This Will Trigger Crypto’s Mass Adoption Next Years: Animoca Brands’ Yat Siu

The cryptocurrency industry is rapidly changing. There’s no doubt about it. From a field reserved only for cypherpunks and heavily tech-oriented people to a global phenomenon that’s now ventured into the mainstream, blockchain is no longer a topic that’s raising as many eyebrows as it used to, and Web3 became mainstream in talks.

Those who’ve been following the latest gaming and NFT developments have surely heard of Animoca Brands: one of the most prominent gaming studios and VC, boasting a tremendous investment portfolio, including names like The Sandbox, Axie Infinity, Atari, Alien Worlds, Aurory, and many more.

Animoca Brands has been one of the driving forces of the blockchain gaming niche – a use case touted by many as the most prolific and powerful when it comes to implementing the technology.

During EthCC 2023, CryptoPotato sat down with Yat Siu – Animoca Brands’ co-founder and executive chairman. In an eye-opening interview, he shared his thoughts on the latest rise in popularity of crypto in Asian countries, or even a China 2.0 wave (“they see an opportunity to break away from the US”), why he is sure that there will be a second wave of NFTs and why Ripple’s win over the SEC is a breakthrough for the industry, where the next big trend will come from and when.

What made you believe in the emerging blockchain industry, and when did you first hear about Bitcoin?

I heard about Bitcoin over 10 years ago, but my interest in it wasn’t really that big. I experimented. It was more intellectual interest.

What really got me into crypto was non-fungible tokens (NFTs), which are basically CryptoKitties in 2017. One of our subsidiaries was based in Vancouver, and it was involved in building CryptoKitties. And the co-founder of that business ended up becoming a co-founder of Dapper Labs, and we became investors in that business.

Since you’re talking about Bitcoin, I find that the conversation that happened with CryptoKitties back in 2017 is very similar to NFTs, with the ERC-721 standard being very similar to what we’re seeing today with Ordinals and Inscriptions.

It almost feels like history repeating itself.

What really excited us wasn’t so much about the financial aspect of it; although that’s a key component, it’s the cultural aspect. The fact that we can now actually own, basically, stores of digital culture through NFTs. Because we had a gaming background, it meant a lot to us because, as a gamer, you wanted to keep your virtual identities, you wanted to keep your weapons or your assets or things, and things that evolved you as a character in the game.

We embarked on this vision. And in the last five years, we have made over 450 investments in anything related to NFTs and Web3.

You’re based in Hong Kong. China has had a love-hate relationship with crypto. How do you view the recent developments in Hong Kong’s opening to crypto? In your EthCC 6 speech, you mentioned that Asian countries are pushing Web3 because they see an opportunity to break away from the US. Do you believe there are other reasons?

China’s always had a love relationship with blockchain, to be precise. It is a love-hate relationship with crypto for a couple of reasons. First of all, there’s obviously a whole currency matter, but I think the bigger issue that China had with crypto, and particularly with Bitcoin, was mining.

Because when you think about what’s important for China, it’s about energy safety. And it wasn’t very helpful that people were basically mining Bitcoin, right?

That was perhaps the bigger reason why there was a crackdown on mining in China. But separately speaking, blockchain technology, they’re very excited about. And when you think about the role of Hong Kong, Hong Kong has always been the financial intermediary of China. It’s always been the way in which money flows in and out of China, for foreign direct investment, for investments outside, and so forth.

I think when it comes to digital assets, as in crypto, it’s exactly the same. As I was talking in my ETHCC speech, it’s not a coincidence, I think, that Hong Kong was opening up to Web3 and crypto and blockchain, and then China was talking about it and releasing their own Web3 strategy paper around that. To me, they’re all interrelated and tied, but they’re one; they’re connected to each other. Meaning that you do not expect, for instance, that in the short term, you can buy crypto directly in China, but you can do it through Hong Kong, for instance. I think that could be a potential path,

but I don’t think China is going to allow the trading of crypto inside China.

Speaking on the US falling behind in Web3 and metaverse, as well as if that may change following the upcoming presidential elections.

There’s so much activity about metaverse, about Web3. They’re all trying to push it and try to become leaders in this space. And this might be perhaps the first time in a while that the US might possibly find behind in the short term.

