Blockchain technology has gone a long way in improving access to financial services, efficiency in financial transactions, and the transparency thereof. While there is optimism in the potential of blockchain tech to bring about further improvements in the system, the challenges mostly revolve around knowledge-gap, real-world utility, as well as regulation, as we learn from Marcus Lim, Co-Founder and Chief Executive Officer of Zipmex, in a TechNode Global Q&A.
A digital asset exchange, Zipmex has operations in Singapore, Thailand, Indonesia, and Australia. The company focuses on consumer, retail and institutional investors seeking convenience to trade digital assets securely. Zipmex aims to excite, educate and enrich people by providing them with insight into endless financial possibilities. Zipmex boasts over 1 million clients with over $4 billion traded to date. The company aims to become a wealth-generating platform by helping people save and invest wisely, increasing their wealth.
A blockchain and technology entrepreneur raised in Australia, Lim first embarked on his start-up journey by founding One Flare, a local B2C e-marketplace that connects customers to a diverse range of businesses including graphic designers, interior designers, tax accounting, and home renovation companies, in 2011. Through raising online visibility for small businesses, the Sydney-based firm now has a consumer base of 400,000 Australians and has been featured in Deloitte’s 2016’s Fast 50 growing companies.
Capitalizing on Asia’s fast-growing crypto hub, he later moved back to his own country, Singapore, and started Zipmex in 2018. Zipmex utilizes distributed ledger/blockchain technology, allowing for secure crypto trading within the institutional and retail investment community.
Under Lim’s leadership, Zipmex has recently raised US$41 million in an ongoing Series B funding round from Bank of Ayudhya’s corporate venture capital arm, Krungsri Finnovate, and listed multimedia companies Plan B Media and Master Ad (MACO) of Thailand, as well as B Capital, TNB Aura, and V Ventures. The investment makes Bank of Ayudhya, part of the Mitsubishi UFJ Financial Group (MUFG), one of the first banks globally, and the first in Southeast Asia, to invest in a digital asset platform.
Leveraging his commercial acumen, Marcus hopes to accelerate the mainstream adoption of digital currencies and virtual assets. In 2021, the company processed Southeast Asia’s first-ever purchase of a Lamborghini car with Bitcoin and subsequently the first-ever purchase of an upscale Condominium apartment in Thailand.
Below is the full TechNode Global Q&A with Marcus Lim, Co-Founder and CEO of Zipmex.
What are the trends driving innovation in the FinTech ecosystem in the region? What part do blockchain and crypto play in these innovations?
FinTech innovation in Southeast Asia is being driven by the need for better and more accessible financial services at lower price points, for example, savings accounts with higher yields. The results have been impressive. People in the region now have app-based access to a variety of regulated financial services, such as investing and digital-only banking, that offer a better user experience at a fraction of the cost.
Blockchain and crypto are playing an important role in these innovations. By design, they enable low-cost value transfer, full transparency, and have few barriers to access. They are also global in scope, meaning Southeast Asians can tap into liquidity that extends far beyond the region. Perhaps most important is that blockchain and crypto are democratizing access to wealth creation. Through the proliferation of decentralized financial services (DeFi) and non-fungible tokens (NFT), people are being given greater opportunities to grow their wealth more efficiently.
What are the three key challenges in achieving mainstream use of digital assets?
The first challenge is the knowledge gap. While interest in and understanding of digital assets are growing, they are still largely seen as a domain for tech-savvy, risk-seeking traders. Recent volatility has only contributed to this narrative.
The second challenge is the lack of real-world utility. Digital assets are still considered to be investment instruments first. Other uses, such as payments, are beginning to take hold. We have seen cars, property, and art transacted in Bitcoin, while El Salvador recently made news for becoming the first country to accept Bitcoin as legal tender. Having more players in the space will create a network effect, leading to more merchants accepting cryptocurrency, which will in turn increase demand for digital assets.
