By June Ramli
Singapore, Nov 12: Now that you know what an NFT is, let us turn our attention to the cryptocurrency industry in Malaysia.
Broctagon Fintech recently launched WorldBook, the world’s first global crypto liquidity movement, focused on solving key liquidity issues plaguing the crypto industry.The initiative aims to introduce a universal standard of liquidity for digital assets, uniting both processes and technology within the crypto industry under a single framework. We recently spoke to the company’s Head of Liquidity Cecilia Chan (pictured above) to help us shed us some light on the industry in Malaysia. Without further ado, let’s read the interview with Chan below.
How does regulations and bitcoin surge raise crypto adoption in Malaysia?
It is an industry imperative to have policies that ensure effective measures are in place to combat any money laundering and terrorism financing risks associated with the use of digital currencies. Regulations will act as a catalyst for cryptocurrency adoption and gradually push it into mainstream in Malaysia, over a period of time. This is the same for other markets too. Regardless of their geopolitical location, what we see is that regulators typically refer to existing compliance structures to formulate a regulatory framework for crypto. In this sense, crypto is gearing towards greater standardisation. The pandemic has spurred the growth of digital assets and highlighted their usage and relevance in the new normal. The interest in investing in cryptocurrencies like bitcoin is on the rise. Though as of now bitcoin is more a commodity rather than currency, but this gap will shorten as we move forward.
Is the lack of liquidity holding back the crypto industry in Malaysia?
The lack of liquidity is the biggest issue that the industry faces. Cryptocurrencies remain extremely volatile, and this volatility serves as a double-edged sword, both as an exciting asset choice for investors and apprehension from others, holding back its widespread adoption. A tweet from Elon Musk is all it takes to cause wild fluctuations in bitcoin’s value, for example. The volatility of Bitcoin suggests that both consumers and merchants bear exchange-rate risk, which arises from the need to change fiat currency to Bitcoin. Moreover, the current crypto-liquidity landscape is not friendly towards traditional financial institutions. This aspect has, for the most part, acted as a barrier-to-entry for mainstream institutions, and has kept crypto a “fringe” investment. At Broctagon we are attempting to resolve the liquidity issue through the NEXUS by enabling smaller crypto exchanges to acquire more liquidity. Security is another big issue plaguing the crypto markets right now which is why players and regulators are looking at regtech to tackle security issues.
What is the impact of China’s crypto ban on the industry?
In September, the Chinese government announced a crackdown on all financial transactions involving cryptocurrencies and issued a countrywide ban on cryptocurrency mining, the energy-consuming process by which cryptocurrency tokens are produced. Since about 65 per cent of the world’s Bitcoin mining takes place in China, the crackdown might seem concerning. But the reality is that it won’t affect the global cryptocurrency pricing and industry in the long run. The utility and ownership of bitcoin has become broader over time. This is not a first for China, and in the past, they have banned ICOs (Initial coin offering), pronouncing them illegal and ordering operators to return money to investors. For years, China has signalled that they want to ban bitcoin. China has been home to the world’s largest bitcoin mines, due to plentiful and affordable electricity, and the country has accounted for a vast majority of the volume traded in global markets in the past. Now most trading will stop in China though there might be others who would look at new investment routes. The China market for cryptocurrencies has always been important but going forward it is significance will reduce.
What are some of problems faced by the smaller or newer crypto exchanges?
While it is a wider industry problem, the lack of liquidity in the cryptocurrency market is the biggest issue that the newer exchanges in Asia and globally struggle with. They are hoping for more market makers so that there’s more liquidity and transparent pricing. As they look to establish themselves, they are also struggling with a small number of users, low order frequency, low trade volumes, drastic price disparity and huge settlement costs for users. The reality is that building an order book that can rival top exchanges requires heavy capital and resources. The problem is that each exchange functions on different protocols, both technology and process-wise, which makes it difficult for them to interact not just with external entities, but also amongst themselves. There is an evident need to standardise processes and technology for the crypto industry in the future which will also infuse liquidity in the ecosystem. As crypto assets become more liquid, trusted and accessible, ownership and trading will grow steadily.
How does one teach the masses about bitcoin and all things crypto?
Bitcoin is one amongst other cryptocurrencies, which are digital currencies that aim to do away with problems of online transactions. Everything we buy today goes through a bank or credit card company who takes a cut. There are also security concerns where you have to trust your card company to keep your details safe. With cryptocurrencies, there is no central authority to control the flow of money, which will lead to a cheaper, easier flow of money, even across national borders. The time when bitcoin is being used to buy and sell goods is near, though the journey is a long one and the regulatory foundation needs to be laid.
Bitcoin will drive financial inclusion which means that it will serve the unbanked who the traditional financial institutions have been unable to cater to. For now, there is uncertainty around bitcoin, but while there are concerns, there is a general consensus that if we get a digital currency to work without a middleman, the way the economy functions can be transformed for the better.
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