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https://youtu.be/X5u3Z8-UBw8

Speaker1: Hello and welcome to Vox Voices in Digital Finance. I’m your host, Jane DeBlasio. If you enjoyed the program, please support it by giving us a like. My guest today is Amber Huang, managing partner at Amber Group, a privately held crypto company that has expanded from institutional only business into the retail space. I spoke with Annabel about Amber is incredible valuation, how it plans to expand and what that says about the state of the crypto business today. Annabel Huang, welcome to Digits Phone Box.

Speaker2: Thank you. Thanks for having me.

Speaker1: It’s a pleasure to have you. So you’re managing partner at Amber Group in Singapore. Temasek recently led a series B round $100 million, valuing the company at about 3 billion. Massive increase in valuation. You’ve gone from unicorn to trio corn. What? What explains that huge rapid increase in valuation?

Speaker2: Well, I think first of all, it’s just a booming crypto market. So of course, a bit of the market beater, so to speak. But I think for us, we’re continuing to build our offering globally and I think growing beyond a crypto finance platform, but also incubating different projects in DEFI and then of course Web3 space. So I think fortunately a lot of the investors also saw the potential in us. And of course with the strong backing, we’re going to continue to expand in different regions and also in the services we offer.

Speaker1: What is the story that you began the group before you joined? Began about four years ago as just a. Prop Trading Structured Products Group for institutions. Hedge funds, but like now you’ve got a much broader footprint. What’s driving that expansion? Why do you not want to just stay in your niche where you’ve got that expertise?

Speaker2: It’s interesting. I think a lot of the growth happened organically, at least in the beginning. So when we started off, it was 2017 Bull Market. And of course with most of us background in trading, then the first foray or the first natural point of entry, this market is also starting with trading. But then as we get to know more players in this industry, they have a lot of needs to be serviced in terms of planning their, hedging their own portfolio or having a lot of liquidity needs. Then we became a natural counterparty to step in and to start trading or working with them. So we thought, why not build it into an institutional desk with the offerings since we already have liquidity connection and all of that financial engineering capability in the background, then, then I think we started to think about it in a more systematic way. Thinking about our first growth engine, right, is our core business or the institutional business. Then where is the second growth curve coming from? And I think also at that time we started to seeing there are a lot of individual needs to get into crypto as well and I think they struggled a bit with the right platform to go to maybe in the US if Coinbase. But what about the rest of the world? What about Asia? What about Latin America? What about Europe? Or even a lot of the Southeast, Southeast Asia countries or emerging markets are underbanked or underserved. So we do see an opportunity and I think we have the right engineering, the right tech stock, even willing to commit to the right building, the right ragstock to make that happen. So of course, it’s a challenge for us. We never had that background in the individual or consumer space, but we were very committed and went for it.

Speaker1: Your background, you’ve been an ethics and trading person at places like Nomura and Deutsche Bank. The group itself was founded by ex Morgan Stanley. People again structured products and fixed income and currency. What’s different about serving institutional clients in this growing crypto space than in the traditional finance space?

Speaker2: I would say the definition of institution within the crypto space also evolved. In the beginning it was probably a lot of the token projects themselves that the miners themselves who have exposure to crypto. But now we’re talking about very similar players in traditional finance, the hedge funds, a lot of family offices as well. So it’s quite interesting to see that transition as well. And and for us, I think because we had that background in the more traditional finance institution experience. So we knew how to deal with the institutions, the kind of services they’re used to and what they might need, sort of the the same match within crypto. So that was actually very easy to understand and we sort of speak the same language, so it’s easy to explain as well.

Speaker1: What is that need in crypto though? Because you know, in Defi, even though there’s a lot of firms that are just hedging positions and making speculative bets right on on something, they’re still making a bet at the end of the day on a company or on or on the company’s ability to pay a debt. And so there’s something to analyze there. There’s some sort of revenue stream there, some kind of business, or it’s a government that is backing a bond or something. In crypto, you don’t have anything like that. You’ve got digital assets which are a form of property and their valuation go up and down. But who knows why, you know? So what is it that the clients coming to to you in the crypto space, what are they looking to achieve that’s different than what they would be doing in traditional markets.

