About the Frontier3 Podcast
Welcome to Frontier3 by PatSnap!
This series is dedicated to unpacking the innovation ecosystem of Web3. Featuring our Co-Founder, Ray Chohan, and various industry experts, Frontier3 explores how Web3 will fundamentally change how we live, work, and play.
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In This Episode of Frontier3
Ray is joined by Ken Chia, head of APAC for Abra, the world’s premier crypto wealth management platform. Ken made the leap from traditional finance into Web3 when he realized the exponential growth potential for this market. Follow along as Ray and Ken explore Abra, the stability regulations of the Web3 space, and possible market setbacks from inflation, the war in Ukraine, and the energy crisis.
- Why DeFi, NFTs, Metaverse will exponentially grow as they mature
- Web3 adoption in enterprise organizations through Bitcoin and crypto trading
- Abra’s vision to build simplified, honest global crypto banking
- How Abra enables Bitcoin holders to access dollar liquidity without selling
- Why Ken believes regulations within crypto space bring certainty to institutional players, empowering market expansion
- How the war in Ukraine, inflation, and the energy crisis are impacting the market
Head of APAC, Abra
Ken has over a decade of experience in finance and crypto. He was most recently with J.P. Morgan where he independently managed institutional & private client portfolios in Southeast Asian markets.
Since 2018, Ken has been building in the cryptocurrency ecosystem. Currently, Ken is growing out the APAC business for Abra, the world’s premiere crypto wealth management platform. Buy, trade, earn and borrow on www.abra.com
Connect with Ken on LinkedIn
Co-Founder & VP New Ventures at PatSnap
Ray started PatSnap’s western operation from his apartment in 2012, helping grow the team to 400+ by 2020. PatSnap now serves 15,000 companies worldwide – supporting R&D, Innovation & IP teams with market and technology intelligence research. Their SaaS-based platform helps Deep Tech innovators connect the dots between technology, markets, and people. PatSnap officially became a Unicorn in 2021 and now has over 1,100 employees and 15,000 companies using its software across EMEA, North America & Asia. The ultimate mission is to provide intelligence that improves R&D and Innovation productivity to help innovators bring their ideas successfully to market. Ray also works closely with Blockchain & Web3 community and is a passionate angel investor in this space.
Ray: Ken, welcome to Frontier Free. Super pumped to have you on the show today. I’ve been a big fan of Abra, so observing from a distance what you guys have been up to. And Ken, it would be great to kick off with your background story and your wonderful journey into digital assets.
Ken Chia: Yeah Ray, thanks for having me on the show. So in my previous life I guess, I used to be in what people know as traditional finance, so I used to be a banker. Most recently I was with JP Morgan and in banking for a total, for about seven years or so. And then I moved into crypto in 2018 to help an ex-colleague who, to keep a long story short, he had invested into a company, an exchange that was based in Indonesia, became really big very quickly and needed help to grow the offshore business in Singapore. So I came onboard in 2018, and that’s kind of how I started my journey into digital assets and crypto. Not something that I had planned, but have been around since.
Ray: Wow. Because I really want to put a pin in this part, because we’re seeing so many professionals who are traditionally from TradFi, so investment banking, now making this huge leap across to digital assets, stroke Web3, stroke being in the world of the blockchain primitive. So you’re at JP Morgan, which is a phenomenal name, and I’m guessing a dream name to be at considering your background and what you studied at Monash University. But what was that specific moment for you personally Ken, which made you jump across to Tokenomy and get into this world? Was there something specific which made you think, “Wow, this is the future.”
Ken Chia: Yeah, I mean to be very honest, when I joined it was more of a “why not” kind of thing, because at that point in time, I had spent seven years of my career in banking. I had for a couple of years thought about doing something else, just because I think I was part of that cohort in finance that had joined after the financial crisis, after a lot of I guess interesting parts of financial history had already been made. Things were starting to get a bit boring, a bit over-regulated, a lot of vanilla business that we could do could no longer be done. So I think the initial opportunity that I had with Tokenomy, which was pitched to me as they run an exchange, they’re also coming up with an ICO platform which I understood at the time as the crypto version of IPOs, and how to get companies and coins public, to be a primary and secondary marketplace, that made a lot of sense to me from a TradFi perspective. Decided to give it a go.
