How Asia’s Trading Culture Results in a Vastly Different Crypto Scene

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Transcript

Laura Shin:

Hi, everyone. Welcome to Unchained, you’re no-hype resource for all things crypto. I’m your host, Laura Shin.

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Laura Shin:

My guests today are Luis Buenaventura, founder of Bloom Solutions, and Leo Weese, President of The Bitcoin Association of Hong Kong. Welcome, Luis and Leo.

Luis Buenaventura:

Hey, Laura. Thanks for having us.

Leo Weese:

Hey. Thanks for having us.

Laura Shin:

Let’s start with Luis. Tell us what you do in crypto?

Luis Buenaventura:

So, I’m the founder of Bloom, a company out of Manila, Philippines. Our mission has always been to try to figure out a way to kind of fit the, I guess you could call it the, you know, the complexities of bitcoin into something that works with our emerging markets.

At the start, we were kind of focusing very heavily on how to use bitcoin as a remittance settlement mechanism. You know, the Philippines has a pretty massive migrant worker population across like 50 countries around the world. So, it made sense to us. Our second product is called BloomX Teller, and what it does, is it basically sets up your average foreign exchange agent or money changer at hotels and airports to be able to start buying and selling cryptocurrency over the counter. You know, kind of merging the traditional business of foreign exchange into this new world of cryptocurrencies, and we’ve been around for three and a half years now, seen our fair share of, you know, kind of crypto weirdness, and things are going pretty well for us on this side of the world.

Laura Shin:

And Leo, what about you? What do you do in crypto?

Leo Weese:

I’m mainly known in Hong Kong for organizing the meetups, which over the years have a lot more elaborate, and we are hosting more speakers and panel discussions and lectures. We’re hosting, like, Lightning Hack Day, in March or the job fair a few weeks ago. We’re hosting an annual conference for cryptocurrency exchanges, and so most of it has to do with community organization, and yeah, keeping the industry together, but of course then also that means we talk to the government, talk to regulators, talk to police on behalf of the industry, and I personally would also write a lot or teach and give lectures myself.

Laura Shin:

Yeah, and that’s actually how you and I first connected, because you are a contributor at Forbes, and when I was working there, tasked you with some stories to fill out our crypto coverage in Asia.

Leo Weese:

Yeah.

Laura Shin:

Yes, and actually, just because listeners may be curious, you are actually not originally from Hong Kong. So, can you just explain where you’re from and how you came to live there?

Leo Weese:

I was born in Italy. I studied in Austria and moved to Hong Kong for my masters studies. That was in 2011, and around the same time, I heard about bitcoin for the first time, and in Vienna it was more difficult for me to fine people who heard about Bitcoin, and yeah, as I met people in Hong Kong and we talked about politics and tech, I slowly got to meet a few more people who heard about Bitcoin at least. Who at least had similar questions than I did, and yeah, so I finished with my studies, I saw that somebody had just created the Hong Kong Bitcoin Meetup and I offered to host more events, and since then, I’ve been pretty much organizing these meetups.

Laura Shin:

Luis, can you also tell us how you got into Bitcoin and cryptocurrency?

Luis Buenaventura:

So, I’ve been a tech entrepreneur for, like, I don’t know, most of my adult life, and in a previous startup, kind of one of the biggest challenges I was trying to workout was how to make ecommerce work in a country where credit cards are just not really a thing. I think even now, you know, nearly a decade after, like, the credit card penetration in the Philippines is still only about five percent. So, I was looking for kind of a way to do online payments, and that’s kind of how I discovered Bitcoin in 2014, and I mean, it never really…I guess you could argue that, you know, Bitcoin still really hasn’t fulfilled the promise of being an online payments rail, but that was kind of how I first discovered it, and that was kind of the impetus for me to learn what this was. You know, it was a little bit later after that, when we realized that you could use it as a remittance settlement mechanism instead, which is kind of still primarily how we use it to this day.

Laura Shin:

So, the three of us met in person, even though I had connected with Leo online before. We finally met in person at the Oslo Freedom Forum, what was that, I guess about a month or so ago, and the two of them are just so knowledgeable about the crypto scene in Asia, and I had previously done an episode about Asia that was very popular, and so, I figured I would have the two of you come on the show to discuss that topic.

So, let’s just start with the most general question. How would you characterize the differences, like in broad strokes between the crypto scene in Asia versus the West?

