdown happened. But that doesn't mean that they snuffed crypto out. Like, not at all. Like, hence what I just said about finance. Basically what they did was they. They raised the barrier to entry. So, you know, what it means is that, like, if you're just, like, really. Just want to really easily go and like, you're totally unsophisticated investor, you don't know anything about crypto or about trading, and you want to open an account and trade Remny, it's not that easy. But if you just, like, you know, have like, a little bit of sophistication, you know, there's a few little workarounds, it's actually not that hard, you know. So I think that's more of sort of like China's strategy. Like, they're not really, like, letting this pass by. They're just raising. They're raising the barrier. And then in terms of Hong Kong, I mean, this is like kind of the biggest question. Like, what. I think people generally agree, you know, as yet said that, like, Hong Kong is to some degree sort of this, like, gateway to China. But what does that mean? And that's where people disagree. Like, I've definitely heard some people say, like, oh, yeah, you know, know, eventually China is going to be open to crypto. I'd say that's the minority view. I don't think most people think that, like, all, you know, in five years, there's going to be just all these exchanges Openly operating in China because China also has capital controls. Like, that's a big part of the story. China is very strict capital controls, and they still care about that. So I don't imagine that they're suddenly going to be like, oh, never mind. You know, I mean, anything can happen in China. We have to also say that, like, anything can happen. So I could be wrong, but I doubt that that's going to happen. But clearly, you know, when you look at these exchanges that are investigating so much in the Hong Kong market, it is so hard to operate an exchange in Hong Kong. Right. For a while, there are only two exchanges in Hong Kong. It was Hash Key and osl. Both of these made a huge investment to do this. It costs a ton of money in terms of compliance. It costs a ton of manpower. It just caught a ton of resources. Hong Kong is not a big enough market to justify that investment. Right. And I think, like, if you talk to people of these exchanges, they'll basically say as much. So they're clearly doing it for like, a longer game and for like a, a bigger market. But, like, if you ask them, like, what exactly that means, I don't think anybody really knows. I don't think anybody really knows yet. Right. It's clearly like Hong Kong is a gateway to something, but nobody knows, like, exactly what that thing is going to look at. But I will say, like, the thing about China is that China is very capable of turning on a dime. Like, that's the thing. It's like anyone who says they know what's going to happen in China is just lying or just, you know, just dumb. It's like, nobody knows. Nobody knows. And so if China at one point decides that, that, you know, this is to their advantage to, like, allow a crypto market, like, they will do it and they will do it fast. I'm not saying that's going to happen. I'm just saying, like, you can never really, like, count anything out because things can always change and you just don't really know, like, where the calculations fall. But I'd say, like, for the most part, that doesn't seem to be in, like, the immediate roadmap for the reasons that I said for, you know, the, the fear of speculation for capital controls. And right now it's like, again, if you really want to trade crypto in China, you can find a way to do it. And so there's no reason to, like, open the floodgates, you know, as such.
- [54:56]
C
Yeah, maybe I just want to add to that, you know, it's an Absolutely Fair point Emily makes around, you know, it's the same for instance, when you look at sort of, you know, basically people using things like Tor and sort of, you know, bypassing the great firewall of China to get information and stuff. It's a minority number of people, generally speaking. Of course they know people are doing it. They're not actively hunting people down saying, you can't do this, but there's a sort of core that allows it to do it for the activities because they have reached a certain level of knowledge. And frankly, I think this is kind of what, what Hong Kong is good for. Because the kind of people who can park money in Hong Kong are not going to be your average sort of, you know, sort of Chinese person. They're going to be someone with a certain amount of wealth that can send their kids overseas that have certain kind of knowledge or they work for financial company or they work for some enterprise or, or that kind of stuff, right? And so they're the ones who can then basically partake in this stuff. And I think the big hope, hope for the hash keys, osls and the other ones who basically got their licenses recently, I think it's five in total, but might be more now.
- [55:48]
B
I think, I think it's 10 now, actually. I think, I think so we should double check that. But I think it's up to 10. But it was two for like a really long time and now I think it's. I think it's up to 10.