Ken Chia: But even then, I was probably still learning as I went along, and I wouldn’t say that I’d been completely red pilled. But I think when it came to 2019 onwards, that’s when I really saw a lot of I guess “writings on the wall,” where you see the likes of your, at the time it was Coinbase Prime or Coinbase Institutional, and the likes of Ember, the likes of a lot of these very sophisticated market players coming into the industry and doing things that essentially replicated from investment banking or financial, and that’s when I saw I guess my version of the aha moment, and I knew that the big wave was coming.
Ray: Yeah, because you take that leap of faith in 2018, where we’re basically going through a winter at that time weren’t we? Where we’d just come off that crazy run in 2017.
Ken Chia: Yeah. To be honest, the first six months after I made the switch, I kind of had a little bit of an identity crisis and a bit of a career… I guess you started to reflect and think, “Oh, have I messed this up completely? This is going completely down.” It was also a period of time where there were a lot of ICO scams and a lot of noise rather than actual developments in the market, so definitely a lot of uncertainty during 2018.
Ray: Yeah, I remember we came off like Feb 2018, where literally that’s when the winter started. But it’s actually sometimes a good time to join, right? Because you get to focus your mental energy away from all the crazy price action and look at some of the fundamentals. So unpacking Tokenomy, you were there for what, over three and a half years? What did your journey look like there?
Ken Chia: Oh wow, that’s a very loaded question. I think just from the nature of how crypto moves and how the market moves, every year was almost a different year to me, so I guess I can summarize it as in my first was a lot of groundwork laying and venture building in a sense, where I would set up the company, set up bank accounts, hire people, get office space when we used to have an office space. And a lot of, get working with lawyers, getting the AML frameworks in place because we were a marketplace. We were registering users all around the world, we were getting to know all the different providers in the ecosystem, your QIC providers, your other exchanges, guys that you could work with, guys that you stay away from as well. That was probably the first year, and then I think in the second year was a lot of expanding what we already built as foundations, and then ramping up hiring, expanding in different parts of Indonesia.
Ken Chia: And then in the third year was a lot of key partnership building I would say. I think during the third year closer to 2020, we started to see a lot of sophisticated players like I mentioned earlier come to the space, such as your crypto lenders, your market makers and so forth. Guys who had been building throughout crypto winter, and I think plugging into those kind of networks and plumbing was very important and very crucial for the platform that I used to work for.
Ray: And in a nutshell, what was the value proposition at Tokenomy? What were you guys trying to build and offer to customers?
Ken Chia: Yeah, I mean I think the name is hopefully relatively self explanatory, like token economy, Tokenomy. So we wanted to create an entire end to end marketplace where people could trade tokens, people could get fiat to crypto and access all the different services that you can within the crypto space. So in 2018, I think a lot of focus and attention was on capital raising, so ICOs were something that we focused on. We worked with quite a few large projects in Indonesia that wanted to solve different problems in the ecosystem through their ICO projects. Later on as the market developed, we also went into a bit of interest earning products, a little bit of derivative products as well, and I believe now after I left they’re now into lending products as well.
Ray: Wow, so they’re progressing nicely. And taking couple of steps back, I mean a lot of our audience Ken are folks on LinkedIn, so product manager who are probably from Web2 but are getting enamored by Web3 and flirting with the idea of making that jump across, or loads of folks in the software space who could either work on go to market marketing, and loads of TradFi folks who maybe look at you as a role model and go, “Wow, Ken’s made that leap across. I want to do it but I’m quite nervous about the bigger picture.” So just to set the stage and educate in a layman fashion, obviously digital, USDC, all the digital currencies are at center of what enables Tokenomy, I’m guessing what enables Abra to do on the other side of the fence when you guys work with retail.
Ray: So in a nutshell, could you describe that kind of journey on fundamentally this space, and what it’s enabling, which is very different from TradFi, just to kind of make that demarcation? What is so special about this world which you think will open up a brand new future for retail investors, high net worth individuals, institutions, what are some of the fundamentals that are the wow factor in your opinion?
Ken Chia: Yeah, I think that’s a really big question. So maybe what I can do is unpack it a little bit to start, and then we can see how it goes. So I think the biggest wow factor for me is that there’s so many writings on the wall showing that what crypto is today is very similar to say the commodities markets, so very nascent markets back in the ’70s before things like futures and derivatives were introduced. We’re seeing a lot of that being built again today in crypto, so I think at least for people from the traditional financial world, this is a trend or an analogy that I like to use. And that is very exciting, especially for people in finance. And I think that applies, or rather that ripples out to many other things as well, for example if that is the case for crypto, then you start to think, what else is possible within crypto?
