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Crypto Winter to Corporate Spring: How Institutional Adoption of Web3 Thrives Amidst Volatility


Crypto Winter to Corporate Spring: How Institutional Adoption of Web3 Thrives Amidst Volatility

Amidst the crypto winter, the value of digital assets plummeted by $2 trillion since the 2021 peak—a harsh reality impacting countless lives akin to that of the 2008 financial crisis. This period of negative gains presented significant challenges in 2022, with major events shaking investor confidence.


From the stablecoin failures like TerraUSD and Luna in May to the collapse of FTX in November, the crypto winter's impact echoed across the market. Investor uncertainty was further compounded by market instability due to inflation, recession, and regulatory uncertainties, leaving the digital asset landscape hanging by a thread.


As the crypto market grapples with these challenges, Southeast Asia has surprisingly emerged as a blockchain frontrunner where it hosts 14% of global crypto transactions with just under 9% of the world's population. Notably, venture funding for SEA crypto, blockchain, and Web3 startups has topped $1 billion, solidifying the region's dominance in a trend that is here to stay.


Today, we delve into the ongoing institutional adoption of web3 technologies. And through the lens of Southeast Asia, we examine how the region's early adoption translates to influence and economic advantage in the post-crypto winter era, guided by the strategic vision of these pioneering blockchain advocates.


Crypto Winter's Effect on Startup Ecosystem


During the crypto winter, the industry experienced a significant decline in venture capital (VC) funding. In Q1 2023, global VC funding fell to $2.4 billion, an 80% drop from the previous year's all-time high of $12.3 billion. This cautious sentiment has led investors to be more selective in funding decisions, impacting startup valuations, with many returning to sub $10 million levels.


Despite the challenges, institutional adoption of web3 technologies remains resilient. Over 52% of Fortune 100 companies pursued crypto, blockchain, or web3 initiatives since 2020, with around 60% of initiatives since 2022 reaching the pre-launch or launched stage. Technology, financial services, and retail sectors drive about 75% of these projects.


In the face of the downturn, corporate players continue investing in web3 initiatives to harness the potential of blockchain and web3 technologies.


Blockchain as the Driver of Corporate Innovation


Fortune 500 Focus


For Fortune 500 companies, blockchain technology serves as a pivotal driver of innovation within the web3 space. These companies recognize the potential of blockchain as an operational infrastructure that can revolutionize their processes and enhance efficiency.


By leveraging blockchain, Fortune 500 companies aim to streamline operations, increase transparency, and reduce costs. The decentralized nature of blockchain also provides them with the opportunity to reimagine existing systems and explore new business models that can create value for their stakeholders.


Institutional Blockchain Adoption Remains Robust


Within the Fortune 500 landscape, several key use cases have emerged as areas of focus for web3 innovation. Blockchain infrastructure that supports network operations, data collection and management (both customer and internal data), and payments/settlement are among the top use cases being explored by these companies. By integrating blockchain technology, these companies can establish secure and immutable data repositories, enabling efficient and reliable data management.


Blockchain-based payment and settlement systems devised by them also offer the potential to streamline financial transactions, reducing the reliance on traditional intermediaries and facilitating faster and more cost-effective cross-border payments.


DeFi: Financial Services Revamped

(1) JPMorgan successfully executed its first cross-border transaction using DeFi on the public blockchain, Polygon. (2) Credit Agricole and SEB developed a sustainable, blockchain-based platform for issuing, trading, settling digital bonds using smart contracts.

Within the financial services sector, the adoption of web3 technologies has predominantly revolved around payments, crypto trading products, and tokenization.


Companies in this industry recognize the transformative potential of blockchain for improving transaction efficiency, reducing costs, and enhancing security, considering blockchain-based payment systems can enable faster cross-border transactions and enhance transparency in financial operations.


Additionally, the development of crypto trading products and tokenization provides new avenues for asset management, liquidity provision, and investment opportunities within the financial services ecosystem.


See below how companies have been making great strides in web3 adoption despite the crypto winter:


JPMorgan's DeFi Transaction
JPMorgan, in collaboration with DBS and SBI Digital Asset, executed its first cross-border transaction using DeFi (decentralized finance) on the public blockchain Polygon. This transaction involved tokenized Singaporean dollar and Japanese yen deposits, along with a simulated exercise of buying and selling tokenized government bonds. The successful execution of this transaction demonstrated the potential of cross-currency transactions of tokenized assets, which can be traded, cleared, and settled instantaneously among direct participants.

Crédit Agricole CIB and SEB Digital Bond Platform
Credit Agricole CIB and SEB developed a sustainable, blockchain-based digital bond platform, so|bond, enabling the digital issuance, trading, and settlement of bonds using smart contracts. This innovative platform offers more efficient and secure solutions for launching bonds compared to traditional methods. It also incorporates a unique validation protocol known as "Proof of Climate Awareness" to minimize the environmental impact of the infrastructure while incentivizing sustainability.

Ospree: Compliance for Crypto Made Simple
Ospree offers a streamlined solution for companies to implement their web3/crypto compliance requirements from a single platform.

Ospree, a global digital asset compliance platform, is making significant contributions to web3 and crypto compliance in the financial services industry. They offer companies a streamlined solution to implement and manage their Anti-Money Laundering (AML) compliance requirements from a single platform to mitigate financial risks and foster trust among stakeholders.


