Why Coinhako Bet Big On Bitcoins When Crypto Was Unfamiliar In S’pore

Almost a decade ago, the concept of cryptocurrency was really new and no one really understood it, especially in Singapore.

While there were plenty of media coverage on bitcoin back then, what people mostly took away from it was the “Silk Road incident” and that its “prices are rocketing”. Beyond that, people didn’t fathom how it’s being used and what’s the underlying technology behind it.

While the rest of Singapore was in a cloud of confusion about cryptocurrency, Yusho Liu — the co-founder and CEO of Coinhako — took a different stance and saw it as a burgeoning business opportunity that was worth tapping on.

After all, all startup ideas begin with a problem, he mused. Together with his army buddy Gerry Eng, the two started dabbling in bitcoins but the process to buy one was arduous back then.

“There were not many places you can buy from. You had to send papers to like foreign brokers and you have to find overseas exchanges, so I think there could be an opportunity for us. That sort of sparked the whole idea. One month later, we incorporated a company and that was day one of Coin Supermart.”

Founded in 2014, Coin Supermart — which has since rebranded to Coinhako — is now one of Singapore’s leading digital assets wallet service that aims to make buying, selling and trading of cryptocurrencies easy and secure.

“The idea was to provide an avenue for Singaporeans to buy cryptocurrency and back then, it was only bitcoin. So in 2014, we started Coin Supermart (but) it was more like an exchange model.”

“After a while, we realised that the model for SGD doesn’t really work. Maybe it was still too early then.”

From Singapore To Silicon Valley

coinhako founders yusho liu and gerry eng
Yusho Liu (left) and Gerry Eng (right), co-founders of Coinhako / Image Credit: Coinhako

Shortly after they launched, Coinhako faced a huge business crisis.

The price of Bitcoin had skyrocketed to over US$1,200 in November 2013, but when the infamous Mt. Gox exchange went bankrupt, everything went downhill.

We were affected by the Mt. Gox exchange closure, which was one of the major incidents in the crypto space in 2013 to 2014. We lost some money there, and (were forced) to either raise capital or close shop.

– Yusho Liu, co-founder and CEO of Coinhako

The founders then scrambled to reach out to Singaporean investors to raise some funding, but ended up facing multiple rejections.

Some investors didn’t even bother to reply their email, but mostly, local investors didn’t want to back a cryptocurrency-based company because nobody really had bitcoin back then.

That forced them to “look outside”, particularly in Silicon Valley, which is deemed the epicentre of innovation.

They applied online for Boost VC’s accelerator programme, which was heavily focused on investing in bitcoin companies back then.

We got in with the pitch saying that we are going to be like the ‘Coinbase of Asia’. Adam Draper (founder of Boost VC) himself is the first investor of Coinbase. He’s the very first investor who seeded Brian Armstrong (CEO of Coinbase).

His thinking was, if crypto or bitcoin is going to be big, then he has to first create an ecosystem — not just in the US, but globally. We came in from the Singapore/Asia angle and maybe due to the friendliness of our environment and startup ecosystems, he was willing to take this step (to invest in us).

– Yusho Liu, co-founder and CEO of Coinhako

He also credited the successful investment to the “right synergy” and “right timing”. Since Boost VC was focused on bitcoin companies and Singapore is the hub for Asia, they tried pitching this angle to them. And it worked.

coinhako tim draper
Coinhako co-founders with Tim Draper / Image Credit: Coinhako

They flew over to San Francisco, and Boost VC paid for their lodging and funded them for six months. At the end of the accelerator programme, they also managed to get additional funding during Demo Day from Tim Draper (father of Adam Draper, who is a prominent Silicon Valley investor) and a few other angel investors.

“All in all, funding-wise, we got about $200,000 in 2014 and only recently we got $1 million from strategic investors. All our investors are from the States.”

Comparing Singapore and Silicon Valley investors, Yusho finds that the former tends to be “a bit conforming and play catch up.”

“When things work, that’s when they will start looking. For example, if Uber works in the US, they have this mindset that we should have an Uber for Singapore. Whereas for Silicon Valley, the more people are not looking, the more they want to look. The crazier the idea, the more they want to invest.”