- [56:01]
C
But the point being that it's accelerating and it's precisely accelerating with the hope that in the same way that Chinese, when they come basically to Hong Kong and they can basically buy and do certain financial things they can't do in China, that same audience can eventually maybe also do it in crypto. So right now, for instance, Bitcoin ETFs and Ethereum ETFs are available in Hong Kong, but not for Chinese nationals. So if you're basically from China, you can buy a bitcoin ETF in Hong Kong at this moment in time, but maybe in the future you can and would make sense for it to do so. The other thing, to Emily's point, yeah, crypto isn't explicitly banned in the manner that people say it is. That is media bait for the most part. I would add that one big policy direction around that was around energy security and energy security and continues to be a big issue for China because they don't, you know, it's a reason why they invest in sort of green energy. They don't have access to the same oil reserves, they're being cut out of what's, you know, they did recently a deal with Saudi as a way to sort of establish that. But you know, they've been really cut out of the major, you know, classic fossil fuel type of sort of arrangements. And when you think about the size of its reserves, it is, is arguably probably one of its bigger national security concerns and also from a stability standpoint. So if you're going to use the energy to mine bitcoin, which hires basically literally nobody, but makes all sorts of money from an export dollar, or do you use the same energy to basically hire thousands of employees in that same province or region, what's going to have a more harmonious and better long lasting sort of solution for that society in that area? Clearly the one that hires thousands of people. Right. And so, you know, it wasn't that long ago where China still had brownouts and people had to quota their energy, which is the reason why they had to burn coal, for instance. So bitcoin is not, you know, mining is therefore, I mean, at one point I think China had like over 40% of miners. I mean it was, it was, it was insane. But it just didn't make sense for China because it was going to destabilize them in a different way. In terms of employment, for instance.
- [57:54]
A
Yeah. And actually you referenced briefly the digital yuan there. Are you getting a sense of sense that that is gaining adoption, that people are using it or.
- [58:03]
C
Well, I mean it's used, it's really for bricks and it's really, it's not going to be, it's not broadly used in terms of, because it's a cbdc, but from a, you know, brick settlement perspective, people will use the digital yen. But, but it's not, it's, you know, again, I, it, it's not getting the kind of adoption that I think a stable coin will ultimately in the, in, in the longer term, you know, so if you do trade, trade in business with China, it gets settled in Renminbi. Sure. But it's used as an intermediary. It's not used as a way to sort of store and hold.
- [58:32]
A
Oh, wait, wait, wait. And just to understand, you feel like it's that the government isn't even aiming for it to be used that way. It's only to just have trade with other countries.
- [58:42]
C
I can't speak for the government. I mean, obviously when you're launching an initiative like a cbdc, you're hoping for widespread adoption. But I think the widespread adoption, it's a little bit different from a stablecoin versus a cbdc, which is, I think cbdc. The way that they'd be looking at it is essentially as a, as a sort of, you know, sort of making it easy for remittances and transfer of money and obviously to some extent extending the influence of the yuan. But in the case of a stablecoin, there's also the aspect of basically holding bonds and treasury assets as a result of that. That's not what I think a CBDC would do in itself. Right. So I think it's maybe a little bit different. The other thing, of course, is that the monetary strategy of China, because it's a closed market, is controlled and therefore makes it very, very difficult for outside investors to, you know, you know, they want exposure. They can buy basically dim sum bonds, but they're not going to be, you know, it's hard, right? It's hard because it's a, it's, it's a closed capital market. Korea is the same, by the way. Korea has, you know, maybe a little looser, but has also a fairly close capital market, which is the reason why, why the crypto exchange world in Korea is so contained. And this is the reason why you have a premium in Korea because of the fact that you don't have typical sort of capital flows as you have in other markets.
- [59:58]
A
Okay, so basically those, those two governments are trying to kind of control their internal economies a bit more or something. Is that the way to think about it?
- [60:06]
C
It's a planned economy. China is a planned economy. And I think that's also one of the biggest, like, stresses. Right.
- [60:12]
A
But Korea is different because it's more capitalist, but they're just trying to.