The third challenge is a regulatory one. Regulators are still finding their way with regard to how best to regulate digital assets. Regulation is an important component of public trust, which is needed for mass adoption. This is why Zipmex is committed to following the regulations in each of its markets and assisting regulators as required.
Traditional banks and other financial institutions are starting to explore and invest in companies that build/provide blockchain and crypto solutions. Can this be indicative that the industry itself is shifting toward a more decentralized approach to finance?
Traditional finance’s foray into blockchain and crypto solutions serves to legitimize the entire blockchain and digital asset industry. It is recognition that such solutions, including decentralized finance, have the potential to be the future of finance. This does not necessarily mean traditional finance is becoming more decentralized, but rather that it is responding to customer demand and the possibility of increased efficiency. For example, we have already seen banks utilizing blockchain successfully for interbank settlements.
The increased confidence from institutional investors has propelled more retail investors to invest in digital assets. In turn, new financial products and services related to digital assets will be developed which may provide opportunities for both existing and new investors to participate in projects that will be the first of their kind and shape the future financial system.
How are companies like Zipmex and regulators addressing the need for the safety and security of financial transactions? How effective are regulatory sandboxes and other compliance mechanisms in promoting innovation in this space?
Regulators across the region have implemented strict KYC/AML policies for digital asset service providers. We have included these policies in our onboarding process and remain committed to ensuring that transactions are conducted in a safe and compliant way on our platform.
We have also sought or are seeking the necessary licenses in each of our markets. In Thailand, we have already secured exchange and brokerage licenses from the Thai SEC. In Singapore, we are currently in the advanced stages of the Major Payment Institution license with the Monetary Authority of Singapore (MAS) for, among others, digital payment token services. To keep customer funds safe, we leverage institutional-grade custody solutions and insurance for up to $100,000,000 from BitGo.
Sandboxes, like the six-month exemption period offered by MAS, are an important part of the cutting-edge innovation we see in FinTech and cryptocurrency. They allow companies to try out new ideas and regulators to better understand the potential impact of innovation. Together, the two sides can work together to implement sound regulations while keeping the level of innovation high.
What makes Zipmex unique from other platforms or solutions in the market?
First, we are an established regional player. We started in Thailand but are growing very quickly in Indonesia, Singapore, and Australia. We are deeply integrated and trusted in each of our markets–a total population of more than 370 million.
Second, we are regulated. We have obtained two licenses in Thailand (the exchange and the brokerage licenses) and are in the process of applying for licenses in the other jurisdictions in which regulators have been looking to issue crypto-related licenses. We are registered with all relevant authorities, putting us at the forefront of compliance.
Third, innovation. We are not a pure commoditized exchange business. Our vision transcends that. We aim to integrate personal finance and lifestyle through customer-centric products such as: a native token (ZMT), savings (ZipUp and ZipLock), trading (Zipmex Exchange), crypto payments (ZipSpend), a Visa-branded payment card (Zipmex Card), and access to art, gaming and other lifestyle products and experiences which can be tokenized and made into NFTs that can be redeemed and traded on our upcoming NFT platform.
What is the future of finance, digital assets, and regulatory regimes in Southeast Asia, from your perspective?
We are set to see greater adoption of digital assets in the near future, particularly with the rise of both investment in blockchain technology and the acceptance of crypto as a payment method. Institutional investors will continue to increase their digital asset positions, companies will ramp up innovation across the industry, and retail participation will expand as more digital asset use cases are made available.
From a regulatory perspective, Thailand is at the forefront in Southeast Asia. The country’s SEC has made significant headway in regulating the industry. Security Token Offerings are of particular interest as they are the gateway to digitizing traditional asset classes. The SEC has publicly stated the revision of the law to incorporate digital securities and custody of such digital assets. We hope to see more countries following in Thailand’s footsteps.
Can you share some case studies, use cases, and data?
Overall market case studies/data:
Cryptocurrencies are never far from the headlines, especially with Bitcoin which finally broke through $50,000 since its previous all-time high in April (almost $65,000) for the first time. It is probable that we are set to see greater adoption of crypto in the near future–particularly with the rise of both (1) investment in the blockchain technology, and (2) acceptance and adoption of crypto across various use cases, from payments to investments and more. Thus, crypto will have a more and more prominent role in our daily lives.