They Had Five Years To Make Things Work

When they returned to Singapore in end-2014, they have rebranded to Coinhako — “because the name Coin Supermart wasn’t very appealing” — and pivoted to a brokerage model.

They adopted a simple user interface that allows non-technical users to get in on the cryptocurrency game in a simple, efficient, and cost-intuitive way.

coinhako platform
Coinhako platform / Image Credit: Coinhako

Coinhako is the perfect platform for crypto noobs to get started. We provide a very detailed app with multi-language and multi-currency (capabilities). In a couple of clicks, you’ll be able to deposit your Singapore dollars and after which, you will be able to buy your first cryptocurrency.

– Yusho Liu, co-founder and CEO of Coinhako

For a minimum of only S$30, users can buy and sell cryptocurrencies on Coinhako and securely store them on the platform thereafter, and all users are required to use two-factor authentication for enhanced security.

Despite the highly competitive rates and the security appeal, cryptocurrency was still in its infancy stages back then, so why did he choose to take the plunge?

To me, it was one of those ideas that could go all the way up to the moon, or it could just go crashing down.

Right after school, I wanted to do something. Something a bit crazy, rather than going for a nine-to-five job. And I thought crypto could be one of those once in a 10-year, 20-year opportunity that might be worth (exploring).

– Yusho Liu, co-founder and CEO of Coinhako

But they needed a means to an end and gave themselves a timeline of five years to make things work. They needed to figure out the product market fit first, which might not work out in just a year.

Moreover, he observed that a lot of projects that started in Singapore start to lose steam after just one year and eventually dissolved in less than three years. He didn’t want Coinhako to be one of these ‘bubble’ companies so he wanted them to dedicate enough time to make a real effect.

Gaining Trust And Credibility Among Users

Addressing the common misconception of cryptocurrencies, Yusho said that many people often thought of it as a scam.

“The more they see the news (on crypto), the more they will start to wonder: ‘is this really a scam?’ And then of course, the price is very good. When the price goes up, it naturally attracts eyeballs. And when the price goes up, people don’t really care if it’s a scam or not,” he said with a laugh.

coinhako blog
Screenshot of Coinhako blog

However, this also highlights the fact that education is lacking on this front. As a company, they are trying to bridge this gap by creating educational content such as FAQs and blog posts on cryptocurrency. A learning academy is also in the works.

As a preventative measure, Coinhako also pushes out scam warnings to users. For instance, they manually verify and confirm transactions with users before proceeding with it to ensure that they are not being duped into a high-yield programme.

“For crypto transactions, there is no reversal after the transactions are completed. Which is why we make it slightly inconvenient, but our core (goal) is to safeguard customer funds,” he explained.

Ultimately, you have to build trust with customers right? When customers don’t trust bitcoin, they won’t trust us; and the whole point is really to get them comfortable with where they’re putting their money.

– Yusho Liu, co-founder and CEO of Coinhako

Over the past seven years, Coinhako has established its reputation as a trusted and credible firm through constant updates of its security measures and its commitment to employ industry-best practices across its platform.

The Boom And Bust Of Bitcoin

The journey of Coinhako is intrinsically tied to the price action of Bitcoin — a true roller coaster ride since Bitcoin’s creation in 2009.

The first price hike occured in 2013 when one bitcoin was trading at around US$1,124 in November 2013.

Four years later, bitcoin experienced a meteoric rise and reached record highs, with some exchanges having the price of a single bitcoin at approximately US$20,000 in late 2017. However, prices soon started to tumble in the months that followed, which saw the price of Bitcoin falling as much as 70 per cent.

bitcoin price history 2013 to 2021
Bitcoin’s price history from October 2013 to March 2021 / Image Credit: Statista

ICO crashed and basically the whole market went into bear mode for two years. (Our) revenue dropped quite a bit, 5 to 10x. During that period, we are on capital conservation mode — we didn’t spend on marketing, but we continued to work on our business and (invest in) R&D.