- [60:18]
C
Yeah, so it's a. Capital, capital controls are still within Korea. You can't move money out of Korea that easily. And, and it's, it's very much, it's, it's a, you know, Asia has, you know, Asia has examples of countries that are sort of managing them in a way in terms of looking at the different investments around the world. I think, I think if you look at Saudi, for instance, it's the same as well. Right. So people outside might not appreciate that. Even the fact that they have one of the US's largest trading partners when it comes to oil and that kind of stuff. Actually, it also doesn't have free growth capital. So. Yeah.
- [60:52]
A
So, you know, before we, before we started recording, we also chatted briefly about Korea and Emily said something interesting. She said that Korea's lifting a shadow ban on Institutional crypto investment, which was interesting to me. So tell us about this shadow ban. And if it's a shadow ban, meaning not an official ban, then how do you lift it? And what do you think all this will mean for Korea?
- [61:16]
B
Yeah, so Korea is such an interesting market because generally speaking, like in other Asian markets, like you look at Hong Kong, for example, the Hong Kong authorities are sort of more comfortable with, like, institutional investment than they were with retail investment, right? Yeah. Like at first, you know, the doors were open to, to institutional investment before or to corporate investment, rather, before it was open to retail. Right. Like, there was this idea that, like, opening to retail was like opening the floodgates. Korea's kind of the opposite. So Korea, you know, has just been purely a retail market. And, you know, and when I mean shadow ban. So this is like something I've been sort of trying to figure out for a long time. Basically, like when I say shadow ban, it's like there's not this official regulation in crypto where it says, like, okay, you know, if you're, you know, if you're an institution, you can't invest in crypto. If you're a corporation, you can't trade crypto. But there's generally, like, the sense that it's not allowed, and there's a very strong sense that it's not allowed. And I guess, like somebody said something at some point, I've been trying for a long time to figure out exactly like, where the origin of this is, but it's generally just like sort of well known in Korea that this is something that you can't do and that is not looked well upon. So it's. That's what I mean by shadow ban. I don't think it's like, written in some regulation anywhere saying you can't do this. But basically it. I think it was in March of this year, the Financial Services Commission, the fsc, basically announced plans to sort of lift this kind of shadow ban on institutional crypto investment. Now, this is kind of like a step by step, piece by piece thing. This isn't going to happen like all in one, in one throw. There's like a bunch of things that happen. First, like right now, I think it's like, you know, it's open to, like, nonprofit corporations and law enforcement agencies can sort of open accounts and then like, eventually, like, we'll see more opening. But yeah, I mean, the short answer to your question is that, like, once this actually becomes a thing, like, like once Korea is no longer a purely retail market. Because one thing We've seen is that even as just a retail market, Korea is so powerful. Right. I mean, especially when it comes to things like altcoins. And this is something that's always fascinated me about Korea. There's just been so many times where like I've seen an altcoin just like shoot up seemingly for no reason. It's like, oh, it's something happened in Korea, right. It's something happened on UPIT or, you know, so, but. And this is purely the force of the retail market. So I think like, you know, once we have corporations kind of like entering the fray. Yeah, I think it's a really, really big deal. I, I don't know exactly when this is going to happen again. I think it's like a phase thing, but you know, it could be very soon and you know, definitely like the, the. It's been set in motion. So yeah, it's definitely a big deal. Yeah.
- [63:42]
C
Maybe to augment some thought some stuff around that basically market makers are not allowed in Korean exchanges. So technically there are no market makers operating there. So that's kind of one aspect. So the institutional side of crypto in terms of trading, for instance, is impossible. The second part, and I think it's correlated around areas around basically sort of capital flight. Right. For institutions, they just have the ability to move crypto around much easier, whereas with retail, that's not the case. Also in Korea, if you are moving money into your metamask wallet, you have to register that wallet, essentially kyc that with the Korean authority. So that's the other thing that entire country has a framework around where if you have a defi wallet, they know which one is your defi wallet. Right. That's again, something that is totally different in other parts of the world. So there's that aspect. And then if you look at Korea's history, elite's modern capitalist history, which is really just over the last three plus decades, it's always had to grapple with major corruption cases, which is the reason why every president seems to somehow land in jail of some sort of. And it's almost like a rite of passage that if you're a major CEO of a company, you at least flirt with going to prison, whether that's justified or not. That's just how the Korean judiciary has worked over the last few decades. And so I think there is that aspect as well, which is sort of this tension between the newly generated wealth which has benefited Korea, but also created that sort of, I guess, social political sort of scenario which, which, you know, talk to anyone in Korea and ask them about, you know, what's happening with the judiciary there. And they all have all sorts of stories to tell you, just because it's such a very Korean thing. Right. And you see this Korean drama, and it might explain why Korean drama is so incredible, because probably a lot of it is true. I don't know.
