The crypto frenzy in Southeast Asia

The bankruptcy of Bahamian-registered cryptocurrency exchange FTX had a snowball effect on the entire industry.

Asian investors are unlikely to be spared as the cold wind chills global crypto-mania. Robert Bociage reports on Asia’s obsession with these unregulated financial instruments

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

Now it has suddenly disappeared, exposing gaping gaps in regulatory oversight and leaving many people or people seriously out of pocket.

From its peak value at $32 billion, the platform now has $8 billion in debt it cannot pay and up to 1 million creditors.

Since the filing for bankruptcy, the various cryptocurrencies have lost value, but quickly stabilized and started attracting new capital from speculators.

“It’s the daily food of crypto activists, especially investors or traders,” says Mirza Richie, a trader from Jakarta who has been active in the market since early 2017.

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

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

Cryptocurrencies are defined as any type of digital or virtual currency that uses encryption to protect transactions. They do not have a central issuing or regulatory body and instead rely on a decentralized system to record transactions and issue new units. This has caused headaches for governments, who worry about the personal savings of their people and the possibility of illicit activities receiving funds from unknown sources.

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

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

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

In his country, cryptocurrencies have become very popular, says Mirza Richie, “even our current government often brings up the subject of establishing enforceable laws. Crypto is like a hurricane, you cannot stop it”, he adds.

However, when it was initially introduced in 2008, Bitcoin was meant to be a medium for everyday transactions, allowing users to buy everything from a cup of coffee to a computer or even expensive things like real estate.

This has yet to happen, and although the number of institutions adopting cryptocurrencies is growing, large transactions involving them are rare.

Nonetheless, several tech companies have now embraced cryptocurrency, while luxury goods and automakers have followed suit.

Against this backdrop, cryptocurrency-related crime is on the rise, leaving crypto holders with the promise of huge profits.

SOUTHEAST ASIA LEADS THE WORLD

According to the latest from Chainalysis “Cryptocurrency Geography” report, Vietnam leads the world in basic cryptocurrency usage. The country was one of three Southeast Asian countries to top the 2022 list, having led the rankings for the second consecutive year.

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

In general, these are economies where the national currency is weak and there are few services to move or receive cash across borders.

According to the research, users in these countries “rely on cryptocurrencies to transmit remittances, protect their funds in times of fiat currency instability, and meet other financial demands unique to their economy.”

Other than that, the region’s growth is driven by play-to-earn games.

Axie Infinity, a digital pet game in which players breed, trade, and battle virtual creatures for in-game assets became extremely popular, especially in the Philippines, where some players earned far more than the average salary of the country.

The most successful gamblers have used their gambling winnings to pay for their children’s school fees and even to buy property.

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

According to statistics, the number of active players in September was less than a third of what it was during the game’s peak in January.

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

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

Indebted Laos wants to profit from digital currency mining and has allowed cryptocurrency mining and trading. Their success in the sector remains to be seen.

MYANMAR’S FIGHT CONTINUES

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

Nzo was able to send funds for food to his cousin who is fighting the military junta as a rebel in the jungle.

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

The idea is simple: avoid traditional banking networks controlled by the military government of Myanmar, which has dominated the country since the February 2021 coup.

Since then, Myanmar’s economy has been in dire straits, with the World Bank predicting that it will shrink by 18% this year.

As a result, the Myanmar kyat lost 60% of its value in September 2021.

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

Analysts say Myanmar’s crypto revolution is just beginning in its tug of war between repression and resistance.

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

Building trust in Myanmar’s digital currency will be key to funding and winning the fight against the military junta.

– Asia Media Center