Speaker2: Which are similar? So they’re say hedge funds, right? They’re just treating crypto mostly the majors as alternative asset class. They’re trading equities or trading fixed income, and now they’re trading crypto because they’re all potentially higher, higher profitability for them. And for the family offices, they view crypto as another alternative form of yield product. So maybe they are overexposed to equity side or they’ve done private equity investments and now they’re looking for what’s next or instead of cash, what else they want to diversify into. So I think they all have different needs and what we offer is crypto as our specialty. So we offer basically anything they want to do within the crypto space and going forward hopefully even expanding beyond that because I think either the crypto native crowd and also of course the traditional finance crowd, I think a lot of these are going to converge and become in a way where can I find one platform where I can trade everything and manage my entire portfolio?

Speaker1: What do you think will drive that convergence? Will it be securitisation and creating, I guess, tokenized, tokenized forms of digital securities or will it be some other driver?

Speaker2: I think potentially, if it’s a tech driven solution, then maybe tokenized stocks or tokenized bonds will make more sense so that it’s all built upon the same open infrastructure that blockchain offers. But I think unfortunately, a lot of times it’s still very much regulatory and compliance driven. So from that perspective, maybe it is the crypto native platforms like ourselves getting the same regulatory stack as a lot of the traditional players and being able to offer it ourselves or vice versa. We’ve already seen a lot of the traditional players also getting to crypto outside of the banks, whatnot, and a lot of the neobanks are the web to fintech startups or I guess they’re not start up anymore. A lot of them are public listed already and we’ve seen tremendous growth in the last ten years. So they also want to start offering in crypto. So I do expect to see a lot of convergence and services there.

Speaker1: One area that is always still an issue for many institutions is regulation in terms of being able to get into this space. Some probably would like to see some changes in regulations so they can do it. Others may be fear that. What is the do you have a particular area market in mind where you see the most progress or areas where you would expect to see the most movement as regulation changes?

Speaker2: It’s an interesting question because I think all the regulators say they’re all very different, but they all came from the same. They all have the same ethos where they want to protect consumers. And I think that that’s something that we can all agree on. But right now, I think, unfortunately, some parts of the world, maybe they just needed a bit more time to figure out how best to regulate it. So now we still lack clarity to some extent, and also because it’s very fragmented. Of course, you have to apply for different sets of licenses in different jurisdictions, so it can be very time consuming for incumbent players. But one thing and also that’s also why we are here in Singapore, is that I think out of the developed market regulators and this the monetary authority for Singapore has been very progressive. And our latest round B plus round is backed by Temasek, the sovereign wealth fund in Singapore. So I think that really shows their stance.

Speaker1: What tell us a little bit about that, because you guys started off based operationally in Hong Kong last year. You moved was the Temasek coming in part of some sort of agreement or decision to work more closely in the Singapore environment and therefore wanted to support you or is it unrelated to that move?

Speaker2: I would say it’s a lot of factors for us. Hong Kong courses is a great market and we still have a team there. But just judging from the regulatory environment and especially with what happened last year with China, I think a lot of people started to think about, okay, where, where should we really base our operations and where Bitcoin trading. Exactly. Exactly. So. So that was a bit of a shock to the industry, to say the least. And although for someone who is born and raised in China, I wouldn’t say I’m entirely surprised. It’s you know, it is. It is. Well, it’s all over the walls. Yeah.

Speaker1: I mean, I think that the just me speculating, but I think the Chinese government wants to maintain control over its own money. And they viewed crypto as as a as a rival. That’s one. Yeah.

Speaker2: Exactly. So, of course, a strong push for the Cbdcs in China, the Dcep. And then I think on the other hand, they also want to have a stronger stance towards other types of digital payment or digital currencies. And then at the same time, I think in contrast, the RMS showed their progressiveness in actually putting out the crypto related regulatory framework under their Payment Services Act and really become has been very welcoming to a lot of the crypto startups or crypto firms. And then yeah, so I think for us it just made sense. And then of course now with Temasek, that really brought more credibility hopefully to us being here.

Speaker1: What is the longer term prospect for crypto if, let’s say, several of the world’s most powerful governments decide to push their own, whether it’s a cbdc, or perhaps they just decide to regulate a stablecoin that they trust more like a bank. Is there then going to be a need for a lot of what’s happening? What will be the use case for for crypto effect comes about?

Speaker2: Yeah, it’s interesting. So I think of Cbdc as a digital version of what you carry in your wallet. So instead of carrying cash, you have government issued digital cash, so to speak, or digital currency. And that’s inherently very different from having Bitcoin in your wallet. So just ask cash and Bitcoin and crypto can coexist. And there has been in the last few years, I think BTC really replaces the circulating physical cash, but it is not the same in characteristic as the cryptocurrencies and.