- [65:34]
A
I did also want to ask about potential crypto IPOs in Asia, just because we are facing this moment where potentially in the US we would have a number of. And I know that coincheck, which is a top crypto exchange to Japan, I did list on the Nasdaq here in the US In December. So I wondered if you could explain kind of like why they chose to list in the US and whether you thought we would see more public offerings from crypto companies in Asia.
- [66:04]
B
Yeah. So I feel like this is something that just didn't get as much attention just for how significant it is. So, you know, full disclosure, I'm advising Coincheck Group. I'm a senior strategic advisor there. But I say very sincerely that I think this has news value because. Because, you know, basically before they listed on the Nasdaq, there was one publicly listed exchange in the United States, which is Coinbase Global, Right. And now there's two, and one is Japanese. Like, that's really interesting, right? I mean, like, I feel like that's just a, you know, a very significant data point. And I think, you know, what's interesting about it is that, I mean, when you look at, you know, just sort of like, compliance. So, you know, Japan is, you know, quote unquote, crypto friendly, but it's also like, one of the toughest jurisdictions in the world to be a crypto exchange, right? So, you know, here you have an exchange that's regulated Japan, and then also kind of like manages to get, you know, through the compliance to list on the Nasdaq, that's like kind of a double, double hurdle there. And I think that's something that's very unique to sort of Japanese exchanges. But what's interesting about this is that this is. This story is not really about the Japanese exchange. This is much bigger than the Japanese exchange. Basically, this is a story about Coin Check Group going global. So, you know, why did they list on? So, first of all, like, just to be clear, this is not like US users can go and use Coin Check. Like, that's not what this means, right? That it's not like coinjack coming to the United States. Basically, what this is is it's kind of. It's Kind of an acquisition play. So basically the idea is that like Coin Check Global wants to basically Check Group wants to basically go global and, you know, kind of acquire and they see sort of like NASDAQ stock as like an acquisition currency. So that's really kind of. And so, you know, so basically this story interested me for two reasons. Reasons one, the fact that the second publicly listed exchange in the US is a Japanese exchange, which just seems like, just very interesting from the standpoint of like crypto history. And also just the story of kind of a Japanese company going global and, you know, aspiring to become like a player, you know, on the global stage, I think is also very significant because we don't always sort of see that. So, yeah, that's what it's about. It's not about like opening up Coin Check Exchange to US users. It's about, you know, using NASDAQ stock as a kind of acquisition currency and kind of becoming an even bigger player globally. As for your other question, yeah, I think we are going to see more exchanges listed. You know, it's been kind of, you know, slow to now, but I think, yeah, that's going to be something. I anticipate we will see some of that. I know that there's been a bunch that's been trying to do it for a while, but it's tough, right? I mean, there's a lot of regulatory hurdles to get through in order to do that.
- [68:22]
A
Yeah. And just when you said this was interesting, given Japan's history in crypto, I think you're referencing Mount Kong Bucks, which is probably why they have these strict regulations, but it's also why things like when FTX went under than FTX Japan customers, they got their coins back in a very orderly fashion and very quickly. Yeah. Were you going to add something on there?
