When discussing the topic of cryptocurrency, many opinions are thrown out to the front. Some say it is a fad that will simmer down, while others believe it will revolutionise our relationship with money. Whichever the case, the authorities are definitely keeping an eye on the developments of this nascent market and ensuring that its citizens’ interests are taken care of first before granting more leniency to new players.

One of the players within this burgeoning market is Singapore-born digital currencies exchange company, Tokenize Xchange. Leading the company is Hong Qi Yu, a coder-turned-entrepreneur whose journey started in 2017 after his friends introduced the Ethereum blockchain to him. “Around April or May, I was still looking at the technology and figuring out how to buy Ethereum, then I managed to code for my own token and issue a smart contract,” shares Qi Yu about how he went about learning about cryptocurrency.

The lack of such a medium to buy or trade digital currencies spurred Qi Yu to consider creating his own. Bearing in mind the many problems he faced while interacting with the exchange platform, he tried to reduce the barrier to entry through Tokenize Xchange. And while understanding the mechanism of cryptocurrencies, Qi Yu realised the enormous potential of this technology. “[In the early months of 2017], Ethereum cost less than US$200 and I can send this amount anywhere as long as I have internet access, and that fascinates me a lot,” shares the founder and by the end of 2017, Ethereum would have more than doubled. 

To pursue this venture full-time, Qi Yu quit his day job and pooled funds of around S$120,000 from his friends and other angel investors to start Tokenize Xchange. While the idea was the brainchild of Qi Yu and his friends, he did not expect to be wearing multiple hats. “Aside from being the technical person, I had to be the CEO and ensure that operations are conducted smoothly especially since Tokenize Xchange is a new company.” The fund he raised could only provide a short runway for a tech-based company like Tokenize Xchange and Qi Yu was actively looking for fresh funds.

“There were multiple ICO projects when I first started the company and these helped us raise funds and where the total reached S$12 million in valuation.” The cryptocurrency market saw a bullish trend and many investors were over the moon from their earnings. To quote Isaac Newton, “What goes up must come down,” the market saw its first major correction in 2018. “The S$12 million we raised was short-lived. In the next three months, the value went down by 50 per cent and a further 50 per cent more the following three months.”

In Singapore, the government has cautioned retail investors when dealing with the growing excitement for technologies that are based on the blockchain. At the beginning of January this year, the Monetary Authority of Singapore (MAS) issued a guideline giving effect to the regulator’s expectations that digital currency platforms should not engage in direct marketing to retail investors. Inevitably, this has driven bigger players off the market due to the lack of a strong base. The country’s crypto community is not substantial enough to warrant its independence. 

Despite such unfavourable conditions, Qi Yu still decided to keep business as usual. At this moment, Tokenize Xchange operates in Singapore under the “exemption” list meaning the company can still conduct its business like offering cryptocurrency exchanges until its application for a licence is approved, rejected, or withdrawn. Qi Yu shares that the company is still pending the Digital Payment Token Licence from MAS and is hopeful of the results as the company has strictly abided by the regulations and is in touch with the relevant authorities.

Being headquartered in Singapore has also provided Tokenize Xchange with the home ground advantage of waiting for the regulators’ approval. This luxury of time is not conferred to foreign entities as the cost of maintaining operations is costly and these resources could be used more efficiently elsewhere. The curtailing of direct advertising also means only a niche group of people is in the know but obviously, the goal is to have as many on board as possible.

For a long time, Singapore has prided itself on being a hub for innovation and there are a host of policies to support businesses venturing into emerging tech spaces. MAS is said to be broadly supportive of blockchain, but is concerned about the risks involved with cryptocurrencies and discourages retail investors from owning them, hence companies are not allowed to overtly market their products. However, the regulator acknowledges the potential for innovation and is keen to explore the technology in a controlled manner. It has since launched “Project Guardian” and it involves regulated financial institutions like JP Morgan, DBS Bank and Marketnode, and the SGX to issue bonds using tokenisation.

This is encouraging for companies like Tokenize Xchange as it shows that the Singapore government is looking into expanding the space. “If we were to look at the crypto market in 2019, it is bearish with only 2 per cent of the population in Singapore investing. But during the Covid period, it has grown by at least ten times more.” The magnitude of growth is telling of people’s confidence in this fledgling asset and people are less doubtful about the technology.

To further strengthen the company’s case for its licence approval, Qi Yu shares that due diligence has been conducted since day one of operations and external parties are engaged to safeguard the investments of its users. “Currently, even before we get our licence, there are routined checks like VAPT (Vulnerability Assessment and Penetration Testing) and third-party vendors are hired to access our security and infrastructure.” Additionally, the company is looking to work with insurance companies as extra protection against unforeseeable circumstances. The recent Terra Luna crash is an apt case study to take into consideration.

In a similar vein, NFTs have had a terrible start to the year and reports have shown its value plummeted by more than 50 per cent. But Qi Yu, is not fazed by how the market is behaving as he sees the “crypto winter” as a part of any business cycle where there will be periods of time where it corrects itself. The company is in a strong position, Qi Yu shares, and it is in the midst of closing Series A funding while looking to raise US$300 million in Series B.

Tokenize Xchange has launched its own NFT marketplace called “Elemint” and its first collection is the “Poker Penguin”. Interested creators can launch their projects with Elemint and seize the opportunity to connect with Tokenize Xchange’s 250,000 users. However, one must be able to meet the criteria set by the company. “Our NFT platform requires creators to meet these requirements: it must have a utility or be backed by a tangible asset like a physical artwork.” And increasingly, pressure on meeting ESG guidelines is taking place and Tokenize Xchange is considering to include that into its set of criteria.

For the Poker Penguins, collectors will be entitled to perks like coaching, access to an exclusive community and even private events. The mechanics are similar to how other major NFTs like Bored Ape Yacht Club organise its pool of collectors.

A common perception that people have of NFTs draws parallel to how cryptocurrencies are thought to provide: fast cash. Qi Yu’s advice to those interested in NFTs is to look at it as more than just an investment. Rather, it would be better to see NFTs as the spending economy for the cryptocurrency world. 

A change in mindset is pertinent for regulators, investors and operators. To look beyond just the monetary gains one can get from dabbling with cryptocurrencies and NFTs. The authorities have to be assured that its citizens are well-informed of the risks involved and this can be done through robust education in crypto literacy. For investors, being prudent will always help and they have to look through the glitz associated with this speculative asset. And for operators, it is their responsibility to minimise possible ramifications to their users by making sure protocols are put in place. In order for this tripartite relationship to blossom, all hands need to be on deck to push for a safer crypto environment.

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