Ken Chia: And a lot of things that we’ve seen from your DeFi and NFTs, Metaverse, all these buzzwords being thrown around, I think a lot of them are still probably at the very, very early innings, not even close to being mature. And on top of that, we have so many other verticals that are yet to exist, I think probably in the next five to ten years.
Ray: That commodities and 1970s analogy, that makes a lot of sense. So what you’re saying is there’s lots of compelling upside for building different products and different offerings in the market, and because we’re so early, hence there’s probably some really compelling upside for customers, but also participants involved in the whole chain.
Ken Chia: For sure. I think there is just a lot of low-hanging fruit, and those who are I guess a bit more involved in the I guess OTC trading or prop trading space, very active traders, when they look at trends in the derivative space in crypto versus in traditional will for example I get a lot of comments from friends and ex-colleagues of mine who are macro traders, they would look at the term structure for options in let’s say Bitcoin or ETH, or even the futures structure, and compare that with something like FX or equities. And the spreads are just so wide that it’s kind of mind boggling, and that gets them really, really interested. I mean, those are just some I guess a little bit more technical, but they’re really very tangible low-hanging fruit that gets a lot of people interested in the space to begin with. And then of course there’s also the tech element, a lot of the different use cases, which I think are still developing as we speak.
Ray: So the actual volatility in this space on the underlying is actually a compelling opportunity, right? That’s what enables some of those big spreads. Is that fair to say?
Ken Chia: Yes.
Ray: Yeah, so that actually is, considering an asset class which floats close to a trillion dollars depending what day it is, that’s never happened in history right?
Ken Chia: Exactly.
Ray: That type of spread with that type of asset. But so just putting a pin on this, because obviously us to get it, right? We have been, well hopefully red pilled, right?
Ken Chia: Yup.
Ray: Where are you on the curve for your other adjacent peers in TradFi who really get this and are aggressively saying, “Listen, I’m leaving TradFi. This is once in a lifetime. This is kind of what my uncle talked about at a dinner party in the ’70s. This is now my time to participate,” right? Are you seeing huge numbers, or are people still sitting on the fence? Because-
Ray: … huge numbers or are people still sitting on the fence? Because the press sensationalize everything. “Oh, wow. Everyone’s jumping across from Goldman, JP, and they’re all getting into some form of digital asset organization,” but what’s actually happening in reality, in your opinion?
Ken Chia: I can only speak from my own experiences firsthand and probably in the beginning of 2021, so early last year, I started to see a lot of big news around things like MicroStrategy buying a whole bunch of Bitcoin. One of the largest bank in Singapore, DBS, offering Bitcoin and crypto trading. Licenses were being given out by the MAS. And that’s when I personally started to see and witness conversations with some of my old network and friends who are calling me up for coffee or beer and saying, “Hey, I want to pick your brains on crypto, I’ve been thinking about it. This are what I’m seeing. It’s really clear.” And I think that those conversations have probably intensified throughout last year and the first quarter this year. I have personally more than a couple of friends, maybe three or four friends, who have in the last couple of months moved from very well established financial institutions and at least 10 years in finance career history to join crypto, if not already then still having those conversations and transitions en route.
Ray: Okay. Yeah, we’re definitely seeing that in Europe as well, and North America. You’re seeing it on LinkedIn every other day, right?
Ken Chia: Yeah.
Ray: Someone leaving TradFi and doing this nice elegant poster sharing the news and setting the context really, it’s kind of like free marketing really. It’s pretty powerful. And it’s interesting when you talked about the 70s and the spreads, I love that mental model to just start to learn about this space. It’s interesting, and I told Ken, I love your take on this before we dive into Abra in a few minutes, I just wanted to get your take on the current lay of the land. Yesterday I was looking at the average transaction size on BTC. It’s changed exponentially literally in the last six months. Clearly points towards its institutional participation. It made me think that “Wow, BTC now is just going to be an institutional play with less retail participation.”
Ray: What that will mean is the ecosystem will really expand out where retail are more getting involved at the ALT level, which they have been, but maybe further tiers of the ALT level, NFTs and how they can be programmed to become more of a financial tradeable asset and have different utilities, which then unlock a different subset of asset class where retail participate. Are you seeing the ecosystem really expand out and do things which are surprising you and then offering you opportunities for retail to get back in because that classic BTC participation, which was there from 2012 to 2018, that ship has seemed to sail now and it’s evolving to something else. Are you also seeing that where the market’s really expanding out?