Luis Buenaventura:

So, I guess, my characterization of it kind of stems from the fact that I’ve always been an outsider to things like Silicon Valley culture, right. So, I kind of see it very much from afar, and kind of the way that the West approaches cryptocurrency tends to revolve around issues like, you know, it’s better for personal privacy, personal liberty, things like that. Whereas, kind of on the Asian side, it’s very much about whether or not it can save us money. I’ve found that the primary question that I have to answer, like when I’m doing either lectures or training or whatever is, is this any better than what we already have, and we do a lot of things manually still here in this country, and you know, kind in most parts of Southeast Asia, but for the most part, with kind of minimum wage being what it is, it’s not terribly inefficient, because it provides lots of people jobs. You know, all of the kind of internals of banking here that is still done manually, is not terrible in the sense that, you know, it’s getting the job done at a particularly competitive cost. So, is Bitcoin better than that, is always kind of the question I get, and it comes down to raw numbers. If you can bring the margin down, the profit margin down, the costs down, then we’ve got a potential deal on the table, and if not, you know, kind of the promise of liberty and potential, you know, digital convenience or whatever, is just not quite enough to convince people to get onboard. At least that’s what I’ve found.

Laura Shin:

Leo, what about you?

Leo Weese:

In East Asia, especially Hong Kong, China, Taiwan, Korea, Japan, stock trading is already a lot more popular than it is in the United States or Europe. It’s almost done recreationally. People trade it while they work other jobs. People trade stocks while they drive taxis or while they commute, and cryptocurrencies fulfill much of the same purpose except that they’re a lot more accessible to people. It’s a lot easier to have a wide variety of products that you can trade. On top of that, people, especially in China, don’t always have a lot of investment opportunities. They might consider their local stock market too restricted or even fraudulent, while the local real estate market might be completely, might be in a bubble phase and completely over valued, and there is not a lot of foreign products that are accessible, and so cryptocurrencies open up a whole new range of investment products that people can invest in, and it might not always be a very good idea, and a lot of these investment products of course might be more sham, but they do create enough buzz, and they do create these wild dreams of instant riches that draw quite a, yeah, quite a large number of people to them.

Laura Shin:

Yeah. I think the differences in your two answers probably stem from the fact that I think Luis was really talking about more of a B2B pitch, where he was saying, you know, they’re interested in how much can this save them, like, Luis, you mean like a business, that might want to work with a company as…

Luis Buenaventura:

Yeah.

Laura Shin:

Yeah, and then Leo is, like, talking about retail.

Luis Buenaventura:

So, certainly yes, on the business level, it’s kind of, it’s the very first question that they will ask. The second question is, is it legal, which is another conversation entirely. But I think even for your average customer, if you were to tell them that there is a way for them to kind of support their family back home from a country as near as Hong Kong, right, so Hong Kong and the Philippines are not even 90 minutes away by plane, but you know, like, every year, you’ve got about a third of a billion dollars in kind of personal remittances streaming between the two countries, and you know, the question that an individual would ask, like an individual migrant worker, who is working in Hong Kong, the question they would ask is, is bitcoin cheaper for me than, you know, any number of traditional remittance channels in Hong Kong, and you know, just a little bit of context there. Like, if you trust World Bank statistics, Hong Kong and Philippines, that is the most fiercely competitive remittance corridor in the world, and I’m not talking about on a crypto level, I’m talking, like, just traditionally. So, using traditional channels, you can probably send money from Hong Kong to the Philippines for under one percent in total fees, which is probably as cheap as it’s ever going to get from a kind of a personal remittance standpoint, right, because you can barely run a business on one percent. What’s interesting though, is that, you know, the reason for that is that quite a bit of those savings are happening because of massive, like, business subsidies, right. It’s customer acquisition cost. So, a lot of remittance businesses will enter Hong Kong and try to kind of compete by basically offering remittances that are so cheap that you could not say no to it, and that’s just market competition, I guess.

Laura Shin:

So, some of this is starting to get into actually where I want to go next, which is I think also geographic differences within Asia, because also Leo did qualify his statement by saying that, that was a trend he was seeing really in East Asia.

So, let’s kind of break this down geographically. You know, we talked about the differences between crypto in Asia versus the West, but now let’s sort of talk about the main types of activity you see in the crypto scene in places within Asia, or like what you think are the main issues or kind of themes that you see in crypto in each of these geographies, and let’s just start with the biggest one, which is China. What do you guys say about the crypto scene there?

Leo Weese:

The Chinese government would very much want crypto to just go away. I think it’s still small enough for them not to get, like, overly upset, but whenever the cryptocurrency scene makes too much noise, or whenever it gets too much attention, the government likes to put it back in it’s place, and that means that the cryptocurrency scene is increasingly hidden. It’s increasingly closed down among a couple of participants that trust each other and that only want to trade, for example, with people that they know, and it’s becoming more and more inaccessible for new people who want to buy or new people who want to enter, new people who want to participate in this community. That being said, Bitcoin is still very liquid in China. It’s still, for those who are part of this community, very easy to sell millions of dollars of cryptocurrency and find a market for that.

Laura Shin:

How do they do that?

Leo Weese:

They would have their network of contacts, and within those contacts and within a couple of, like, online OTC platforms, similar to local bitcoins, people would buy these bitcoin if the price is right. There are some people who are making money doing arbitrage. There are some people who are onboarding their family or their friends through their personal bank accounts onto the cryptocurrency system, because their family or friends might also want to trade, or they might also want to invest, or they might also want to move money. The cryptocurrency changes…

Laura Shin:

And wait, just to clarify. Wait. Just to clarify what you meant there, you meant, like, if you’re a relative of mine, and I have bitcoin, and you don’t then, you give me Chinese yuan in my bank account and then I give you bitcoin?