Speaker1: But it is.

Speaker2: The same. For example.

Speaker1: Yeah, I was talking about web three or metaverse stuff. I mean, you could you could pay for things using a crypto, but you could also then start to pay for it using the digital or digital dollar or whatever.

Speaker2: Yeah. So that’s just kind of the proposition for having a digital form of payment, right? But if we look at what’s going on, a lot of times when there is sovereign crisis or what’s going on in Russia or Ukraine, and if people cannot withdraw the ruble either in physical forms or in digital forms, then they don’t have access to money, but they can still use their bitcoin. So I think that is perhaps an example.

Speaker1: Let’s talk about the shift from institutional to retail. You guys have a product called Whale Fin, which is I guess you are your digital asset management wealth management platform. If I, if I got that right, what are the. Coming from an institutional background where you’re dealing with complex products, structured products for people that are supposed to understand these or be accredited to to use these products. Now you’re going into a mass retail game. Are the same tools appropriate for these investors or how do you have to kind of change what you offer to them?

Speaker2: Yeah. So the offering is quite different. I would say I think most of the consumers, they want something that’s easy to use and simple and almost sort of pre prepackaged standardized offerings in institutions and some of the high net worth or family offices. A lot of times solutions are customized to whatever it is they need, but on the consumer side, we tend to put out easier to use simple to use standardized offerings so you can quickly buy bitcoin and then hold in the wallet and spend it later, etc.. So it is different and we’re looking at maybe packaging some of the structured products into easier to understand or one click to subscribe. Products for them, of course, giving out enough sort of user education first and offering it in the compliant regions. But I think with crypto. There are a lot more interesting features we can add to the wealth and platform. So adding a lot of the gamified elements to similar to how Robinhood made stock trading fun. We also want to make crypto finance easy and also engaging.

Speaker1: There’s some criticisms around that Robinhood model that gamification is just a way to basically create a casino like atmosphere and that we’re abetting gambling rather than investing in something that has some kind of long term value. How do you deal with that question ethically and also in terms of your with your stakeholders or regulators?

Speaker2: Yeah, for sure. So I think it’s it depends on on the product that the platform is offering. So Robinhood made investment easy that maybe teenagers for them. They can also start using it. But the online platform, a lot of it is around trading or even options trading with leverages which could be dangerous if not managed properly. The way that we want to gamify is it’s not really centered around crypto trading because after all, we are wealth management platform. We want our users to grow their wealth with us over the long term and not really kind of treating it as a casino as you mentioned, or maybe unlike the other more exchange based models. And a lot of the gamified option would be centered around our other new features such as earning carbon credits or earning NFT for your activity. So it’s not necessarily rewarding you based on how much you trade and incentivizing you to really take on the risk that you can stomach.

Speaker1: To do things that you talked about. One was carbon credit, the other was NFT. Let’s start with the NFT. The market overall for nfts has been cratering. Valuations are dropping. What’s happening?

Speaker2: I think well it’s sort of a marcus like abilities with the word the cycles we are entering cyclicality there is a bit of I think it’s more it’s quieter now compared to where we were. The entire market felt I felt the same way and of course there were a lot of hype around NMT so I wouldn’t I wouldn’t say that. All of it. All of that JPEGs is worth millions or hundreds of millions of dollars. So it is expected it’s similar to maybe back in 2017, right. There was the initial bull run. And then when the market crashed, of course, the altcoins dropped the most. So I think we’re just entering a new era, but I think different than a lot of the the ICO era tokens. I do think there will be a portion of these NFT projects that are building towards something with real value lending.

Speaker1: I mean, like, where do you see that going? Because on the one hand, I like the idea that you’re talking about Nfts is just a fancy jargony word for basically something that’s got unique characteristics and you could think of in the financial world, you know, a derivative has unique characteristics. It’s not like another one or a bond issued by one by company A is not the same as another bond also issued by company, a different coupon or whatever. At the same time, though, it seems like the whole thing has been hijacked by this meme craze. And I know people like memes and they’re fun, but you know, we’re talking about people’s life savings sometimes going up in smoke. So what is the what is the use case for Nfts?