- [68:45]
C
Yeah, so quickly. I mean, I think we should definitely expect a whole bunch more IPOs, certainly within our portfolio. We're seeing a lot of conversations and discussions about sort of of, you know, listing some of those businesses, not necessarily all big ones, but there's thought around that. Should also remember that, you know, in particular, Japan had a number of companies that were actually engaged in crypto gaming as a public entity. I mean, we were a public entity ourselves as Animoca Brands in Australia when we engaged in crypto, which is the reason we got delisted. That's a different story. But for instance, if you look at, you know, Japanese gaming companies, you know, there's a. There's a couple examples of Japanese gaming companies already engaging actively in Crypto, it's not just sort of smaller listed companies, but some of the largest ones out there that have basically built out Web3 strategies, whether this is Square Enix or Sega, for instance. Right. They, they've gone out and sort of said, we're going to do something. And most notably, obviously is Sony, you know, with the so on blockchain. Again, something, you know, to Emily's point, the west just doesn't really talk much about the fact that an enterprise like Sony, I mean, you know, one of the largest corporates in the world, launches their own blockchain. I mean, isn't that amazing news? Doesn't it show something that's happening in this part of the world that, you know, you can't yet imagine a major US entertainment corporation sort of would launch yet? I mean, it's like Microsoft saying, we're going to launch our own blockchain. I mean, that would make headlines. Right? So I think there's a little bit of that. And of course you have the, you have the microstrategy copycats like Meta Planet and so on that are sort of initially leading the way and demonstrating value. And therefore, or every, every listco is thinking about, hey, maybe I need to do something. There's a little bit of the fashionable element and you have a little bit of that hype. But at the same time you also have companies therefore thinking about, well, you know, what problem could I solve with that? And so I think it opens up these pathways. Right. Again, this is classic sort of capitalist argument. Sure, there's money to be made, but then if there's money to be made in a way that actually makes sense, that's better and more sustainable and they basically have an incentive to, to do there because it might help them and therefore build out or expand their businesses that they're already doing.
- [70:49]
A
All right, so before we go, I just wanted to make sure that we touched on gaming because for the longest time people have always said that that seemed like an industry where it seemed ripe for crypto to come in and take off. Because it was kind of. The gaming industry had been doing similar things in an analog fashion for a long time. And Asia obviously is a big gaming center. You, you just mentioned Sony and we have seen previous trends around crypto gaming take off in Asia. Even if they die down eventually, such as, you know, Axie Infinity, I think a lot of play to earn activity was in Asia. So can you just kind of tell us what you think of the current activity around crypto and gaming in Asia and you know, whether you think it's poised to take off?
- [71:37]
C
Yeah. So generally speaking, actually interesting enough, a lot of people don't talk about this enough, but 2024, in terms of crypto gaming adoption has been one of the best years ever. I think we closed the year with close to 7 million daily active players in Web3 gaming, which of course in the broader sense isn't that large. But when you consider where the market was in the sort of hypiest of days, which is like late 21, it was really only a million, maybe tops 2 million daily active players. So the numbers have gone up for a number of reasons. One, because of, in some ways because of tons of. Right. Basically Telegram opened up a distribution platform that didn't exist. I mean, most people don't really maybe know that Apple is still restrictive of using NFTs inside games. If you have a game and that uses NFTs, Apple actually doesn't allow that. Right. So that's kind of at least if it has utility. So that's kind of an example where distribution is sort of stuck. Steam is the same, you know. You know, so you still have those sort of, let's call it, you know, sort of, you know, old era sort of regulations or like a company imposition that has impacted, but it's still growing very well. And the combined market cap of sort of gaming tokens is probably somewhere between 12 to 18 billion dollars. It kind of depends on which day you're looking at. So in the broader context, not bad at all. But in the sort of context of broadly crypto, it seems bad. And I think this has a lot to do with the nature of tokens. So. Meaning that tokens are basically not only sort of demonstrative of the utility. I think for most of the token tokens that's not true. In fact, there's a mixture between the speculative quality and the utility quality. And while the utility of the gaming tokens has increased rapidly, the speculative aspect has declined rapidly because the macro sentiment on gaming has been broadly bad. So for instance, when you talk about AI tokens that have done really well last year, that's not to say that all the AI tokens are actually sort of booming in utility and are competing with OpenAI or that kind of stuff. Not even close. Right. And we're exposed in the market and we think they do great stuff, don't get me wrong. But