In the first column for CMC, Saison Capital analyzes the crypto landscape in Southeast Asia — detailing findings on adoption rates, barriers to overcome for mainstream adoption and more.
By Qin En Looi (@webthreedad), Principal at @SaisonCapital
Southeast Asia has been described as a hotbed for crypto adoption, with a confluence of companies setting up shop, talent transitioning from web2 to web3 and boost in capital inflows. In 2021, crypto adoption rates in Southeast Asia averaged 3.56% — Singapore leads the pack, with almost 10% owning crypto.
Yet the crypto landscape has shifted radically in recent times. Since the start of the year, cryptocurrency prices have cratered over 70%-90% from all-time highs in 2021 and notable players have fallen from grace. Behind the bearish sentiment, it has not been clear how crypto adoption has been impacted in Southeast Asia.
Is crypto awareness picking up despite the downturn? Are consumers considering the depressed crypto prices as entry opportunities, or reasons to avoid? Most importantly, are we closer to or further away from crossing the chasm for crypto to be mainstream in the region?
We at Saison Capital conducted a survey with over 1,000 Southeast Asian consumers across Singapore, Indonesia, Vietnam and Philippines this month (in October 2022) to find out where individuals are on their crypto journey. The majority of prior surveys and studies were conducted in the 2021 bull market, so we wanted to take a closer look at the state of crypto one year later, in the bear market. We also share the ‘4 horsemen of crypto adoption’— barriers which we need to overcome in order to reach mainstream adoption in the region.
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The path to crypto for a typical Southeast Asian consumer
To first understand the state of crypto in Southeast Asia, we need to define the path to crypto for a typical consumer. Terms like “crypto adoption” or “crypto ownership” can be vague — if an individual starts a crypto wallet (whether on a centralised exchange like Crypto.com, PDAX or TokoCrypto or decentralised like MetaMask) but does not purchase crypto, have they ‘adopted’ crypto?
Inspired by the AARRR funnel used in web2, we propose a 5-step path to crypto:
1. Awareness - has heard of crypto from family, friends or the media, but has not taken any action. The no-coiner.
2. Acquisition - heard of crypto and curious enough to start a crypto wallet, but has not bought any crypto yet (no monetary exchange). The curious George.
3. Activation - has a crypto wallet, and purchased some crypto, but not an active trader. The HODLer.
4. Ambition - not only has purchased crypto, but also sold crypto in search for a profit ( trading). The Flipper.
5. Advocacy - has traded crypto and is an active advocate of crypto to family and friends. The Degen.
Our perspective is that true “crypto adoption” and “crypto ownership” occurs only from the Activation stage onwards — when an individual has acquired some form of cryptocurrency. Acquired can be loosely defined as either a purchase — exchanging fiat money for crypto (as we commonly know it as) — or the exchange of other forms of value, such as time (in the case of X-to-earn, like Axie Infinity where players game to earn crypto).
The state of crypto in Southeast Asia
Having established the path to crypto for the typical consumer, we now set out to answer the key question — where are we in the state of crypto adoption in Southeast Asia? In short, through our survey, we have learnt that:
- Southeast Asia is at the cusp of ‘the chasm,’ as crypto is about to leap from early adopters to the early majority
- Philippines leads the pack in crypto awareness, followed by Singapore, with more than half the population surveyed indicating they were somewhat aware of what crypto is
- Once someone buys crypto, they are likely to become advocates and bring friends and family in. This is even more likely if they are aged 35 to 44
- Awareness is broadly equal across different ages and genders, however there are differences in adoption
Below, we’ll deep dive into some of these key findings.
Southeast Asia is at the cusp of the chasm
Based on the Technology Adoption Lifecycle Curve popularised by Geoffrey Moore’s Crossing the Chasm, the inflection point of when a product, concept or service becomes ‘mainstream’ is when 15% of the population has crossed the proverbial chasm.
Southeast Asia is right at the cusp of crossing the chasm, with 12% of the surveyed population having bought crypto (“Activated” in the path of crypto outlined above). Echoing 2021’s finding of Singapore leading the charge in crypto adoption, our survey found that 18% of Singaporean consumers have purchased crypto, indicating a successful bridge across the chasm and entry into the early majority. The other countries in the region remain fairly close together behind Singapore, averaging 9-10% of the population who have bought crypto. While the Philippines appears to be the slight laggard in crypto adoption, it would not be surprising to see the nation leapfrog neighbours due to high crypto awareness (more on this next).
Philippines and Singapore lead on crypto awareness
While Singapore leads in “Activation”, we found that the Philippines takes pole position in overall awareness. More than half (53%) of the surveyed Filipinos are aware of what crypto is, slightly edging out Singapore at 50%, followed by Indonesia at 44% and Vietnam at 35%.