Speaker2: It depends. Or I think NFT is actually a technology rather than an asset class. So exactly like you said. Right. It’s just used for things that are non-fungible that are not identical and you can use it in so many different ways. What’s popular now? Know again, I don’t know how much value is in there, but if you look at in terms of even taking carbon credits as a example, we can make it into token based formats. Then is it going to be faster or cheaper or I think it’s same as the underlying blockchain tech. It’s just another way to denominate things that are non-fungible versus bitcoin ethereum’s of the world and then for use cases. Then I think that maybe we talk about web3 or metaverse. Then if you think everything’s going to be on chain or everything’s going to move into the web3 world, then NFT is just another way to express everything that you own, different items that you have versus the the fungible sort of cash like portfolio that you have or equities of the world.

Speaker1: That that web3. Do you have a sense of differentiation in terms of how your institutional clients think about it or talk about it if they do, versus the consumers?

Speaker2: Well, I guess it depends if you’re talking about play to earn or action to earn, and consumers are drawn to the earn parts of it, and if they want to participate or they want to find a community. For the institutional players, I think they’re looking for more of an investing point of view. So thinking about, okay, what does it mean? They probably have seen a lot of the companies building games or virtual AR VR in the Web two stands. And I think, okay, what is the value in bringing it on to Web three and how what’s comparable there?

Speaker1: Is there a social benefit to essentially financial izing things like games or other aspects of life that were not necessarily financialized before?

Speaker2: I think so. For me. I think I’m excited about. What we can do with data. So right now, we all give it out for free. We take all of the accept all. And we never read the terms of services and we don’t really have control over the data that’s been collected on from us. But I think in a web3 world, there will be a way for us to monetize that directly or at least take full control of that. So it could be data could become a very interesting asset class.

Speaker1: The big elephant in the room when it comes to crypto markets are the stablecoins in particular tether, which has some reputational and regulatory problems. They have lied about their their assets backing that stablecoin. Yet it’s massive. I mean, it fuels so much. It greases the wheels in so many exchanges and so on. How do you talk to your clients about about that?

Speaker2: So I think for it used to be very popular in Asia because I think most of the US based clients, they just do focal to say usb-c. And it’s very easy with your USB banking rail and all of that to exchange 1 to 1. But for a lot of my clients in Asia, then it’s difficult for them to access the dollar world. So and it being the first mover is very liquid here in Asia. So they default to that and that always becomes almost become a habit. So there’s that interesting dynamic. But I think now I would say a lot of the Chinese based players have moved overseas or maybe stopped being involved in crypto. So perhaps that dynamic is a little different now. And and for me personally, I would always explain to my clients the different intricacies between U.S. versus U.S. and impact. So or I guess the U.S. and the rest of the STABLECOINS, because they can see that there is a pricing difference. So on our platform, usdc of the likes is always 1 to 1 interchangeable with USD fiat. But U.S., because there is a market price, it’s not always 1 to 1 use, usually between 10 to 20 basis points. But there are extreme cases where it had dropped. And we’ve all seen that there were a lot of. Like every once in a while, there is a tether of flood and you see that. So. So, yeah.

Speaker1: Okay. You guys are talking about doing an IPO for the business. Where are you with that?

Speaker2: Well, it’s still in the works, I would say. It’s something that I think we chose the more traditional VC funding route. So from RC as A all the way B plus and with plans to eventually go IPO in the US timing wise, I think we’re still thinking about it, but at the same time getting getting ready for audit and everything else.

Speaker1: Do you see a prospect for your crypto company and you help your clients in all things with with cryptocurrencies and digital tokens? Do you see a prospect for your IPO being in digital form?

Speaker2: That is that’s interesting. I think that would actually really drive it home. But I think why now we’ve seen the Coinbase ah being the milestone, Coinbase IPO being a milestone for the industry. I think there were chatters about them eventually launching their own token coin. And for us, I think what we’re focusing on is, is more maybe potentially having our own token for our NFT efforts or any other things, not necessarily on the group level ourselves.

Speaker1: Last question, Annabel, and thank you for your time today is what’s the thing about 2022 that you’re most excited about?

Speaker2: Me personally, I think I think on this wave of incredible adoption we’ve seen over the last two years, it would be a lot more players, both the consumer side and institutional side, coming to the space and what we are building. And again, not just crypto finance offerings but incubating different projects within define NFT space and within an NFT space there is just so much more room to innovate. So maybe it’s blockchain based gaming, maybe it is building virtual worlds and virtual characters and collaborating with the different IPS of the world. I think that is what excites me most, and I hear at a number of groups, I will have a few, I would say exciting news coming up as well later this year.

Speaker1: Okay, good stuff. Thank you so much for your time.

Speaker2: No, thank you.

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