Ken Chia: Yeah, for sure. I think back to the previous question where I had friends from finance who are joining crypto full time, I’ve also had friends who are not from finance and joining companies like Play to Earn DAOs and all these more frontier NFT protocols as well. So definitely a shift towards the other end of the spectrum in terms of the risk curve and innovation curve in crypto. I think I agree with you. And here’s the interesting thing about crypto, because crypto is one of the, I think probably the only market where it started with retail and then much later on institutions started to come in and to do arbitrage and to get exposure. If you compare that to anything else in financial history, when it comes to stocks, when it comes to commodities, when it comes to bonds, they all started with institutions and then is the other way around, sold them to retail.
Ken Chia: I think that’s quite an interesting dynamic within crypto. So yeah, definitely a move to away from Bitcoin. And I guess the other analogy I can pull up is a lot of people in my network, in my own network especially who’ve just come into crypto last year, so over the last two years, I think similar with a lot of people, none of them have bought Bitcoin, but instead they’ve gone straight into Ethereum, into Solana, into AVAX, into all these DeFi yield farms, like some of the things I’ve not done myself personally. I think it’s quite an interesting observation.
Ray: Yeah, it’s interesting. BTC is now going to become this platinum grade offering for the big folks, the BlackRocks of this world. And then so now we’re going further up the curve and it’s not even up the curve, it’s up the curve if you were participating from 2012-ish, right?
Ken Chia: Yeah.
Ray: For people who are new, this is just their entry point. They’re not even thinking about BTC. That narrative seems to have just evolved. It’s this old news now, which is interesting if you’re a bit of a historian in the space.
Ken Chia: For sure.
Ray: So there’s those points. So then going to Abra, obviously you’re building something really special at Techonomy. What made you jump across to Abra in terms of the company, the mission? What made you take that leap of faith to kind of build out APAC for Abra?
Ken Chia: Yeah, it was a really big decision at the time considering I was a founding team member at Techonomy and been there for three years. But I think as you start to follow the space and you’re looking at trends in the space, so the market that I was in charge of and the market that we covered at Techonomy and Indodex was the Indonesia market. So only one, I guess, local domestic market. We looked at a lot of IDR, liquidity pairs and so forth. But then when I had the opportunity to look at a more global player, specifically in the lending space, which is the space I’ve been following for a couple of years at the time, in my role at Techonomy I had to do a lot of due diligence and work with a lot of different lenders to deploy our treasury and to make sure that we are utilizing our coins and being capital efficient.
Ken Chia: Abra was one of the players that we worked with, so I was on the client side before I joined Abra. Got to know the team really well, understood their risk management, understood the team. I got to know everyone. And then I think one conversation led to the other and it kind of made sense to take another leap of faith and help a US based company expand into a new region in APAC.
Ray: I actually think it’s a really cool move. I think it’s probably got huge potential in that region and for all the layman folks in the audience, and actually for a lot of people, I was trying to explain this to my brother-in-law over the weekend and he just got lost when I was trying to explain to him some of these new value props that Abra offer and in the UK, we have something called Nexo. And his question was “Okay, I deposit in fiat. It’s then converted to USDC or TEVA. What do they do with that to give me the yield? What’s happening backstage?”
Ray: And I was like, I struggled to explain it to be fair with you because I’m not from this world. So in a nutshell, I think that’s what a lot of folks are curious about. Yes, I get this kind of, it moves right five to nine to 10% yield on USDC or any other stablecoin, but what are you guys doing backstage to enable that? And what are some of the exciting things happening backstage which are making people move across from Crowdfire to this world? If you could just kind of unpack that backstage thing, that would be great for the audience to understand the bigger picture.
Ken Chia: Sure. I guess to start with Abra’s vision is to build a honest global crypto bank. I think we very purposely chose the term crypto bank because what we’re doing is no different from what any other bank would do in the sense that most banks, they gather deposits from the public, the general public and different clients, and then they then deploy those deposits into other types of products. You get credit cards, you have loans, you have all sorts of FX lines and so forth to get a higher yield than your deposits. And that’s exactly what we’re doing with Abra. But instead of with fiat, we’re working with crypto.
Ken Chia: The main bulk of our activities when we receive deposits from clients into Abra, we would then deploy that out into the institutional lending market, which is basically a market where you get sophisticated market players across players like exchanges, who they have funding markets as well. You have market makers who may be looking to borrow to deploy into delta neutral strategies to arbitrage. You also get parties like crypto miners who have a lot of, for example, Bitcoin miners have a lot of Bitcoin and they’re looking to access dollar liquidity without selling and to fund their operational expenses. That’s another group as well.