We lost $100,000 to $200,000 every month. (Continually) losing money is of course difficult to stomach, but we had the runway to tide us through. We did a projection and we didn’t have to resort to firing anybody. Thankfully, we did not over-hire and could maintain the existing headcount, which was less than 20 at the time.

– Yusho Liu, co-founder and CEO of Coinhako

Compared to the crisis they faced when they first launched where the team was focusing on adoption and customer acquisition, Yusho described the 2017-2018 market crash as the “colder winter”.

“The first one, it was just a couple of us and we had investors’ money to get us through. But the second one, we had bigger team and offices (to account for),” he reasoned.

Despite the setbacks, Yusho said that the company morale wasn’t too badly affected because they are aware that “this is just part of a cycle.”

Fast forward to today, although many businesses have suffered during the Covid-19 pandemic, it is quite the opposite for Coinhako, much like many other digital businesses.

According to the company, they experienced record-high trading volumes earlier in January. The catalyst for this is the huge run up in cryptocurrencies prices, leading to more retail and institutional interest in this new digital asset class.

January and February was quite good months for us. These two months alone covered more than the whole volume of last year.

– Yusho Liu, co-founder and CEO of Coinhako

He added that they receive almost 10,000 sign-ups per month and their monthly active users is at over 100,000 in 2021 so far.

Crypto Sees Continued Interest In S’pore

In its first two years since inception, Yusho felt that nobody really cared about bitcoins.

“The price was low, there was no ecosystem and no use case, so we were just trying to stay very new during that time,” he said.

That is why Coinhako only had three or four people in its team then.

coinhako team
Coinhako team / Image Credit: Yusho Liu via Medium

Today, Coinhako has offices in both Singapore and Vietnam (the latter is more of a development support office). Across both offices, it has a combined headcount of almost 70 people and might triple it in the next couple of months.

In the past 12 months however, Yusho observed that many institutions started changing their minds about crypto being an alternative asset, which was boosted by the US printing a lot of money via quantitative easing measures.

Even the Monetary Authority of Singapore (MAS) has established its first regulatory framework to govern cryptocurrency services called the Payment Services Act, which came into effect on 28 January 2020.

Under the Act, cryptocurrency providers in Singapore will have to acquire a license and be regulated under the MAS — this was finally passed in Parliament in January this year.

While there has been no definite date on the first issuance of the first licenses for companies in the local space, it is a sign of greater adoption to come in Singapore.

Once we get (the license), then crypto becomes a ‘real’ business and a lot of value can be unlocked from there. We are experiencing a bit of growth now, but I think it’s only the start. Once this industry is regulated and we get the license, there will be so much more room for us to grow (further).

– Yusho Liu, co-founder and CEO of Coinhako

He believes that acquiring a license in Singapore will aid their expansion efforts in Southeast Asia (SEA). Like Grab, he wants to strengthen Coinhako’s local presence first before launching in the rest of the region.

“Being based here (means) we have good access to the rest of the SEA markets. When we pass Singapore’s standards, it should be easier to speak to the rest of the regulators once they have the framework.”

He added that Singapore is a very mature country in terms of financial services, and crypto is always put side by side with financial services.

When asked about the possible use cases of cryptocurrency, Yusho feels that it will remain as an alternative asset stored value for now. He is also not convinced that it will evolve to be a mainstream payment infrastructure, though that might change over time due to the advancement of technology.

While it’s too early to say, bitcoins as a payment may not be a reality anytime soon. However, he foresees that crypto assets will be merged into the traditional banking custody solutions.

So where does Coinhako come into play with all of this?

(We are like) the infrastructure provider — we lay the pipes, the roads, and then down the road, we can let the cars run. So these would be the application payments.

As a crypto user, there are lots of creative, funky stuff that are not accessible to the traditional retail user. Our goal is to be the ‘pipe’ to these creative products.

– Yusho Liu, co-founder and CEO of Coinhako

Ultimately, their goal is to go beyond being a brokerage model and offer a full suite of cryptocurrency financial services, including a possibility to explore payment services down the road.

Featured Image Credit: Coinhako

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Jothi Venkat

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