Leo Weese:

Yeah, or I would give you renminbi into your bank account and you know somebody who you can source this from.

Laura Shin:

Oh, I see. Okay, and you were going to say about exchanges?

Leo Weese:

It’s very much a chain of trust in a way, where I would go to somebody who goes to somebody, who goes to somebody, who goes to somebody, and so each of these hops, there is a trust relationship, and that’s how eventually I end up with bitcoin and somebody else ends up with renminbi. The Chinese exchanges, more or less, all had to leave China with their products. That includes Binance and OKEx but they are all still active with those products. Binance probably most famously. It’s all a bit sensitive in how these products are marketed, but these products are still very popular among people in China. Of course, they need a VPN to jump the firewall. They need to buy bitcoin somewhere else, but they’re still trading these products and they’re still being marketed at, and on Huobi OTC, people can easily find each other. They have some kind of rating system that makes it a little bit easier to source bitcoin outside of people’s personal trust circle or outside of people’s proprietary reach out groups.

Laura Shin:

Okay. Wow. Interesting, and what about Hong Kong? We’re going to keep going, yeah, with the different geographies.

Leo Weese:

So, Hong Kong still has a very liquid OTC market. It’s very easy and it’s possible to do so in the open, to buy tens of millions of US dollars’ worth of bitcoin from a couple of, yeah, very professional offices. The traditional fiat exchange market has never really taken off in Hong Kong. It just proved too difficult for these exchanges to onboard, to maintain banking relationships, and essentially accept fiats deposits into their bank accounts. Meaning Hong Kongers who want to deposit money onto an exchange often do that in New York or in Europe. Where the European and US exchanges are able to, relatively easily, accept these international wire transfers, and for Hong Kongers to then trade. There are a lot of bitcoin ATMs in the city that serve mainly those who value privacy and those who need bitcoins very quickly or very conveniently, and there are almost no legal issues around trading bitcoin in Hong Kong. It’s very easy for anybody to start trading bitcoin. No matter if it’s on the peer-to-peer market or if it’s through a dedicated OTC desk. Theoretically, it would also be possible to start a traditional exchange without any licensing requirements but whenever bank accounts are, yeah, too important for the business model, the business model often fails.

Laura Shin:

Interesting. Yeah. The more that I learn about the states, the more I realize just how important these banking relationships are. All right, and let’s talk about Japan. What is the crypto scene like there and how does it differ from other parts of Asia?

Leo Weese:

Japan is very much the lighthouse of Asia, and it causes a lot of discomfort for its neighbors and for, like, for Asian countries. I have the feeling that if Japan would not take such a positive stance on bitcoin, a lot of places, especially in Southeast Asia, would have already banned this. The question we get so often from big skeptics, but why is Japan embracing this so much. Japan has a very restrict licensing regime. Japan is very strict with its exchanges, but it’s the only country that gives cryptocurrency and Bitcoin so much legitimacy in that they almost treat this, yeah, as an important part of future banking sector. The Japanese authorities, unlike, for example, their Korean counterparts, would also be quite coherent in their message. There’s the, yeah, the Financial Authority of Japan that has a, yeah, quite a clear message that rarely contradicts itself. All exchanges are always under scrutiny but are, within a couple of limits, allowed to offer, yeah, a lot of products, a lot of different cryptocurrencies, trade, all sorts of tokens, and offer these products to the general public.

Laura Shin:

And you started to say something about Korea there. So, what is the scene like in Korea?

Leo Weese:

Korea is in some ways similar, but it has these financial authorities split up into at least five different actors, who might create conflicting messages, and as the way Korea gets, yeah, portrayed, for example international media, is then often a little bit conflicting. As in, Korea might ban exchanges or Korea might ban ICOs while others insist that exchanges are doing very well in Korea and that ICOs are still legal.

Laura Shin:

And what are the behaviors there? There was so much talk about the Kimchi Premium. I don’t know if that still exists, but how is activity there?