there's no correlation between its market value and trading volume relative to its utility. That's sort of the nature. And our view is that tokens generally are sort of market priced information. So in other words, if there's a market that's happening in the global context, then there's going to be impact in the token because it informs and prices just like the stock market does. Now if Quantum is hot, Quantum stock prices do well. But you know, like seriously, right, like it's like you don't have a, you don't have a long, you don't have an immediate lens in where the utility happens in terms of suddenly we have, you know, functioning qubits next year, not at all. Right. So there is that aspect and I think tokens are very much because of its 24 by 7 nature in that area. And so gaming, most people might not realize if they're not in a gaming industry. Gaming has been on a slow decline post Covid. So it was on an absolute high now. So this whole sort of gaming sort of narrative in Web3 accelerated during the time of COVID What were we saying? We're saying we're only going to live online, we're not going to travel anymore, we're just going to be on these calls and we're just going to be playing games online because we have nothing else to do. And even after Covid we're going to think that's better and more efficient because introverts had a victory lap. But it turned out that most people were like actually, you know what? Revenge travel. We're coming out and we're meeting people and actually what happened was that gaming stayed largely flat but didn't increase. But what else happened? Well, a monetary inflation. So you know, the cost of milk went up, the cost of everything went up, but the cost of gaming did not. So you can still buy a game for the same price that you could pre Covid. Now just imagine that for a moment, right? Your salaries go up, your costs go up. So the gaming industry on the net value has actually experienced a slow but horrible decline on a sort of, you know, pure money basis over the last several years. And there gaming layoffs, it's been harder to make good products, all that stuff. Console sales have been lagging. So the result has been a negative sentiment on gaming macro which has affected essentially token prices. Macro as well. Right, so that's kind of how we take that view. But we think there's major sentiment changes this year. And let's see, maybe we can come on a podcast later on and see whether this is right or not, which is that we have two macro events that are really going to change the gaming scene, which we think is going to have a major impact. The first one is Nintendo Switch 2, which is launching this summer. Just for those who don't maybe understand the impact, Nintendo hasn't launched a new console in eight years, and they tend to be pretty revolutionary in their designs. And, you know, once you start buying a console, you tend to buy 10, 12 more games. And also they've pushed the boundary of the pricing of the game. So it'll be interesting to see in June what happens when they launch it. Mario Brothers Digital is charging $80 and physical 90. Now, just again, you can buy a Nintendo switch game for 50 or $60. Now if, if they can get away charging $80 to $90, which is basically their target price, then every other gaming company out there is going to have license to increase, you know, maybe $10 or $20, but they'll catch up with inflation. So that's going to create basically a sort of a macro event in terms of more revenues, more growth, more positivity, more investment in the sector. The second, which is, I think the bigger event, is GTA 6. So for those who are not in the gaming world, they might not know, but GTA 6 is probably going to be the largest cultural event, not just in gaming, but broadly speaking. And it's the reason that if you're going to buy a new console, Whether it's a PlayStation or an Xbox, you'll do it for GTA 6. The other interesting thing about GTA 6 is that you can run RP servers. These are servers, by the way, that.
- [76:50]
A
Stands for Grand Theft Auto. If anybody doesn't play video games, like.
- [76:53]
C
Oh, I'm sorry, yes.
- [76:54]
A
I was like, wait, what is it?
- [76:55]
C
Yes, I'm sorry, yes. GTA is Grand Theft Auto. Right, sorry, it's. Of course. And, and Grand Theft Auto is, Is, is. Is. Is. Is probably the single largest game launch in the history of games at this point. And people are going to buy consoles, they're going to spend money. They're probably also going to push the price boundary. But as I said earlier, you can run your own GTA servers. And previously, it's not to say that you should expect Take two to suddenly say, hey, we're going to launch a token. Not going to happen.
- [77:21]
B
Happen.
- [77:22]
C
Very likely. But when people are running basically tokens on their GTA servers, Take two might not take an aggressive view on it because of the fact that regulation is much more friendlier and open, hopefully at that point in time, meaning that there's no reason to block it because there's no risk around it. Whereas in the previous Administration, you would have to try to stay as far away as possible. So there's that added element. But narratively speaking, gaming is going to be at a high point, we believe by the end of the year, which will have a broader impact on tokens as a whole. And of course with the broad increase of Web3 gaming, which is already happening, but isn't going to be commensurate to the token prices. Right. There's a bit of a disconnect there just because of the fact that there is a lot of speculation in web 3.
