There are a number of key factors driving high levels of blockchain investment in APAC’s FS sector. The first, and possibly the most important factor, according to Waller, is that incumbent FIs in the region had initially adopted a defensive position on blockchain, but they are now planning to invest heavily to catch up with early adopters in the US and Europe.
“Initially blockchain was possibly seen as a fad by the local market, something to wait and see how it pans out, but now it’s clearly here to stay,” says Waller. “There’s an acceptance that every financial services business needs to have a strong blockchain and digital assets strategy.”
Another factor driving the investment in blockchain and digital assets by incumbent FIs is the proactive regulatory regime in the region. Markets such as Singapore have led the development of crypto regulation, which has created the certainty companies need to invest with confidence. This confidence is clearly illustrated by the growth of some of the world’s biggest crypto-native companies – notably the APAC-based exchanges Crypto.com and BitFlyer, and blockchain-based gaming companies: Immutable, Sky Mavis and Animoca.
How blockchain technology is shaking up the market
As with other markets, disintermediation is a key goal for FIs moving into this space. Thanks to blockchain and digital assets, FIs can streamline transactions and remove intermediaries to reduce cost and accelerate transaction time.
The technology is also being used to grow collaboration across the market, expediting interbank lending and settlement processes. Blockchain is also increasingly being used by APAC FIs to streamline reconciliation and reporting and also to bring new products to the market.
“One use-case we’re seeing in APAC involves FIs using blockchain to capture, consolidate and process data relating to the carbon emissions of asset portfolios,” says Waller. “Blockchain is particularly well-suited to this because it ensures high levels of data trust and integrity.”
While the evolution of blockchain in the fintech sector began with organizations building the blockchains, protocols, privacy technology and scaling solutions needed for sector growth, more recently it has extended to decentralized use cases within APAC’s capital markets. For example, traditional FIs are now offering hedge funds and deposit accounts on blockchain with no intermediaries.