When David Low left Luno Malaysia Sdn Bhd to set up Hata Digital Sdn Bhd, another digital asset exchange (DAX), he reckoned that it would be a case of David versus Goliath. He had helped build Luno from scratch to become the largest DAX in the country with over 90% market share in just five years. Can he do the same for Hata so that it can compete against the big players, like Luno?
Officially launched in July, Hata has several local investors, including venture capital firm 1337 Ventures and Raja Hamzah Abidin, co-founder of venture capital firm RHL Ventures and son of Malaysian politician and businessman Datuk Seri Raja Nong Chik Raja Zainal Abidin.
Hata recently raised US$4.2 million (RM18.07 million) in its seed funding round from overseas investors such as US-based venture capital firms Castle Island Ventures, Cadenza Ventures and Plug and Play, as well as the investment arm of global crypto exchange Bybit, Singapore-based investment firm AP Capital and crypto accelerator Alliance.xyz. The capital injection will allow it to expand its product range and acquire new users across Asia.
Some industry players doubt if Hata will have an easy ride and question whether Low has made the right move, as they see the DAX business as a winner-takes-all market. The more users an exchange garners, the higher its liquidity, which translates into better price discovery, competitive pricing and even more users. It is partly why Luno, the first licensed DAX locally, has commanded such a large market share for years.
Low is unfazed. “Most people don’t realise that the industry is still experiencing tremendous growth, albeit slower than four years ago, which allows new players like us to enter the space to compete,” he tells Wealth in an interview.
He is targeting high-net-worth investors (HNWIs) and institutional investors who want to manage their digital assets directly, including small and medium enterprises (SMEs), family offices, market makers and financial institutions. All these are in addition to existing investors, who are getting more sophisticated by the day and demanding more products and services.
The question is, how can a newcomer grab market share? As the fifth licensed DAX, Hata is by no means a front runner. Besides Luno, there are three other players — Sinegy Dax Sdn Bhd, Tokenize Technology (M) Sdn Bhd and MX Global Sdn Bhd. But Low says he is up for the challenge and has a plan.
Lower prices, more tokens, new projects
Low says Hata has an advantage over some of the other DAXs as its team is fully composed of local talents, which translates into lower operating costs. Also, it allows the exchange to charge users lower trading fees.
Users of local DAXs have two ways to trade digital assets, either through the instant buy/sell function, which means trading cryptocurrencies directly with the exchange operator, or trading tokens in the marketplace of each DAX with other platform users. The market rate for the instant buy/sell transaction is 2% per trade, in general. Hata charges users only 1% on that, says Low.
As for the marketplace, crypto sellers are usually charged up to 0.3%, depending on the volume. For Hata, the exchange does not impose any charges on such transactions regardless of the trading volume, which means sellers can convert their digital assets into ringgit for free.
As for buyers, the market rate ranges from 0.2% to 0.6%. Hata charges 0.1% to 0.4%, depending on their 30-day trading volume. “So, we are basically cheaper on both sides,” says Low.
He hopes its pricing strategy can attract more users to its platform to enhance Hata’s liquidity, which is still relatively thin compared with its peers.
“Our liquidity isn’t as deep as Luno, as we started only about four months ago. But it is growing. And you can definitely buy crypto off Hata because we already have market makers that are market making quite consistently. We will continue to improve liquidity over time,” he says.
Second, Hata has a sales team dedicated to HNWIs, SMEs and institutional investors that help them expedite the registration process, which is very different from that for retail investors. One of the most challenging parts is to identify their source of funds and whether these come from legitimate sources.
“The whole process could take up to a month or two for some exchanges. We are committed to doing that within two weeks, or even one. We offer in-person services [for this segment of clients] that some exchanges don’t. We allow them to come to our office to open an account on an appointment basis,” says Low.
He says Hata has an internal legal team to advise HNWIs, SMEs and institutional clients on drawing up proper legal documents to ensure they have the necessary mandates to trade digital assets. “We can help them in bringing in the right people too. We have a very strong legal team to support them on every step of their journey to make sure they get their accounts.”