This is in no small part due to the overwhelming success of play-to-earn (P2E) game Axie Infinity, among other P2E games, that gained popularity during the 2020-2021 bull run. With the Philippines accounting for more than 40% of Axie’s gamer population which peaked at 2.7M users, it would not be a stretch to describe blockchain gaming as the most popular “on ramp” for many FIlipinos into the crypto world.
Once someone buys crypto, they are likely to become advocates
Another interesting finding is the strength of advocacy that crypto enjoys in Southeast Asia. Once an individual buys crypto, they are likely to become advocates and share with family and friends about crypto. Across each country surveyed, about half of individuals who bought crypto had also shared about crypto with their family and friends, contributing to the rapid rise in awareness and adoption of crypto (at the cusp of the inflection point, as discussed earlier).
Unsurprisingly, the strongest advocates tend to be those aged between 35 to 44 years old, most of whom grew up as ‘digital immigrants’ and are familiar with emerging technologies — they learned and adopted the internet, computers, smartphones and a digitalized world as it developed . While Generation Z (those born from 2000 onwards) are arguably the first digital native generation, the lower advocacy could potentially be attributed to limited purchasing power. However, it would not be surprising to see this segment overtake others in crypto advocacy in the very near future.
While awareness is similar across ages and gender, adoption differs
Hearteningly, awareness of crypto is broadly similar across genders and age groups in Southeast Asia.
Approximately 45-47% of the population are aware of crypto (with the exception being the 35-44 age group). Differences, however, start to appear at the Activation and Adoption stages. While 47% of individuals aged 45 years and older are aware of crypto, only 3% of those have actually bought crypto. This is in comparison to the 12-14% of individuals aged 18 to 34 who have bought crypto — which represents a higher conversion when you consider that awareness levels are comparable across the age groups. Furthermore, advocacy among those aged 45 and older is the lowest at 1%, compared to 5-6% across other age groups.
On the gender front, a similar pattern is observed — 47% of males are aware of crypto, not too distant from 43% of females. However, the disparity widens slightly when it comes to the purchase of crypto — 14% of males have bought crypto, as compared to 10% of females.
The 4 horsemen guarding the chasm
While our survey findings show that crypto is progressing towards mainstream in Southeast Asia (from 3.56% adoption in 2021 to 12% in 2022 — assuming the definition of adoption is the purchase of crypto), structural challenges still exist. We call these the “4 horsemen guarding the chasm” — barriers that must be overcome in order for the majority to embrace crypto. They are:
1. Limited use cases of crypto, especially for the middle-class and below: Crypto remains a highly speculative investment for many, with limited applicability in real world circumstances. Even though it is called “cryptocurrency”, it hardly functions as a currency — a medium of exchange — due to its volatility and the absence of a government or monetary authority to act as a counterparty and guarantee its value. While there are increasing applications of crypto and the blockchain being developed to meet pressing needs (for example, to facilitate borrowing and lending of real world assets), many of the use cases today are manifestations of an individual’s “self-actualisation” — sitting at the top of Maslow’s hierarchy of needs.
2. High costs of on-/off-ramps: The purchase of crypto largely remains a costly affair, compounded by the inefficiencies of on-ramp and off-ramps in Southeast Asia — the exchange of fiat money with crypto. On/off-ramp fees for an average consumer can go as high as 7%, compounded by slippage, gas and a whole suite of hidden fees that make the crypto proposition less attractive. To circumvent these fees, a plethora of informally coordinated groups on WhatsApp and Telegram have emerged for consumers to facilitate peer-to-peer (P2P) exchange of fiat-for-crypto and vice versa. While these are accessible for the majority of consumers, they also bring a number of risks, namely fraud and security.
3. Fragmented UX that is inefficient and increases cognitive workload: Consumers in Southeast Asia are used to “super-apps” jam packed with functionality, all within the convenience of a single app or wallet. Within a single app, one can bank, travel, shop, order food, and send laundry, amongst other conveniences. In the crypto world however, the UX is highly fragmented — one app to on-ramp, another for a decentralised wallet, another to track token prices, yet another to stay engaged with communities. The cognitive workload to learn, onboard and utilise each app creates a high barrier to entry for the already-attention-starved and time-pressed consumer.
4. Nascent tooling that does not serve the mass-consumer needs: As the blockchain remains a relatively nascent technology, tooling is also at its infancy. Take communication as an example — in web2, the platforms to engage consumers are known, tried and proven: email, SMS, social media, push notifications, and ad networks. In web3 and crypto, these communication channels and platform social graphs are only being built, with compounded complexity from the fragmentation (as discussed above) and anonymity of crypto identities (most often, a wallet address)
In summary, across the region, we have come a long way from the dismissive attitude of “crypto is a scam” from the 20-teens. With significant progress over the last year in spite of the downturn, there is much to celebrate as we build up to the inflection point in crypto adoption. Facing the chasm, guarded by its 4 horsemen, the time to build is now.
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