Ken Chia: And you also have retail, so not just institutions, but also I guess high net worth crypto holders who have a lot of Bitcoin, a lot of Eth, a lot of crypto and for a variety of reasons they don’t want to sell, they don’t want to realize that tax event. And instead they want to borrow against a crypto and borrowing in a non-crypto world and traditional world is also a very tax beneficial activity where your interest is tax deductible. That’s another use case as well.
Ken Chia: I would say that’s the majority of what we do with client assets at Abra, and to a much smaller extent, maybe 10, 15%, we look at deployments into different parts of DeFi. And I think that’s a whole different topic altogether, but we look at the blue chip DeFi pools where we are able to capitalize on higher yields when the yields are available, we try to keep at the forefront of all the developments and deploy. I think the reason why we, up until today, we still keep quite a small conservative allocation to DeFi, 10 to 15% is because we want to scale up as we get more comfortable, as you know things can happen in DeFi. Smart contract risk, you get protocol risks, key men risks, founders leaving protocols and so forth. That’s kind of in a nutshell and happy to unpack any part of that.
Ray: Yeah. That framework’s really useful. I think that really helps the audience understand, “Okay, great. I make my deposit in fiat. It’s USDC. This is how I’m getting my yield and all the wacky stuff happening backstage.” Great, good luck to them, but this is why I get my yield. But obviously leverage in this space is pretty crazy right at the moment, hence why folks are doing a lot of this arbitrage, different types of strategies and it hasn’t been regulated yet. Do you see that evolving and becoming more contained? Because at the moment, if you’re really good at this, it’s a once in a lifetime opportunity. It is that 1970s commodities moment, hence why you’ve seen organizations like FTX absolutely crush it and various others, but where.
Ray: But as regulation kicks in more, and controls around leverage, other elements, around covenants, audits around code because I understand the DeFi point as well, and I think Abra’s approach is brilliant, really sensible and thoughtful, do you see yields changing quite quickly because as more regulation comes in, the more tapered things come off? Do you see that changing quite swiftly?
Ken Chia: I think it’s a little bit of… I think you can look at it two ways. So regulations have always been evolving, especially in the crypto space. And being a market player, you’re typically ahead of regulations in a sense. You’re developing something new, you’re waiting for regulations to catch up, you’re looking for regulatory clarity and so forth. And the crypto market, and I guess the more established players are typically self-regulating until such guidances appear.
Ken Chia: You can look at it from the perspective where with more regulations, you then get more, or rather less uncertainty around regulations from your more blue chip institutional type players, your pension funds, your larger traditional hedge funds of BlackRocks of the world and so forth to deploy into the space where it’s regulated. And then you see a whole influx of new assets into the crypto space, which is great. And I think on the flip side, if you don’t have as much regulations in the market, that also is… I think the net benefit to have regulations is always good to bring a more place in the market.
Ken Chia: I think to answer your question on the yields, as we get more assets into the space, I think definitely with more people capitalizing on the opportunity and the high yield and crypto, we don’t know how long the yields will last for, maybe five or 10 years, but for now, and for the foreseeable future, there are definitely what I would call a structural shortage of dollars in crypto for a whole variety of reasons.
Ray: Mm. Yeah. I mean, thanks for that context, Ken. I’m actually putting my slight biased red pill hat on here. Regulation is actually a brilliant thing for everyone because I share your sentiment that you’re going to have the larger folks just aping, and go, “Great. I’m comfortable. I now have a framework which I can take to the committees which run the mandates, and we can actually do something now, which is great.”
Ray: But I think at the same time, if, and it’s a big if, because there’s lots of execution, if all of these DAPS start executing against their wild statements and their dreams on what it offers customers, then the actual net GDP in this space, the digital assets, it’s unprecedented, isn’t it Ken? We’ve never seen this in history where we’ve got digital property rights, digital scarcity unlocking mind-blowing use cases for the customer. Right?
Ken Chia: Yeah.
Ray: So if that starts picking up at the same time, then those yields, if not more, are even there, right? Because we’re opening up brand new digital economies, which have never existed in history.
Ken Chia: Yep. Yep. Exactly.
Ray: So that’s the bull case, right?
Ken Chia: Yeah.