- [78:02]
B
I just want to add two really quick things. I know, yeah, lives and breathe these things, but just two really quick things about gaming. Just one very macro thing. Is that maybe sort of too obvious to even say here, but one of the reasons why Asia has long had an advantage in kind of web3 gaming is that like, there's definitely like just a different like cultural take on it. Like there's just more traditionally been more opposition to this idea of web3 gaming in the US like just like gamer communities just really not liking the idea of it. Not liking the idea of introducing tokens or NFTs into gaming. And like that kind of attitude doesn't exist so much in Asia. Right. So I don't know, I mean, I don't know if we're starting to see a change in that on the, on the US side, but that's gives Asia a little bit more as a market like an advantage for just web3 gaming where like people don't have that like negative association necessarily with introducing an NFT is like ruining a game, you know. So I think that's a really important thing. And then the other really important thing that happened last year, this isn't a crypto story, but I just think it's worth mentioning was that there was a major breakout Chinese game, Black Myth. Right. So, you know, traditionally when we talk about, you know, again, not a crypto game, just sort of a game, but still like just worth noticing because when we talk about gaming in Asia, we tend to talk a lot about, about like Japan and Korea and like these are like the, you know, the big powerhouses and, and China just like really kind of like broke out with, with the game, you know, and really kind of made a huge splash globally. And that was like a really interesting, just something to pay attention to, you know, going forward in terms of like, you know, where we're probably going to start seeing more interesting things, things happening from the Chinese gaming world.
- [79:30]
C
Yeah, maybe I'll just add to that. I absolutely Agree with that. You know, when you think about the sort of what crypto and web3 does to gaming, it's a business model innovation that does help the user but is great for business. And adoption comes from the business on model innovation, not from the fact that the user themselves will demand it per se. This is kind of what happened with player sort of, you know, this is kind of what happened with Free to Play. So Free to Play was widely rejected in the West. Nobody wanted that. Right. But who were the pioneers of this gaming method? It was Asia. Right. They were doing, you know, mastering multiplayer games games. You know, World of Warcraft was doing subscriptions old school. Right. While everyone else was basically starting to move into this area but drove more revenues that basically had a business model that sort of was more perpetual for more of a higher value items over time and as a result became the superior business model which therefore then caused all the other gaming companies around the world to say, you know what, I should do that because that's actually a better business model. Right. And that basically in the west in a way forced Free to Play when they were saying hey, I just want to pay my 30, $40 and endlessly play. Which essentially didn't work. Right. So again, I think a similar pattern is going to emerge anyway from east to west.
- [80:37]
A
All right, this has been such a great conversation. I know it's very late where Emily is, so we will wrap up. But where can people learn more about each of you and your work?
- [80:48]
C
Yeah, I mean you can go to our website animocabrance.com also I tend to post a lot on X. My handle is ysru. Once in a while I managed to write a little bit of an essay on my medium under Yatsu, but you know, less than I like. But I do have fairly sort of more video content around what we do on, on Instagram. For instance, if, if you follow my account there as well and just follow the readings that are right on X.
- [81:16]
B
So I'm Emily D. Parker on X. I haven't been posting there very often, but that's where I am if you want to see my. And. And you could also find me at, on places like LinkedIn and. Yep. And I do write about these things and I speak, you know, publicly. So I definitely put these ideas out.
- [81:32]
C
There once in a while.
- [81:34]
B
Great.
- [81:34]
A
Well, it's been a pleasure having you both on Unchained.
- [81:37]
B
Thank you.
- [81:38]
C
Thank you.
- [81:39]
A
Thanks so much for joining us today to learn more about crypto in Asia and Emily. And yet check out the show notes for this episode. Unchained is produced by me, Laura Shin without from Matt Pilchard, Juana Vanovic, Megan Gabis, Pama Jimdar and Marco Curria. Thanks for listening.