Hata aims to be an innovation hub for new blockchain projects and start-ups to raise funds, partly by partnering with initial exchange offering (IEO) platforms to list new digital tokens on its exchange that are issued by local companies for trading.
Hata recently announced its partnership with pitchIN, a licensed equity crowdfunding and IEO platform operator, to achieve this goal. pitchIN successfully closed its first digital token campaign in August, which saw auction platform BidNow raise about RM10 million from 469 investors through the issuance of utility tokens.
Utility tokens are digital tokens that function like a coupon that entitles token holders to enjoy certain privileges when accessing the issuing company’s products and services.
“pitchIN is our partner and we look to support them. We are looking to get approval from the regulator to list [digital tokens issued through pitchIN] on our exchange,” says Low.
“We want to be an incubation hub and beyond just a typical exchange that lists the top 20 to 30 most traded digital tokens globally. We want to enable Malaysians to access newer, more relevant and exciting opportunities that they might not find overseas,” he adds.
Regional ambition with stablecoin offering
Low also harbours regional and global ambitions with the licence Hata acquired from the Labuan Financial Services Authority, making it the only dual-licensed DAX in Malaysia.
When asked about the Labuan licence, he says it enables Hata to set up its global platform for users to access a wider pool of cryptocurrencies. They can also wire US dollars (USD) to the exchange and convert them into USD Tether (USDT).
USDT is one of the most popular stablecoins globally which pegs its value to the US currency. Tether CEO Paolo Ardoino has said the firm holds about US$100 billion in US Treasuries, more than 82,000 Bitcoins and 45 tons of gold to back its stablecoins. The statement was made during an event in Switzerland in October, according to news reports.
By complying with Labuan’s regulations, investors with USD holdings can convert their cryptocurrencies directly into USDT to take profit or shield themselves from market volatility.
Meanwhile, investors with USDT who couldn’t find a way to convert them into ringgit legitimately can wire them to Hata’s global platform and convert them into fiat currencies.
“We do see some clients moving USDT to our platform to convert them into other cryptocurrencies or USD to take profit. Some move their funds to our ringgit platform and cash out in ringgit. But it’s a very small number of people doing so at this point. Most users use USDT to trade other cryptocurrencies for investment purposes,” says Low.
“We see some users coming to us wanting to cash out their alternative coins [mostly lesser-known cryptocurrencies with a smaller market capitalisation] as well. Most of these flows come from larger exchanges that operate globally.”
He adds that it is possible for businesses to convert their USD into USDT to make cross-border payments.
By offering such solutions, Hata has started receiving clients from Singapore, Hong Kong, Brunei, Vietnam, Sri Lanka and Europe, mostly to convert USD into crypto, says Low.
“Regionally, there is a lot of demand for licensed DAXs. Investors want to make sure they are doing things through an avenue that is fully regulated and licensed, to make sure their investments are safe at all times,” he adds.
“What they don’t want to happen is to source liquidity from unregulated avenues or platforms. If those platforms, for some reason, are targeted or investigated by regulators, their assets will be at risk of being seized. So, we provide the avenue that enables institutional players to enter the digital asset space and ensure that things are above board all the time.”
On its global platform, Hata is currently working with RHB Bank and UOB Bank. “We are mainly working with RHB at the moment. We are also applying to several other regional banks for an account,” says Low.
As for the trustee, Hata works with Universal Trustee to store its customers’ fiat and digital assets.
“We want to build Hata to be at least a regional player. Malaysia is a good market, but we are optimistic about the industry’s growth globally,” he says.
“We are studying the possibility of expanding the business into other countries in the region by applying for more licences. We have not made up our mind yet, but the markets that we are most familiar with are Singapore, Indonesia and the Philippines.”
An entrepreneurial soul
David Low was 29 years old when he became country manager of Luno Malaysia Sdn Bhd. He was promoted to general manager six months later to oversee the firm’s business in Southeast Asia. After 2½ years, he was in charge of Luno’s Asia-Pacific business.
The promotions came fast and he was a rising figure. So, why would he strike out on his own to set up another digital asset exchange (DAX) — Hata Digital Sdn Bhd — becoming a competitor to his former employer?