… everyone is looking at the elections, and I think there’s some truth to the fact that they might provide hope because regardless of who wins, then it’s about policymaking rather than about politics per se.

But the Ripple case to me is really interesting because it makes the very first distinction that just one token is one per use case. A token can be viewed as nuanced. If the token is used this way, it’s security. If a token is used another way, it’s a utility. In other words, context matters.

I think the recent ruling by the judge has given new energy to the US, regardless of where the regulator wants it to go.

I think post-ripple, everyone who was scared of doing something with tokens is now like, “maybe that’s the cost of doing business. We take some risk, but it’s an acceptable risk as opposed to before when it was unacceptable.” I’m quite hopeful about that.

The gamify industry still seems very active in Japan despite the fact that we’re in a bear market, while here in the West, it seems like it’s relatively low. Do you agree with this observation? How does Animoca view this, and where is the current geo focus of Animoca Brands?

First of all, globally speaking, there’s still a positive trend on Web3. It comes from a small number, but there’s still growth everywhere around the world, even in the US. But that’s, again, because the numbers we’re starting from are low.

However, having said that, when it comes to consumer opinion, in Asia, it is very friendly. In America, it is not so friendly. In some cases, they are actually even hostile.

I would say that the gamers themselves, which is the majority of young people out there, are sharing their anti-capitalist views from the perspective of crypto. So, in other words, the same opinions that they have about someone who’s working in banking in New York and Wall Street are how they view people in crypto. So that means that Bitcoin, NFTs, and Bored Apes, to them it’s digital capitalism.

They may not articulate it in that way, but it’s the same feeling because when you look at the reactions that gamers have in America to NFTs, it is not a logical reaction. It is a very emotional reaction.

Do you expect a comeback of NFTs? Wave two? How is it going to be different from the previous one?

Absolutely, yes. First of all, I think we’re going to see more mass adoption. And that comes from culture – as it always does, right?

The pure financial nature of crypto is appealing to a subset of people who are very financially literate.

But the way that we bring mass adoption is through culture. Entertainment, gaming, fashion, all that kind of stuff. Things that we as humans identify with.

As you know, it takes several years to make a good game. Most of the games were funded in the last 12 to 18 months. Those games are going to be released in the coming 12 to 18 months. When they come out, we think we’re going to see quite a bit of mass adoption.

For entrepreneurs who’re reading this, what are the main criteria you would look for in a project before investing?

First, assume the team is technical, they know their background, and so on. And obviously, product-market fit is always an important one, but in this space, sometimes it’s hard to know. What I find so exciting about Web3 is that product-market fit can sometimes be something we never thought fit, right?

Because it’s a new industry. If you think about virtual employment, that’s not something that people would’ve thought about as a natural thing. If you thought about Play-to-Earn or if you thought about digital collectibles, these are all concepts that, five years ago, didn’t have product market fit.

We look for founders who are driven by purpose.[…] The Web3 investment style is more about shared success. How does what I built to end up creating benefits for the broader ecosystem as a whole?

Animoca Brands has grown exponentially and become one of the major players in the gaming industry. What, in your opinion, sets Animoca Brands apart from others? What would you say are the key turning points for your company?

I would say the key turning points for Animoca Brands – obviously our embrace on Web3, but more importantly – the conviction that what we’re building is of critical importance to the industry broadly.

So even though people say that we’re a gaming company because we made lots of gaming investments (we made over 140 gaming investments, and we are obviously involved with some of the biggest Web3 gaming projects), the purpose of what we’re building, which is digital property rights, and the mission to essentially create the Web3 ecosystem, which is all about what we consider stakeholder capitalism, in which every customer becomes an owner, that’s the broader mission.

What excites you and Animoca Brands?

Outside of the gaming field, I would say one area that we have been looking at is education.

Education today is a $5 trillion market, and almost nobody in crypto is looking at education.

Where will the next big trend come from?

I don’t think that NFTs are done yet, because they are like the homepage. In other words, everything will have NFTs. Everything will need NFTs in one form or another. To me, it’s a little bit going to be more like the usage of NFTs will drive mass adoption.

The mass onboarding… it hasn’t even started yet.