Ray: But do you see that playing out? Obviously there’s a lot happening in the world right now. It’s geopolitical, we’ve got war in Ukraine, and obviously we’ve had the Feds talking about a taper. So all these things converging. It’s quite crazy at the moment, I’m sure for everyone, especially in your world. But playing this out over two, three years, do you see a lot of these DAPS executing, say goals, which then converge with your world, then unlock brand new opportunity? What’s your thoughts on that bull case?
Ken Chia: When you reference DAPS, I assume you’re referring to DeFi protocols and all these decentralized lending-
Ray: Yeah, DeFi, what’s the promise of NFTs, all the layer one and layer twos. I mean, even NFTs is a primitive on our adding utility where you can stake your NFT or get yield of NFTs. So it’s mind-blowing on how this can expand, how a lot of these collectibles can become financial assets. That will then slowly, probably seep into your world, right?
Ken Chia: Yeah.
Ray: In terms the market makers, so giving the market makers and all the people you serve more surface area to be creative and build more products. So that’s where I was heading. I hope that makes sense.
Ken Chia: Yeah. Yeah, definitely. I think the whole, decentralized and all these DAPS that are being built on a blockchain, they’re definitely the pioneers when it comes to being right at the forefront of innovation in crypto. So I think a really good analogy would be if you kind of rewind back to 2017, the likes of your Kyber Network, the likes of your EtherDelta, these kind of early, I guess V1 beta stage decentralized exchanges were so nascent and they had a very strong following that was almost cultish. People believed that it was the future, but at the same time, at least in my own personal experience, when I started to use it, I’m like, no one’s ever going to use this. The slippage is so high. You need log on with your ledger. You need to transfer on chain. You need to pay for gas. This is ridiculous. Why wouldn’t I trade on Coinbase or AB or, or Binance or something like that?
Ken Chia: But fast forward to 2020, SushiSwap and Uniswap, decentralized exchanges are a common place. And I think we’re starting to see kind of a repeat of that curve of innovation, where with the, I guess DeFi 2.0 and NFTs, to your point, getting yield and boring against NFTs, those kind of use cases, similar to the previous cycle in 2017, a lot of those early stage innovations will probably die off. And that’s just the law of innovation when it comes to startups, regardless of whether it’s Web 2.0, Web 3.0. But what’s left behind will set the stage for the next level of innovation.
Ray: Yeah. I’m quietly really excited about that because I’m already seeing some really interesting utility on the NFT side and DeFi. We were supposed to have defi summer last year. It ended up being NFT summer for the last 18 months. But I love what Abra are trying to do. I think your approach is really good. A, it’s sensible because you got to audit the codes, the founder risk, these protocols can blow up. So I think you guys are going about it in a really thoughtful way. But if you look at most DeFi protocols now, if you look at the 24 steps, it’s nuts. My sister’s never going to do that.
Ken Chia: Exactly.
Ray: It’s not going to happen. So that simple front end where it literally is two steps, but you have exposure to DeFi, how close are we to that? Are you a fan of other organizations that you think are doing it well, because I know Abra are on that journey? But how close are we to that world where it literally can be two steps and my sister go, “Great. I’m participating in DeFi for two steps.” Where are we on that curve?
Ken Chia: I think we’ve seen so many examples of, I guess CeFi companies trying to make this a reality. Obviously at Abra, we’re trying to do exactly what you just described, make things very simple, in plain English, get people to just deposit, put your coin on Abra Earn and start earning right away. You don’t have to do that 24 clicks or whatever it is, pay a ridiculous amount of gas, and double check your transaction a million times.
Ken Chia: But I think we’ve also started to see trends towards directly into Web 3.0. So I think the first phase was exchanges starting to offer their version of staking or their version of lending, and arguably that’s relatively centralized. You have to rely on the exchange and make sure that they don’t get hacked or they issue sanctions against where you’re from, for example. And if you look at the likes of say Coinbase with their Web 3.0 compatible Coinbase wallet, I think that’s quite an interesting development because what that allows is for people to use, or rather to smoothen the user journey from a centralized exchange, and navigating directly into DeFi in a somewhat semi-controlled and semi-secured fashion versus what the crypto natives are used to just using MetaMask and interfacing with anything on Web 3.0.
Ray: Yeah. I think this kind of quasi CeFi to Defi might just work. Because I think you got the old school gang saying, “Oh, it’s not decentralized, blah, blah, blah.” But you might have most of the customers saying, “Look, I don’t care about that. That’s not the outcome I want.”
Ken Chia: Exactly.