Low says he loves new and high growth industries that provide an entrepreneurial person like him with ample opportunities, and the cryptocurrency industry fits the bill. In 2017, when he first learnt about the industry, Bitcoin had risen 18 times from about US$1,000 at the start of the year to more than US$18,000 apiece at the end. The growth was tremendous and captivating.
His initial plan was to launch a crypto exchange himself, only to find out that it wasn’t easy. It was an opportune moment when Luno came looking for a country manager in 2017. He applied for it and got the job in October that year. He officially joined in 2018.
Had launching Hata been his plan when he joined Luno? “I would never say no [to an opportunity that comes along]. I’m not a typical employee. I have a different mindset. I’ve always been an entrepreneur from day one,” says Low.
He started his career as a practising lawyer and once worked as a legal researcher in parliament and was a political assistant of former DAP leader and member of parliament Tony Pua, according to his LinkedIn profile.
However, Low quit his legal career a year later and ventured into the bubble tea business. With some of his father’s savings, he approached Bryan Loo, founder and CEO of Loob Holdings and the master franchisor of ChaTime in Taiwan, before setting up ChaTime branches in Xiamen City in China’s Fujian province. He exited the business 2½ years later after setting up seven branches there.
Back in Malaysia, Low joined Singapore-based online grocery and food delivery start-up Honestbee as its general manager and country head of business development. He was one of the first Malaysians walking the streets and talking to restaurants and grocery merchants to onboard them on the Honestbee app. But he was there for only 16 months as the start-up was dissolved in 2020.
Low’s career path reflects his entrepreneurial spirit and appetite for risk. Things weren’t easy for him either when he left Honestbee to join Luno in 2018. It wasn’t the best of times to join the company. That year, Luno’s bank account was frozen by the bank and its clients were extremely unhappy when they could not withdraw their money. It was a time when the term “digital asset exchange” did not exist in Malaysia as the crypto industry was unregulated.
It was an exciting, challenging and uncertain time. It was also during this time that a former director of Luno was investigated by the authorities for his involvement in cryptocurrencies.
Business came to a standstill and Low’s first task was to resolve the problems. Undaunted, he quickly sprang into action. He started by reaching out to the government for the crypto industry to be regulated.
“I spoke to many people. I engaged with Bank Negara Malaysia and spoke to the Securities Commission Malaysia. I went directly to the Ministry of Finance as well,” he says.
During Low’s conversations with Ministry of Finance officials, he went with the reasoning that the fast-growing crypto industry needed to be regulated by the right oversight body to protect people from all kinds of scams. It was only with regulations that the industry would be able to grow sustainably and contribute to the country’s economy.
“The government then introduced crypto regulations for the first time, which was announced in Budget 2018. The then finance minister announced that crypto was to be regulated in the form of securities through a prescription order, which enabled the SC to step in subsequently and craft very clear guidelines on how crypto, especially exchanges, should be regulated.”
It was partly due to these efforts that Low was promoted to general manager at Luno to oversee its regional business.
Did he hesitate before leaving to set up Hata after spending five years with Luno and establishing a good relationship with many of its people? Low says he did.
“I was worried, I’ll be frank, especially when I was reporting directly to the CEO in London for whom I have a lot of respect. But again, I think I’ve done a lot for the company. They are doing very well today. So, I thought they would be fine with it when I decided to end my five-year tenure with Luno. Thankfully, I’m still on good terms with most of my former colleagues,” he says.
“Personally, I take a stand where business is business, a job is a job. It shouldn’t affect personal relationships, right? We may be seen as competitors, but that doesn’t prevent us from hanging out and having a good meal or coffee, or even a drink after work. There’s more to life than your job at the end of the day.
“Ultimately, everyone seeks different things in life. For me, I seek new challenges and I want to build a whole new business for myself. That was my primary motivation.”
Source : The Edge
Luno Malaysia celebrates milestones with 1 million customers and over RM87b in transacted volume
LUNO, Malaysia’s leading digital asset exchange, has recorded a new milestone of serving over one million customers, solidifying its position as the most trusted platform in the nation’s growing digital asset ecosystem.