Leo Weese:

Yeah. Japan and Korea have a couple of implicit capital controls that make it difficult for people to move money out of the country or make it difficult for foreigners to move money into the country, and I think both countries are well aware of this. They’re well aware of the weaknesses of their banking system, and they don’t necessarily know how to immediately fix those. I can also imagine that things like Bitcoin are a possible way out, not that people in those countries would immediately think that Bitcoin could replace the local banking system or it can replace, connect the local banking system better internationally, but they’re at least aware that this possibility exists and that Bitcoin presents a, yeah, in the future another option and one that might serve people better. But now, as people have difficulty sending money in and out of the country, which…in Japan, people have supposedly solved at least for the cryptocurrency premiums, but in Korea, these premiums still appear from time to time. When people in Korea want to buy bitcoin at a faster rate than everybody else in the world, the bitcoin price goes up in relation to, for example, the US dollar price, and the way people move money then out of the country to arbitrage that, yeah, makes a lot of people uncomfortable, too. We see people coming to Hong Kong in budget airlines with pockets full of cash, whatever the legal limit is, lining up at the OTC desks in Hong Kong in the morning, buying bitcoin and immediately sending them to Korea to sell them there, only to fly back in the afternoon and be on the next flight the day after. That’s making the police in Hong Kong uncomfortable. It’s making the police in Korea uncomfortable. It’s making the budget airlines uncomfortable. They don’t really want so much cash on board either, but it seems to be the most reliable way for people to arbitrage these markets, and I think that shows quite colorfully where these weaknesses in the banking system lay, as it should be more convenient and easier and safer to simply send the money to Hong Kong but that doesn’t seem to be possible all the time.

Laura Shin:

Wow. Is that still happening?

Luis Buenaventura:

Yeah. I watched the Korean crisis in relation to the rest of world, like almost on a minute-to-minute basis during the workday and the Korean premium hasn’t really exceeded three percent in a while now. In fact, for, you know, a big chunk of this year, Korea was actually kind of underpricing it’s bitcoin by a couple of percentage points. Not nearly enough to trigger kind of, you know, the sneaker net kind of behavior that Leo was describing, but certainly, there’s still money to be made there. Yeah, and it’s largely because of the capital controls. It creates kind of this alternate reality where Bitcoin is either minus three percent or plus three percent or more expensive, depending on, kind of, you know, whatever the local sentiment is, and I don’t see that really changing until we get to the point where kind of those capital controls are lifted to allow some of that volume to leave the country. That’s a very kind of high-level political question, though. That’s not necessarily anything but pressure from crypto exchanges are ever going to be able to change, I don’t think.

Laura Shin:

But wait. So, Leo, what you described about the people flying with their pockets filled with cash, is that still happening, or was that just during 2017?

Leo Weese:

That happens at the peaks, and yes, it’s still occasionally happening, but it’s not a daily occurrence. Yeah, as Luis said, when the premium goes beyond say three or four percent, then people very quickly do that again.

Laura Shin:

Wow.

Leo Weese:

It’s an easy way to make some extra money and get a trip to Hong Kong.

Laura Shin:

Right. All right. Let’s talk about Singapore. What’s the scene like there?

Leo Weese:

Singapore is currently again very open to cryptocurrencies, to blockchain products in specific. I think there’s a possible chance that something like, regulated token exchanges will happen in Singapore, but Singapore is not always very predictable in that it swings forth and back. It embraces the community in one year and then swings back and everybody gets, yeah, politely asked out again a year after.

Luis Buenaventura:

I will also kind of just add a little bit of color to that. I think that Singapore, and maybe this is a distinction that’s important to make in all countries. Kind of what the government’s position is on crypto does not necessarily match what the banks’ position on crypto are, and I’ve found in Singapore, the Monetary Authority of Singapore, so that’s kind of the government side, they are, you know, kind of deeply committed to becoming the financial hub of this region. So, they’ve been experimenting with things like an interbank fund transfer system built on Ethereum, for example. Stuff like that, or sorry…yes, it was…sorry, it was a private implementation of the Ethereum blockchain that they were experimenting with. I think that the limitation there is that maybe the banks don’t necessarily want to, you know, kind of bank these crypto companies that would kind of come about, because of the Monetary Authority’s encouragement. So, if you were a cryptocurrency company in Singapore in 2016, 2017, it was unlikely that you would able to get a bank from the big three. In fact, you would probably end up getting…if you wanted to get banking in Singapore, you’d end up getting one from Malaysian bank instead, because it was just easier and they were not going to turn you away at the site of the word cryptocurrency in your business documents. So, I think that there’s always kind this funny disconnect between what the government wants to encourage and what the banks are comfortable doing, and I think that, that disconnect is primarily because, you know, if any of this stuff ever gets used for money laundering or terrorist financing, the penalties that the banks have to pay are so high that it kind of disincentivizes them to even give it a shot, if you know what I mean. Like, just the math doesn’t work out. If I’m going to get, like, a 100 million dollar fine slapped on me just to bank a 10-million-dollar crypto company, it’s doesn’t really…you know, it doesn’t work out. So, that’s the calculus that the banks are doing in their heads, and unfortunately, no amount of, you know, government encouragement is really going to necessarily change their minds on that, I don’t think.

Laura Shin:

All right, we’re going to keep discussing the geographic differences within Asia in a moment, but first a quick word from, first me, but then also from our fabulous sponsors.

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Laura Shin:

Back to my conversation with Luis Buenaventura and Leo Weese. So, let’s now talk about the Philippines. What’s the scene like there, obviously beyond remittances since we’ve covered that?

