Cross-border payments is an area where Asia-based start-ups have the potential to grow into billion-dollar players, according to a report from KPMG and HSBC. Photo: Shutterstock
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https://scmp.com/business/banking-finance/article/3185792/start-ups-nfts-blockchain-based-defi-can-rise-crypto-crash Banking & Finance
Start-ups in NFTs, blockchain-based DeFi can rise from crypto-crash ashes to become unicorns, says KPMG and HSBC report
- A quarter of Asia-Pacific’s 6,472 start-ups are engaged in NFT and decentralised finance, and some of these have the unicorn potential, new report says
- China tops the region as the market with the highest number of emerging start-ups that can grow into billion-dollar unicorns
The Sandbox, is an NFT-based online platform that some see as a precursor to the metaverse. Photo: Shutterstock
A quarter of more than 6,000 start-ups in Asia-Pacific are engaged in non-fungible tokens (NFTs) and decentralised finance (DeFi) as their core businesses, a troubled sector that still has the potential to produce dominant unicorn companies, according to a joint study by KPMG and HSBC.
Among these, Singapore DeFi platform Stader Labs, Hong Kong blockchain gaming platform Catheon Gaming and crypto custodial service provider Hex Trust appear on a top 100 list published by KPMG and HSBC.
The joint report selected 100 companies that have the potential to become unicorns – private companies valued at US$1 billion – from among 6,472 start-ups that are valued at US$500 million or less.
The report on “emerging giants” across 12 markets, including China, Hong Kong, India, Singapore, Indonesia, Australia and Japan, is a first for KPMG and HSBC, which intended to gauge the diversity of the region’s evolving new economy.
The companies completed the report just before the crypto market chilled into a “crypto winter”, with the implosion of lending platforms such as Celsius Network and hedge fund Three Arrows Capital filling investors with fear and slashing two-thirds of crypto assets’ market capitalisation to US$1.1 trillion.
“We believe that blockchain companies and crypto assets more broadly will rebound at some point,” said Darren Yong, head of tech, media and telecoms (TMT) for KPMG Asia-Pacific. “There will be a resurgence of applications, if these unicorns are delivering value they would emerge as the next Amazon.”
These emerging start-ups hold the promise of changing how payments could be made across borders in near real-time by slashing layers of intermediaries and therefore, reducing transaction costs.
The value of blockchain technology is underlined by the development of the metaverse, Yong said. Promising an immersive, three-dimensional online space created by the convergence of physical, augmented and virtual realities, the metaverse will support an economy that Citi predicts will grow to between US$8 trillion and US$13 trillion by 2030.
Apart from NFT and DeFi, the KPMG and HSBC report identified start-ups in 120 subsectors, including electric cars, quantum computing, internet-of-things, robotics, and artificial intelligence. The report’s authors selected the 100 companies to spotlight based on venture capital money raised and future growth potential.
Among countries in Asia, China, India and Japan contributed the most start-ups to the list of unicorn candidates, at 33 per cent, 30 per cent and 13 per cent, respectively.
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Despite a regulatory clampdown in China targeting internet platform companies’ anticompetitive behaviour and their handling of personal, sensitive data, Chinese start-ups continue to attract private funding to fuel their growth, according to the report.
Last year, China added another 50 unicorns, according to a China Daily report, taking the total to 300 and cementing its position as the world’s second-biggest market for unicorns after the US, according to state-owned media. Total venture capital funding into Chinese start-ups rose by a third last year to US$106 billion.
Some examples of China’s top-10 promising start-ups, according to KPMG and HSBC, include BioMind, an AI medical platform that provides diagnosis for brain tumours and vascular diseases, and HuoMao TV, a live-streaming platform for esports gaming.
These findings come amid reports that leading venture capital firm Sequoia Capital is nearing completion of US$8 billion to US$9 billion in fundraising across several funds to invest in Chinese start-ups. In addition, Qiming Venture Partners this month completed fundraising for its US dollar and yuan funds, totalling US$3.2 billion, with the dollar fund being oversubscribed.
“In the past venture capital investment largely focused on consumer-centric businesses,” said Allen Lu, head of TMT audit at KPMG China. “Now we are starting to see business-to-business and hardware companies getting a lot more attention.”