- As public interest grew, crypto-payment platforms and institutional investment in crypto is sure to have a bright future.
- Publicly traded companies that have adopted BTC as a reserved asset and hold direct control over their BTC funds:
- MicroStrategy: From 295 BTC to holding 71,079 BTC in reserve = over $3 billion in BTC;
Michael Saylor also mentioned he opted BTC over gold as reserved asset; - Tesla: Invested an aggregate $1.5 billion in BTC, which amounts to 7.7 percent of Tesla’s $19.384 billion cash holdings as of Q4 2020. Despite Elon Musk’s announcement recently on crypto’s impact on ESG, Tesla’s recent filing still mentions digital assets as a portion of cash in its alternative reserve assets;
- Galaxy Digital Holdings: Holds 16,402 BTC or roughly $770 million.
- MicroStrategy: From 295 BTC to holding 71,079 BTC in reserve = over $3 billion in BTC;
- Funds: Investment funds have entered the crypto space as well, enabling accredited investors to access/gain exposure to cryptocurrency:
- Grayscale Bitcoin Trust: Largest BTC portfolio with over $30 billion in BTC, or more than 3 percent of Bitcoin’s total supply;
- CoinShares: The firm to launch Bitcoin hedge fund and exchange-traded Bitcoin product in 2014;
- Ruffer Investment Company (traditional asset management firm): Invested 2.5 percent of its Multi-Strategies Fund in Bitcoin, driven by its “potent insurance policy” against fiat devaluation, allowing diversification from gold and inflation-linked bonds.
Zipmex use cases/data:
As retail and institutional appetite for blockchain and cryptocurrency continue to grow, Zipmex too has been expanding its offerings.
ZipWorld: Zipmex recently launched ZipWorld, a whole new digital asset world where users can access exclusive lifestyle products and one-of-a-kind experiences by which ZMT will be underpinning every new product that comes onto Zipmex (redemption of lifestyle products and services using crypto).
ZLaunch: Many people would like to invest in exciting new tokens that are fresh to the market, but find it hard to analyze which ones to pick. ZLaunch will solve this problem and clients will soon be able to use ZMT to earn an allocation of new tokens–providing first access to early-stage token projects before they are officially listed on the Zipmex Exchange.
Zipmex Card: Zipmex Card is a crypto card for Zipmex’s customers to be able to spend anywhere where Visa is accepted. Zipmex created our Zipmex Card product with the customers at heart. Zipmex Card will provide a seamless way for our customers to spend with their cryptocurrencies right from their Zipmex wallet. When they take out this card to tap, swipe, or pay via chip, it will be just as seamless as paying with a traditional debit card. In addition, our card will also provide rewards in the form of, but not limited to, cashbacks in cryptocurrency and exclusive rewards such as access to Zipmex’s ecosystems (e.g., NFTs, events, promotions, lifestyle rewards, and much more).
Customers will soon have the option to access the 70 million merchants in Visa’s global network as it seeks to bridge digital assets with traditional payment infrastructure. Zipmex had also facilitated Asia’s first Visa, the world’s leader in digital payments, announced that US$1 billion had been spent using its crypto-supported cards in the first half of 2021.
ZipSpend: ZipSpend is a B2B crypto payment solution for Zipmex’s corporate partners to allow our partners to be able to accept cryptocurrency as a form of payment. ZipSpend has already launched in Thailand and Zipmex has facilitated the purchase of four Lamborghini and five Tesla purchases using crypto. It also tracks a larger global trend of property sellers accepting the world’s most popular cryptocurrency as an alternative to fiat currency with the partnership with One.Six Development, the company behind the ultra-luxury condominium The Strand in the prestigious Bangkok neighborhood of Thonglor. Zipmex is also in the process of improving it to be able to serve more of our merchant partners.