Island Fintech - August 2022

Aug 22, 2022

Hey Islanders,

Joyce and I caught up for dinner recently and we’ve decided to make Island Fintech a monthly - splitting between Crypto and Fintech. All the while, remaining honest about our growing sector in Southeast Asia 🌏 We’d love to hear feedback - reach out to Joyce or myself!

Note - If you are looking to raise early stage funding (seed to A), we may be able to help. Reach out via LinkedIn with a quick note on what you’re building, and the help you need.

🐋 Dives

1. The Philippines isn’t banning crypto, but halts permits for new Virtual Asset Service Proviers (VASPs)

The Central Bank of Philippines is encouraging caution, but not restricting behaviour when it comes to crypto. Rather than putting them in a currency bucket, it seems like they intend to regulate them more like assets, given the volatility.

However, the Bangko Sentral ng Pilipinas announced on August 10 that it will stop accepting new applications on Sept. 1, 2022 for VASP licenses for three years. Applications that have completed or passed the second stage of the licensing process on or before 31 August 2022 will be processed and assessed for completeness and sufficiency of documentation.

2. Southeast Asian crypto firms hit hard

It’s been a rollercoaster ride for the crypto scene in SEA, particularly for Singapore-based Zipmex and Hodlnaut.

Zipmex first announced that it had filed for bankruptcy protection in July, for protection against any legal claims or proceedings for a period of up to six months. This came after a revealed exposure to troubled lender Babel Finance, which suffered losses of about 8,000 BTC and 56,000 ETH and was forced to liquidate due to a severe market downturn.

Hodlnaut announced on August 13th that it had filed an application with the Singapore High Court to be placed under judicial management. Layoffs proceeded as the firm confirmed that there were legal proceedings with the police going on, and Twitter user FatManTerra spilled some tea on Hodlnaut’s alleged $190M in the TerraLuna crash in June. Rumors had been circulating back then on their exposure, but there was never any proof to back those claims up.

3. Fei Protocol might be shutting down

It’s hard to believe that a protocol with $188M might shutdown, but here we are.

Fei Protocol and Rari Capital had merged in December last year, with the aim of solving the liquidity bootsrapping problem in DeFi. In April this year, a hack happened and Fuse pools (lending pools in Rari Capital) were hacked for $80M. After the hack, the CEO of Rari Capital stated that he would resign.

On August 20, a proposal was made by Fei Labs:

FEI redeems for $1 (1 DAI)
Fuse hack victims receive payment making most victims whole
TRIBE holders can redeem for pro rata share of remaining DAO controlled assets
All Governance powers are removed

An outrage poured in in the comments section, as well as on Twitter. General sentiments were anger over the lack of transparency and hard numbers shown in the proposal, as well as skepticism over DAO governance, and the efficiency of it. There have also been allegations that in the weeks leading up to this proposal, the founder of Fei Protocol was uncontactable, leading to more confusion, and anger on Crypto Twitter.

This might be one of the highest profile DeFi protocol shutdowns we’ve seen in awhile, and everyone’s just waiting to see if this proposal will actually go through, or will the team listen to the woes of their users and do the right thing?

4. Indonesia’s OJK introduces new regulatory framework for online lenders

The regulation has received pretty favourable feedback from industry players. For one, it was announced jointly by the industry group for Indonesia's online lenders, AFPI, with the regulatory body, the OJK - which kinda suggests they buy into it. It makes sense, because the sector has been expanding perhaps a bit too rapidly with the previously easy-to-exploit regulation. As of May, outstanding loans sat at 40.17 trillion rupiah (US$2.7 billion), representing a 54% rise year on year.

Here are the highlights:

Lenders must have paid-up capital of 25 billion rupiah ($1.6 million).
- This is greater than the 15 billion rupiah (US$1 million) that was first suggested and is a 10x increase over the 2.5 billion rupiah (US$167,000) under the previous POJK 77 law.
A company must have at least one controlling shareholder and two directors, up from the previous requirement of one director.
Directors and commissioners must now obtain a work competence certificate from an OJK-registered professional fintech certification provider.
- Nice (Anyone wants to start a fintech certification business with me?)
A single super lender cannot make up more than 25% of an online lender’s total outstanding loans.
- This encourages diversification of default risk
- It also discourage international lenders from taking up a supermajority of lending, and opens up to more local players.

The fourth point is the most notable change. With this, it becomes simpler to track where the money comes from, because the offshore-deposits of international lenders has been a question mark for a while.

🍹 Twitticisms

(P.S. Again, if anyone has SEA or Asia focused fintech Twitter accounts I should be following, tweet me. The accounts I see on my feed are overwhelmingly 🇺🇸 focused)