As regulatory frameworks evolve in the web3 ecosystem, compliance solutions like Ospree play a crucial role in facilitating the integration of traditional financial institutions with the innovative world of blockchain and cryptocurrencies. The adoption of blockchain as an operational infrastructure by Fortune 500 companies, along with the integration of NFTs, decentralized finance, and other web3 applications, exemplifies the drive towards innovation and digital transformation across industries.


By leveraging the potential of blockchain and web3 technologies, institutions are poised to enhance efficiency, transparency, and customer experiences, ultimately reshaping the future of business and finance.


Retail Gets In On NFTs

(1) Burberry’s NFT line in the game Blankos Block Party allows users to personalize their in-game characters with NFT accessories. (2) Nike, together with RTFKT, entered into the web3 space by offering virtual shoes as NFTs via its CryptoKicks line.

The retail industry has embraced the concept of non-fungible tokens (NFTs) as a means of engaging with consumers in the digital realm. NFTs enable brands to tokenize physical products and services, creating unique digital assets for the next-gen consumers. This digital transformation sees brands partnering with gaming platforms, offering exclusive NFT lines within virtual worlds for their loyal customers.


How have big brands jumped on the NFT bandwagon?


Burberry x Blankos Block Party NFT Accessories
Luxury brand Burberry partnered with Mythical Games to launch an NFT line in the flagship game Blankos Block Party. This collaboration allowed users to personalize their in-game characters with NFT accessories like jetpacks, armbands, and pool shoes. By integrating NFTs into the gaming experience, Burberry successfully tapped into the scarcity and intangible value associated with luxury items, fostering brand engagement and creating a new channel for customer interaction.

Nike x CryptoKicks NFT Shoes
Sports brands are also capitalizing on the NFT wave to connect with the younger demographic. Nike, for instance, made a splash in the NFT space through its acquisition of RTFKT Studios. Nike's CryptoKicks line offers virtual shoes as NFTs, each pair selling for significant sums ranging from $4,000 to well over six figures. This innovative approach allows Nike to blend culture, play, and cutting-edge innovation, catering to the digital preferences of its target audience.

Southeast Asia’s Web3 Adoption


Southeast Asia has consistently dominated global rankings for blockchain adoption, with three SEA countries (namely Vietnam, the Philippines, and Thailand) securing positions in the top 10 of Chainalysis' Global Crypto Adoption Index.


The region showcases the highest level of penetration across markets, indicating a growing acceptance and interest in these transformative technologies. Southeast Asian countries have also been quick to recognize the potential benefits offered by blockchain and web3 applications, both in terms of economic growth and societal development. This favourable environment has set the stage for innovative startups and entrepreneurs to thrive.


2MR Labs Leading the Way

2MR Labs,the region's first web3 launchpad, helps brands leverage Web3  by seamlessly tying up real-world utilities with blockchain technology.

2MR Labs is a pioneering startup that stands out in the Southeast Asian web3 ecosystem, serving as the region's first web3 launchpad. As a Plug and Play’s portfolio company, 2MR Labs focuses on building a space that ​​helps startups and global brands leverage the power of Web3 technology by seamlessly tying up real-world utilities with blockchain technology.


The company serves as a go-to platform for brands seeking to engage with consumers in the dynamic web3 space. With the backing of institutional investors, 2MR Labs has a long-term mandate to drive mass adoption of digital assets, harnessing their potential to empower businesses and communities across Southeast Asia.


As Southeast Asia continues to be a hotbed for web3 and crypto adoption, 2MR Labs recognizes that many ASEAN brands and communities are eager to embrace web3 but lack familiarity with its workings. 2MR Labs aims to enable this paradigm shift by providing education, support, and a progressive three-phase process to empower the economy and build a sustainable web3 ecosystem.


Thriving Amid Crypto Winter: Fintech Innovation


Institutional adoption of web3 technologies will only continue to shape the landscape of innovation, offering new avenues for growth, collaboration, and customer engagement. The sustained interest and involvement of these institutions reaffirm the significance of web3 as a transformative force, paving the way for a corporate spring amidst the crypto winter.


To effectively navigate this vast space, corporations will need to acclimate themselves to the ins and outs of web3 technologies to strengthen their competitive edge. However, the dynamic nature of this relatively new sector poses significant challenges for many corporations looking to ignite their fintech innovation journey.


In the realm of corporate innovation within financial services, Plug and Play’s comprehensive approach empowers corporations to navigate the complexities of web3 technologies and discover the revolutionary potential of blockchain, DeFi, and NFTs. By harnessing the power of web3 and engaging with startups, corporations can truly unlock the future of fintech and establish themselves as trailblazers in the ever-evolving digital landscape.


Looking to gain access to a carefully-curated network of over 30,000 international startups and network with industry peers? Become Plug and Play’s corporate partner today!


 

ARTICLE WRITTEN AND COMPILED BY: PLUG AND PLAY APAC

As an in-house venture capital, our goal is to fund the teams that are building the defensible businesses of the future. By leveraging our capital, our network of VCs, and our corporate partners, we give our portfolio companies an added advantage. Join our platform today!

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