BANGKOK -- The cryptocurrency industry has a "collective responsibility" to educate investors and prepare them for downside risks, said the founder of Thailand's largest digital asset exchange.
The biggest downside risk may be the volatility of cryptocurrencies themselves. On Saturday the price of Bitcoin, the world's most traded cryptocurrency, fell below $20,000 for the first time in 18 months as an era of loose monetary policy ended.
The weekend tumble followed a sell-off last month that sent Bitcoin's price falling by 20% in five days. Individual investors were left "broke and devastated" by the crash.
"We have always been saying to not put all their eggs in one basket and to not borrow money to speculate. We need to get the right financial education, not just in cryptocurrency but across the stock market," Bitkub Capital Group CEO Topp Jirayut Srupsrisopa said of investors in an interview with Nikkei Asia.
The fall in coin prices and a bearish stock market will not halt the upward trajectory of digital assets, Topp said, as banks and venture capital firms continue to invest in industry leaders like Bitkub. He added: "You have to differentiate between a short-term shock that is happening in the market and long-term vision."
Belief among cryptocurrency trading pioneers like Topp may be unshaken, but the crash last month of Terra and Luna, stablecoins pegged to the dollar, lost real-world money for neophyte investors lured by the sheen of exchanges like Bitkub.
The 32-year-old Topp's face is ubiquitous in Bangkok. His smiling image and Bitkub's logo grace billboards along the city's major thoroughfares and ad spaces on public transportation. This personality-driven approach, he said, has returned multiples of Bitkub's 200 million baht ($5.7 million) marketing budget. The exchange currently has 4.2 million registered users.
"It's important to have a soul behind the company. Customers can yell at you, trust you, relate to you," Topp said.
The Oxford graduate entered the digital asset industry in 2014 after a career in investment banking and sold his first cryptocurrency company to Indonesian superapp developer Gojek. He then founded Bitkub in 2018.
"We don't have 200 years of reputation-building like a financial institution. We have only been around for four years, and the way to gain trust is to be transparent with the customer: Who's running the company? Who's behind the company? Who are the backers?" Topp said.
His startup may soon rely on the reputation of Thailand's oldest bank, Siam Commercial Bank (SCB), whose largest shareholder is King Maha Vajiralongkorn. In November, the bank announced it would buy 51% of Bitkub's shares in a deal worth over 17.8 billion baht, a valuation that made Bitkub Thailand's second unicorn.
Six months ago, acquiring a cryptocurrency exchange might have seemed like a bold step into the future for SCB. As low interest rates and nonperforming loans depress profits for Thai banks, Bitkub reported a net gain of 5 billion baht in 2021.
"We should be wrapping [up] the deal according to the original timeline," Topp said.
When it announced the deal, SCB said the acquisition would be completed by the first quarter of 2022. But it has not yet submitted a plan to the Bank of Thailand, and SCB executives skirted shareholder questions about the deal at the company's annual general meeting in April.
Silence from both sides on the deal has led to speculation that SCB is using a recent spate of regulatory fines against Bitkub to negotiate a lower acquisition price. In May, the Thai Securities and Exchange Commission fined the exchange and members of a committee that selects which coins are traded on Bitkub for violating requirements for digital asset listings.
"We select coins with popularity and a clear development plan, taking into consideration [the] customer's interest as our main priority," Bitkub said in a statement to Nikkei Asia. "Moreover, we also evaluate the coins listed on our exchange to ensure that coin development is still ongoing as claimed by their developer."
Topp shrugged off the regulatory action as the SEC fulfilling its KPIs, or key performance indicators.
"Everyone is doing their job. The regulators are trying to lower risk and make sure things are in place in terms of consumer protection and financial stability. We're trying to build a digital infrastructure for the country," he said.
He chalked up negative publicity about Bitkub to a "communication gap" between the industry, investors, policymakers and the media.
"We have a collective responsibility to educate different stakeholders, not just customers. How do we get the right data point to regulators so they can make sound decisions? How do we get the right data point to politicians to make sound policy?" Topp said.
If the deal with SCB goes through, it would bankroll Bitkub's international expansion plans. Topp named the Philippines and Cambodia, neighboring markets where a winner has not yet emerged in the cryptocurrency exchange competition, as initial targets.
"This exchange business is a local monopoly game," said Topp. "E-commerce is a local monopoly game. Uber and Gojek had to flee the country because they were burning money trying to compete with Grab."
With Bitkub currently reigning in its home market, Topp said he welcomes competition from Binance as it lays plans to enter Thailand through a joint venture with Gulf Energy. As the world's largest cryptocurrency exchange, Binance has become the poster child for global regulatory scrutiny.
Binance will be competing with Bitkub not only for customers but also for talent in a tight fintech labor market. Bitkub is looking to hire 500 more developers, but a skills gap in Thailand has pushed it to recruit in Vietnam.
"It's going to be tough for them, also," Topp said of Binance. "We're the tech champion in the Thai startup space and we are the ones pushing the bar so far."