Ray: “I want the yield and what’s happening backstage. I don’t care. And I’ve got to drop my kids to school now. Bye. I’ve got a life to live. I don’t have to think too much. But if you’re giving me a 12 to 15% yield, that’s spectacular. Thank you very much.”
Ray: So I agree. It’s going to kind of head towards that world. And then you’re probably can have people who are the purists, and then they can probably take more risk and do their own thing, and probably get it more of a compelling yield. So I think you might see the market go from general user, which is the big market, to then always hardcore expert users, but that’s fine too, as well. that’s always kind of existed in many different industries.
Ken Chia: Yeah, for sure.
Ray: So obviously you see DeFi picking up now, but looking at the wider surface area of Web3, do you see some surprise factors popping up, Ken, anything? Which is really creative where obviously you’ve got play to earn and what’s happening with Axie Infinity. I was just thinking about this yesterday, Ken, before our conversation. I think we might be even underestimating what can get financialized, what can be staked, what can earn yield. I think our heads can’t even wrap around the concept of what can earn financial output, if that makes sense. Because now everything’s digital, now you can program in scarcity. The value unlock is mind-blowing. So is there anything creative you’re seeing in the marketplace where you are going, “Wow. That could actually earn yield and become a financial asset,” that you think on that front, which catches your imagination?
Ken Chia: Yeah. I think that’s a really tough one to answer. And it’s always so easy to look back in hindsight and say, “Oh my God, it’s such an obvious trend with DeFi two years ago and so forth.” But there’s this quote that I really, really like, which describes a lot of what we’ve seen in innovations in the crypto space, which is, “Innovations are overhyped in the short term, but vastly underestimated in the long term.”
Ken Chia: And that applies to so many things, similar to the example that I gave earlier on decentralized exchanges. Overhyped in the short term in 2017, totally underestimated in 2020 when the market came in and a lot of volume started flooding in. And today, or rather last year we saw protocols like dYdX or perp protocol, basically decentralize derivative platforms, which in itself is a lot to digest in just three words. And it’s one of those-
Ken Chia: In just three words, and it’s one of those innovations that I didn’t expect that would come so quickly, and ship so quickly, and run so smoothly, but I think just today there’s just so much to keep up with in the space.
Ken Chia: I think to your point it’s very overwhelming in a good way because you get people that are just building, and more builders are joining the space.
Ken Chia: I don’t have a specific example, or rather I don’t have any shareable alpha that I can share with you on the next wave because I think it’s anyone’s guess. It’s probably three or four hot narratives that a lot of these crypto VCs and investors are looking at and kind of just placing bets on each of them, and hopefully one will take off.
Ray: Yeah. It seems to I like the way you framed that, Ken, like people underestimate things in the short term. They’ll hype them in the short term and can’t think in the longterm, so kind of that analogy. Slowly, then all at once.
Ken Chia: Yeah.
Ray: It happens in so many different scenarios. So on the plan for Abra then, what’s the outlook for this year? Are there some new, exciting product developments or launches that you can tease the audience with any new things that everyone should keep an eye for from an Abra front?
Ken Chia: Yeah. I mean, not too much I can share, but definitely keep an eye out on products related to DeFi and NFTs, a space that we’re definitely keeping a very close eye on.
Ken Chia: A lot of our top customers and top clients are very heavily requesting for services and different features, but can’t go into too much detail about it. I think definitely keep a close eye on the DeFi NFT space.
Ray: Awesome. Just for this year, obviously it’s been crazy the last two months or so from various dimensions, but how do you think this year’s going to pan out like in terms of just the space generally? Are we going to continue to see adoption and increase in market cap, or are we going to trade sideways for a long time, or do you see a big correction?
Ray: I know this is really difficult, and no one has the answer, but just what’s your general gut sentiment because I know it’s a guess for everyone.
Ken Chia: Yeah. It is. It is a guess for everyone, and I think everyone’s wrong until someone is right, but I think it’s in terms of short term price movements, my personal predictions for the next… I guess until the middle of the year it’s no surprise that markets are very, very choppy for the reasons that you mentioned earlier on uncertainty, whether the feds are able to raise rates to combat inflation which is exacerbated by what’s happening in Ukraine and energy crisis. It’s kind of almost like a negative feedback loop like really, really. There’s no easy answer to get out of that, so I think definitely very choppy for the next few months, and we’ve seen that over the past few weeks as well.
Ken Chia: It’s really anyone’s guess. I don’t really have a personal view on this. There are many. The way I look at it is you… At least for the short term, there’s maybe a few I guess bull cases, and maybe they’re able to raise rates, and inflation has tapered down a little bit, and we just go up, and the economy is better. Our unemployment is down, but you can think of so many things that could potentially blow up.