Luis Buenaventura:

So, the Philippines is one of the few countries that actually has licensing for cryptocurrency exchanges. So, here we call it the virtual currency exchange license, and that came out kind of very auspiciously in 2017 as the bull market, you know, kind of the last big bull market was happening. To date, we have nine licensed companies here. Quite a few of them are, you know, kind of from other countries. So, quite a few of those licensees are Chinese owned or Korean owned, mostly because they can’t get licenses in their own countries. So, you know, they’ll obtain a license in the Philippines and you know, kind of be able to show their institutional customers, kind of their investors, that they are licensed somewhere, which is…you know, which may or may not be important, depending on what kind of institutional partner you are, but it’s certainly been a strategy. I think that, you know, Japan’s leadership in this space was kind of limited to just like a dozen businesses, right. I don’t know that the Vaishali licensed any new businesses since 2018. So, if you wanted to get licensing for your crypto exchange business, there’s just a handful of countries around the world where those licenses are being issued and also kind of, you know, are respected in a way, and because of that, I believe the queue for license applications here is about 60, 70 companies long. They’re all kind of waiting for, you know, a license to be issued to them and you know, based on the track record, you know, like less than 10 companies in two years, you know, if you’re number 70 on that list, I think you should be prepared to wait for a while.

Leo Weese:

Yes.

Laura Shin:

What about, like, when Leo was saying that there’s a lot of trading in East Asia, the way, you know, people like to trade stocks. Is that a thing, also in Southeast Asia, and we can even branch out now to Indonesia and Malaysia or Thailand or, you know, any of these other countries. Vietnam.

Luis Buenaventura:

I mean, Indonesia is kind of, I would say, the most advanced of the countries in Southeast Asia. You know, I just looked it up today again. They do about 300 million dollars in crypto exchange trading per month. I think that…and that’s like mostly focused around a single exchange called Indodax, and they’ve been around for, I guess, about as long as I’ve been in the space. So, at least 5-6 years now, and I think they’re the one, like, major exchange that the region can really speak to. There’s certainly been many attempts. Thailand has five crypto exchanges that have been issued temporary licenses by their version of the Monetary Authority, but no one has the volume of Indodax that I’m aware of.

Laura Shin:

And is that just because of Indonesia’s size? It’s like the world’s fourth largest country. So, is that just part of it, it’s just like much bigger?

Luis Buenaventura:

That’s possibly part of it. I think it might also just be that, you know, they’ve been around the longest and kind of they started to become the platform on top of which other cryptocurrency businesses were being built, you know, as far back as 2016. So, if you wanted to do kind of a crypto-based remittance business into Indonesia, you would have to have Indodax as one of your kind of liquidity partners or your payment or disbursement partners or things like that. So, you know, I’ve been kind of friends with the founder for a while now and you know, he talks about how, you know, it was really rough for them at the start, because there was a lot of infighting within their own community. I’ve seen that in, you know, the Philippines as well. I’ve seen that in Vietnam to a certain extent. Like, there’s a lot of infighting amongst crypto people. Who’d have thought that that was thing, right.

Laura Shin:

All right. Let’s talk about India. I feel like what’s going on there is kind of interesting. Especially, because it’s a little bit in the opposite direction, or you know, I don’t know how much you guys know about that, but you know, if you feel you can discuss that. What’s the scene like there?

Leo Weese:

Yeah. I’m not an expert, but it seems to be a very difficult market. Of course, it’s massive, but the local authorities seem to put a lot of restrictions on money, anyway, and there seem to be a lot of, yeah, difficulties in moving money in and out of the country for example with more explicit capital controls, and of course, Bitcoin doesn’t fit very well into those existing restrictions, and yeah, the authorities then put restrictions on Bitcoin businesses that they aren’t able to comply with, including making sure that people don’t use Bitcoin for illicit activity, which includes circumventing capital controls, and there’s no way to guarantee that, or there’s no way for the exchanges to monitor this, and yeah, as I understand it, the exchanges are more or less lining up. I don’t know if it’s completely banned as reported, but it seems to be very, very hard for exchanges, and Bitcoin trading is then more going into the underground, similar to China.

Laura Shin:

Yeah. Well, so this is actually segue, because, you know, obviously the news about Facebook’s Libra has come out recently, and just you know, even from, like, the marketing materials, you can tell that they really are targeting those types of economies. Like emerging economies and you know, yet…I don’t think people in India or China…maybe China was not exactly in the marketing materials, but you know, I don’t think those developing economies are, those two in particular, are going to be ones that will be able to access this, but I was wondering what the general reaction in Asia has been to Libra.