Luno has also recorded a 32% growth in cumulative transaction volume from last year, bringing the total cumulative transaction volume on its platform to over RM87 bil in another clear sign of confidence in the growing crypto market.
At the Luno Insights event today (Dec 5), Luno highlighted several other achievements in the country, among them:
- Transaction milestones: Luno has processed more than 72 million transactions in total, encompassing the depositing and withdrawing of ringgit and the sending and receiving of digital assets.
- Asset growth: Assets under custody for both digital assets and ringgit have more than doubled to RM 4.28 bil from last year.
- Staking performance: Luno’s staking services experienced substantial take-up, with Ethereum (ETH) dominating at 55% of staking assets under custody, followed by Solana (SOL) at 25% and Cardano (ADA) at 20%.
- Popular cryptocurrencies: Bitcoin (BTC), Ripple (XRP), Solana (SOL), and Ethereum (ETH) emerged as the most traded and favoured cryptocurrencies among Luno users.
According to Luno country manager to Malaysia Scarlett Chai, Malaysians are increasingly viewing digital assets like cryptocurrencies as a means of diversifying their investment portfolio.
This is across all age and income groups, with the average investor aged 34.8 and a median deposit of RM100.
“Our customers also came from a diverse array of industries – manufacturing, construction, engineering and education sectors,” she remarked.
“In an encouraging development for gender parity in the industry, we also saw a 17% increase in female customers this year, compared with a 14% increase in male customers.”
In addition to these customer insight, Luno further revealed that it is the world’s first regulated digital asset exchange to offer Ethereum (ETH) staking that is certified Shariah-compliant.
Malaysia is now the first country in the world where Luno’s Shariah-compliant Ethereum Staking is available, assuring Malaysian Muslim investors that their investment is aligned with Islamic values.
The exchange also saw the launch of Luno Institutional, a service targeting institutional investors, professional traders, and fund managers, with advanced account setup to onboard multiple entities, as well as a dedicated account manager for customised solutions.
As the only digital asset exchange in the country to provide staking services, institutional investors and traders can leverage Luno’s industry-grade custody and deep liquidity via advanced API integration.
In the past 11 months, the industry has seen remarkable growth, starting with the landmark approval of spot Bitcoin ETFs by the U.S. SEC, which was followed by an influx of demand from institutional investors.
In April, Bitcoin Halving happened, where the reward for mining Bitcoin was cut in half. This automatic process lowers the supply of new bitcoins entering the market, which can act to raise the price if market conditions remain the same because of the rules of supply and demand.
Most recently, cryptocurrencies saw a surge in price following Donald Trump’s return to the White House.
The incoming US administration has been widely known to be pro-crypto and pro-business, with several key individuals appointed stating their intention to support the US in becoming the crypto capital of the planet and accumulating a national stockpile of Bitcoin.
“These macroeconomic factors have contributed to doubling Bitcoin’s price since the start of 2024,” Luno general manager for Asia Pacific Aaron Tang pointed out.
“On January 1, 2024 Bitcoin was at RM198,911; shy of two weeks ago, Bitcoin set a new all-time high of RM438,466 on Luno.”
In November, CCData released the Exchange Benchmark November 2024, Luno was awarded Southeast Asia’s highest-rated exchange, scoring a BB grade.
CCData is the industry standard for ranking the risk associated with the digital asset exchange sector. Luno also received the highest transparency score among all exchanges reviewed globally.
“We are immensely proud of our role in Malaysia and the region – our global exposure has allowed us to work alongside regulators like the Securities Commission Malaysia and Bank Negara Malaysia in growing the local digital assets industry,” Tang asserted.
“Our commitment to driving the industry forward has resulted in us spearheading 18 of the 19 approved digital assets.”
Meanwhile, Chai said this milestone underscores Luno’s commitment to providing Malaysians with a safe, transparent, and accessible platform for engaging in the world of cryptocurrencies.
“Our growth reflects not only the increasing interest in digital assets but also the trust that our users place in us,” she added.
Source : Focus
The Coverage Malaysia