Ken Chia: Credit markets are extended. You get oil markets that are going ballistic. You get inflation going up, and you cannot really raise rates because that would trigger structural unemployment increase and so forth. I mean, this is beyond, I guess, the scope of the podcast, but I think in the long term crypto specifically when it comes to your point to adoption to more market participants taking notice of the space, especially when it comes to the lending and yield space where you’re able to get… For example, on Abra we offer 8% per annum on stable coins in yield per annum, and I think as they understand the space they look at the risks and rewards, what the underlying risk is, and how similar that is to something like a fixed income instrument.
Ken Chia: I think this is just one example, but there’s so many things about crypto that are attracting all sorts of new market participants, so I think in the longterm definitely bullish [inaudible 00:43:40].
Ray: Yeah. It’s a moment to be patient, and just look at the fundamentals and all those macro forces that you mentioned, the interest rate challenge, what’s happening on the war front now, supply chain. It’s just to focus on the fundamentals, and be patient, and continue to build.
Ken Chia: Yeah.
Ray: I think that’s probably the healthiest way to think, and also focusing on Singapore now, so I’m a huge fan of the country. Here at PatSnap that’s our roots. Actually, one of our original investors was NUS in Singapore, so it’s very close to our heart as a region, but Singapore, Dubai, and parts of Switzerland are being praised a lot by the community. Right?
Ray: Even Bill, CEO of Abra, is a big fan of Singapore and what’s happening in the region, so you’re on the ground there. What are they doing well there from a government level and from a regulation level which is making Singapore a bit of a wonderful hub for Web3? What have they done right?
Ken Chia: Yeah. I think the regulators in Singapore, so the MAS, Monetary Authority of Singapore, they’ve taken a really, I guess, consolidative approach, so I’ve been in the space since 2018 based in Singapore between Singapore and Indonesia, I guess, and I think one of the main differences that I have noticed with Singapore versus other regional countries like Malaysia, Thailand, and Indonesia is that Singapore has taken a very consolidative approach, very wait-and-see approach, and taking the time to really understand and learn the space directly from market participants and industry players, a lot of regulatory round tables, and fact finding sessions before passing anything.
Ken Chia: When you look at the main regulations that pertain to crypto players, the PSA or the Payment Services Act, that was passed in 2019 but only really taken into effect starting from the middle of 2020 and 2021. They’ve really taken their time, eased into the conversation, and even after they passed the bill still in that consultative mode and getting feedback from industry players. What makes sense? What doesn’t make sense? What do you need? I think that really sets Singapore apart.
Ray: Yeah. Great. Basically, a really thoughtful and mature way of going about it. Right? Not knee-jerking. Just being a student first, and listening, and learning, and then making the decision which is… I wish most governments had done it that way.
Ken Chia: Yeah.
Ray: It just makes a lot of sense. Are you seeing that generally in the Asian region, or is Singapore kind of a role model and an outlier for that approach?
Ken Chia: Singapore is definitely an outlier. I think when you compare with the likes of Malaysia and Thailand, Indonesia, their regulations came out much quicker, and the frameworks were very prescriptive meaning to say they were very clear. These are the rules, and you have to follow the rules. We’ve seen that in other countries in Asia as well. Yeah. Very stark difference with Singapore.
Ray: Yeah. I think Singapore generally have been great on innovation. Yeah. I’ve had various exposure to working with local government there. It’s been brilliant. It’s like working with a private company, really. Very smooth. Very slick.
Ken Chia: Yeah.
Ray: Great UI/UX. To me, it’s a role model for the rest of the world, but Ken, I really enjoyed our exchange today. For our audience, where can people find out if they want to learn more about you and Abra? Where’s the best place for our audience to kind of drop you a message?
Ken Chia: Yeah. You can find me on LinkedIn or on Twitter. On Twitter my handle is imkenchia, so literally I-M kenchia, and then on LinkedIn I think if you just search Ken Chia Abra you can find me there. I also have a blog that I have done a poor job at writing consistently, but you can check that out at ken-chia.com
Ray: Awesome, Ken. Well, hopefully we can depart to in Q4 of this year and see where the lay of the land is, but it’s been a great conversation, and I look forward to keeping an eye on Abra, and wishing you all the success for this year.
Ken Chia: For sure. Definitely. Definitely keep a look out.
Ken Chia: Cheers.