Leo Weese:

It gets talked about a lot. It does seem to be a big deal. I think it’s mainly a big deal because it legitimizes the idea of cryptocurrency so much, and because people expect a company like Facebook to have a clear plan and to have a clear strategy on how this can be used and how this can be, yeah, put to the masses, and a lot of people are then mainly curious in what these plans are and how they can possibly copy them or how they can…or how these plans might conflict with their personal interests or their corporate interests. I have a bit my doubts. I don’t see the plan, and I’m very suspicious when these strategies are so hidden. Usually, including with Facebook it had a clear idea on how things like WhatsApp was supposed to have a transfer mechanism, a payment mechanism, which I believe has rolled out in India too, and it was a lot more easy to understand how people are being onboarded and offboarded and how people then used this to send money between each other. In Libra, this is entirely unclear. We don’t know how people are going to get their hands on these Libra coins. We don’t know how people are going to be able to trade them or for what purposes people are going to be able to use them, and I think most importantly, we don’t really know how people are supposed to price their products and services in Libra, and how the market is going to, like, find a good local exchange rate. The most exciting and more interesting part about Libra for me, is that Libra is a free-floating currency. It might be backed by a basket of fiats currencies, but it’s not pegged one to one, in that I’m supposed to ask for a Libra, two Libras, 3.3 Libras when selling a product, unlike all the previous efforts of tech companies to build payment platforms and mobile wallets, which were always priced in the local currency.

Laura Shin:

Right. Yeah. I think that is a powerful notion, and Luis what are you seeing in terms of the reaction to Facebook’s Libra.

Luis Buenaventura:

So, I guess you could say that I am both in admiration of and horrified by the Facebook strategy thus far. I mean, they really are…they haven’t been putting this together for just a couple of years. It’s been many years, I would argue, and I think their first real attempt at this, and it kind of dovetails into it, is the Internet.org initiative from way back in 2013. If you recall, that was an initial thing to bring the internet, heavy air quotes on the internet, to people who couldn’t afford airtime, right. So, they launched it all over Southeast Asia. They launched it all over Africa. So, now, there’s as many as 40, maybe 50 million people around the world who’s first experience of the internet is kind of free.facebook.com, right, and part of that is you can use the messenger, you can use WhatsApp, you can get a kind of, you know, a media light version of Facebook without having any airtime credit on your phone, and what that means to me is that they’re probably going to have more uptime for their Libra wallet than most third world banks, because you don’t even need internet access technically to use it. Like, as long you’ve got a sim card in your phone, you’ll still be able to use it, regardless of whether you have any data on your phone, which is kind of an interesting proposition.

So, if you remember in 2016, Facebook obtained its remittance license in Europe. So, they’ve been planning this for quite some time now. Like, they’re trying to build a platform for kind of, you know, the lowest kind of socioeconomic bracket that will allow them to send payments, send and receive payments using the Facebook platform and they’ve already been setting up their regulatory kind of…they’ve been setting it up from a regulatory standpoint from as far back as 2016. I think that because of this, because of all of the kind of things that they’ve had to have in place before they went and launched Libra, I think we have to kind of at least respect that, you know, this is a serious initiative from them, and I think that, you know, come 2020, when they actually launch the thing, we’re going to see, like, a pretty major sea change at least along kind of remittance businesses, because Facebook’s reach is so big that, you know, it far exceeds kind of the…anyone else’s network, really. I mean, I guess Western Union is still in 100 countries. So, that might be the one kind of network that Facebook is not as large as, but I think that, you know, if they use a combination of, you know, their free internet connectivity and the fact that they’re subsidizing customer transactions, very likely, I think that that’s going to be a very powerful proposition for your average customer. The other reason why I actually think it’s a pretty good step. This one is a little bit more controversial, but I did write about this as well. I was saying that, you know, your average Filipino, and I can speak generally about your average Southeast Asia. If you look at it from the perspective of your average millennial, for example, so your average 20 something, 30 something here, they don’t remember that, you know, around the years that they were born, the Philippine peso was able to buy, you know, like one dollar for 27 pesos, but you know, today, you can only buy half a dollar with that same amount of money. So, kind of in the space of, you know, a generation, we’ve lost about 50 percent of our buying power against the dollar and I think that the potential of Libra is that, you know, it might actually provide kind of a weird backdoor way for people to get out of the Philippine pesos. So, I’ve been kind of advocating this. I realize that this is a very anarchist kind of point of view, but I’ve been advocating for people to stop saving Philippine pesos for a long time now. Mostly because, you know, year on year, we lose about 2-5 percent of our buying power against the dollar. That’s been fairly consistent over the last decade. So, saving your pesos in the bank, just doesn’t really make sense. You would never be rewarded for it in the long term.

Laura Shin:

Yeah. In the long run, Libra could be like threatening to developing countries with weak money for that reason. 

Luis Buenaventura:

Yes. Definitely.

Laura Shin:

If a lot of people start doing that yeah.

Luis Buenaventura:

Yeah, and I think that in a way it makes sense, because, you know, if there’s a simple, safe, accessible way for your average Filipino who is not making a whole bunch of money, right. For the average person. If there’s a safe way for them to get into another currency, any of the primary currencies would do, I think that’s far superior than holding pesos.

Laura Shin:

Right. So, in the West, kind of the general themes of crypto discussion have been, you know, continued interest in Bitcoin because of its properties that are similar to digital gold than this question about Ethereum as it tries to scale, and for that reason, more broadly kind of the “smart contract wars” where we’re seeing these other smart contract platforms launch, and then people have also been interested in these interoperability protocols, like Cosmos and Polkadot and for, whatever reason, also perceiving that those might even be competitive with Ethereum. What are the themes of discussion in the Asian crypto community, or what have they been, kind of over the last year?

Leo Weese:

We certainly see a lot of projects trying to be the next Ethereum. That’s a quite big…in similarity to maybe 2015, 2016 when we saw a lot of projects trying to become the next Bitcoin, and now we mainly see Ethereum challengers emerge, but I don’t think people have a good idea of what smart contracts mean or what smart contracts can achieve. People often expect them to be general little computer program that they can plug into anything they want. For example, public transportation or their bank accounts, which can then enforce certain conditions and things like the oracle problem are sadly not discussed enough, but a lot of this is a big investment play. The Ethereum has been successful at, yeah, making a lot of people a lot a money in a short time, and when people want to build the next Ethereum, what they want to build is the next big get rich quick machine and not so much a functioning smart contract platform, and in a way, that’s what investors expect, too. Asia has really seen, over the last decade, or maybe even over the last two decades, a explosion in asset prices, and no matter where you go in Asia, real estate is becoming unaffordable. Anything, any kind of licenses, any kind of asset has increased in price, and there is a lot of capital that is looking for alternatives, and the local stock markets are often not developed enough and there’s Tokyo and there’s Hong Kong and then there’s nothing else, and that capital is not always easy to send to the US or Europe, or it might not be politically convenient, and cryptocurrency, and specifically smart contract platforms are picking up a lot of this capital, and when investors want to invest, then there’s going to be some people who are going to create these investment opportunities. Even when that looks a bit scammy or when that is not built on a solid technical foundation.

Laura Shin:

So, this doesn’t have to be a long answer, but I was just curious. What does the Asian crypto community think of TRON?

Luis Buenaventura:

I mean, here in the Philippines at least, it’s kind of hard to take him seriously. I also don’t think that we have as much as kind of the TRON glow as maybe countries that are closer to the TRON headquarters are. So, we kind of see it mostly as we’re outsiders. He’s just one of many other kinds of founders that have tried to really, really push their product. You know, he’s definitely got…

Laura Shin:

On a plagiarized white paper.

Luis Buenaventura:

Sure. Yeah. I mean, I’m not even going to argue that part. Yeah. Yeah. I mean, he’s a real character. I will say that, and I think that…but we’ve seen that before right. I mean, sorry, not the plagiarizing part, certainly not, but like blockchains that were, you know, immensely popular without necessarily kind of having product that kind of did anything. I think that from the Philippine perspective, we’re still very much kind of in the Bitcoin is crypto kind of mode. There’s very few people that are kind of looking like to the alts for anything other than a quick kind of bump in their holdings.

Laura Shin:

And Leo, do you know what people in that region think of TRON?

Leo Weese:

I don’t hear much from it. I don’t even get a lot of TRON spam. We don’t see proponents, or we don’t see people explaining it. Yeah. I don’t hear much from it.

Laura Shin:

Okay. all right. So, I’m confused as to where this market cap comes from, but anyway.

Okay so, we’re running out of time, but because we have Leo on the line, obviously you’re in Hong Kong, which has been in the news a lot, and I did discuss this briefly with Alex Gladstein, and I did mention to him, you know, I just put myself in the shoes of those people and I just imagine if I had grown up in a country similar to the US in terms of it’s freedoms and then suddenly, you know, it was like, oh, it’s going to become more like China. Like, that would be hugely terrifying to me. So, I wanted to ask about these protests. Have those protests had any impact on the interest in bitcoin or cryptocurrencies or in the activity you’re seeing in the crypto space or vice versus, like, you know, are people using them in any kind of interesting way, the protesters I mean?

Leo Weese:

Not directly. I think when people think about very short run, they’re worrying about how to prevent this law from going through or they’re worrying about how they can pressure the chief executive into apologizing or how they can most efficiently surround government headquarters, and Bitcoin is not, like immediately relevant to that, but it does come up a lot more in conversations when people are thinking about how to prepare their move out of Hong Kong, and we’ve seen the news of a couple of tycoons, a couple of billionaires, preparing to move their money out of the country, and of course people have these same worries. They have to worry that their money could be seized much more easily than they could and for people who don’t have the ability move money abroad because they don’t have foreign bank accounts or the sums are not significant enough, Bitcoin has come up quite a bit in discussion. So much to move money out of Hong Kong by simply putting it in Bitcoin and people…I think it’s quite frightening that people are talking about the possibility of, for example, war with Taiwan or the possibility of having to flee Hong Kong as the government violently suppresses some protests, but Bitcoin does come in those discussions. It’s just that those are not necessarily situations that people want to see, and associating bitcoin as this tool of last resort might not be the best association either, because we believe Bitcoin can be better money even in a peaceful and developed future and not so much only in a future of war and misery.

Laura Shin:

All right. So, because time is short, we’re going to just move quickly through some other important topics. So, Binance. Most important company in crypto, arguably now. They are doing everything. They launched AdEx, they’re going to issue these stable coins, they’re going to offer borrowing and lending. They just announced this Bitcoin-Pegged token. There’s so much going on there. What is the perception in Asia of Binance’s direction?

Luis Buenaventura:

I see them very much admired. I see people very much admiring their founder and the company of having built a product that’s accessible to the broad masses, of not shying too much around what is relevant, and people seem to love their product. I don’t think Binance knows exactly where all this is going, which is fine. We also don’t know where this is going, and for Binance to branch out so much and try out everything is mainly an attempt to not miss out on whatever the next big hype cycle might drive.

Leo Weese:

Yeah. I agree.

Laura Shin:

And has this reputation been damaged at all by the hack?

Luis Buenaventura:

I mean, we did not even really see any change right from the hack. Like, it seems like they’re still as popular as ever.

Leo Weese:

People seem to be even quite impressed with how that was handled. For example, compared to other exchanges in the region.

Laura Shin:

Yeah. Okay. Well, we’ll see. I mean, I think Binance is also hugely admired here in the West even as they did finally block the US.

All right. So, to wrap up, why don’t we talk about which Asian crypto projects people are excited about, and also, which people in that region, you know, you think maybe are not as well known in the West, but probably should be. So, interesting projects or people in Asia.

Leo Weese:

I think there’s a lot of great technical innovations coming out of Japan. For example, the folks of Crypto Garage, which is part of Digital Garage, I think they are getting not enough credit for the, yeah, technological work they do, and I feel that, especially when it comes to Lightening or when it comes to smart contracts and Bitcoin or when it comes to second layer, a lot of the, yeah, a lot of the fame is still soaked up by Silicon Valley and a couple of places in Europe, and Japan is very much contributing to that.

Laura Shin:

And wait, so what are they doing, exactly. Like, you said the projects their working on, but what are they working on?

Leo Weese:

For example, yeah, second layer supplement networks. Similar to Liquid or even building on top of liquid.

Laura Shin:

Oh, okay.

Luis Buenaventura:

So, one startup I’d like to highlight is a company called Bitspark out of Hong Kong. So, founders George Harrap and Maxine Ryan, who’ve been at this for a little over five years and perhaps this is a personal bias of mine, but I think the reason by I like them, is that they tend to have kind of similar instincts as my company when it comes to how to bring this stuff to kind of the, you know, people on the ground, and that’s kind of always been a big kind of mindset that I think is very necessary, because as we’ve kind of spent the last hour talking about the, you know, the Asian mindset is not necessarily the same as maybe, kind of the North American one, and I think that building specific products for this region is a better strategy than say, kind of trying to shoehorn maybe a product that was designed for the Western market into here. So, you know, they’re doing things, like, they were doing things like crypto remittance. They’re also doing things like a money changer teller platform, and in those ways, our two companies are quite similar, except they’re doing it, kind of on the Hong Kong side, and we’re doing on the Philippines side. So, I quite like what they’ve been doing lately.

Laura Shin:

Great. Okay. Well, clearly, there is a ton to discuss in Asia. Obviously, it’s a huge region. It’s probably a little bit more than we can fit into an hour-long podcast, we did go over time, but where can people learn more about each of you and your respective organizations?

Luis Buenaventura:

So, I’m at helloLuis on Twitter, and my company website is bloom.solutions.

Leo Weese:

We are bitcoin.org.hk. Easy to find us on various social media platforms including Meetup. Please, do say hi if you’re in Hong Kong. Even if you’re just traveling through. Say hi, even if there’s no meetup scheduled, maybe we can schedule one. We always love to meet new people and connect Hong Kong to the world.

Laura Shin:

And Leo, why don’t you also tell your Twitter handle.

Leo Weese:

I’m on Twitter at leoaw. Yeah. Ping me there.

Laura Shin:

Okay. All right. Great. Well, thanks both of you for coming on Unchained.

Luis Buenaventura:

Thanks so much, Laura.

Leo Weese:

Thank you so much for having us.

Laura Shin:

Thanks, so much for joining us today. To learn more about Leo and Luis, check out the show notes inside your podcast player. If you haven’t yet taken the Unchained survey, now is the time. Go to SurveyMonkey.com/r/unchained survey2019 to tell us how we can do better at Unchained, and don’t forget, those who enter the survey can enter to win one of five free Casa Bitcoin Lightning nodes, plus a free year of Casa’s gold membership. Thanks, Casa for donating. Unchained is produced by me, Laura Shin, with help from Fractal Recording, Anthony Yoon, Daniel Nuss, and Rich Stroffolino Thanks for listening.