The Pomp Podcast - #501: Annabelle Huang on Crypto in Asia

Episode Date: February 26, 2021

Annabelle Huang is a Partner at Amber Group, a leading crypto finance service provider. She previously served as the Asia Lead at Airswap and structured FX work at Nomura and Deutsche Bank. In this conversation, we discuss the crypto industry in Asia, the rise of institutional interest, digital payments, decentralization vs centralization, and privacy centric technology.  ======================= Exodus is an absolute game changer in the crypto wallet space, and we’ve teamed up to offer an exclusive discount for you, as listeners of the podcast. Sign up for Exodus today using my promo code Exodus.io/. This is a no brainer for both newcomers and crypto heavyweights - go sign up today.  ======================= Diginex is the first company with a cryptocurrency exchange to be listed in the US. Their ticker is Nasdaq: EQOS, and they are the first crypto company that you can buy stock in. They also have a crypto exchange called EQUOS, which has been built to institutional standards, but is available to everyone. You can trade Bitcoin and Ethereum spot, as well as Bitcoin perpetuals, and get a 5% discount on all fees, by signing up using http://www.equos.com/pomp ======================= Money On Chain brings Bitcoin to mass adoption with solutions to meet the needs of different types of users: a fully bitcoin-collateralized stablecoin (DoC), a bitcoin on steroids (BPro), and a dizzying bitcoiner option for lovers of leveraged trading (BTCx). All this, without requiring the delivery of private keys. Money On Chain - Bringing bitcoin into the mainstream.  Visit moneyonchain.com/pomp to learn more

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Annabelle Hong is a partner in Amber Group, a leading crypto finance service provider. She previously served as the Asia-leaded Airswap and structured FX work at Nomura and Deutsche Bank. In this conversation, we discuss the crypto industry in Asia, the rise of institutional interest, digital payments, decentralization versus centralization, and privacy-centric technology. I really enjoyed this conversation with Annabella, and I hope that you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors.

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on with the ethos of bitcoin money on chain wow my voice just cracked money on chain bringing bitcoin into the mainstream you can visit them at money on chain.com slash pomp to learn more Again, moneyonchain.com slash Pomp to learn more. DeFi is definitely for Bitcoiners with money on chain. All right, let's get into this episode with Annabelle. I hope you enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy,

but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Annabelle here. Thank you so much for doing this. Of course. Thanks for having me. For sure. You were sitting on the other side of the world in China right now, and you've had a very kind of unique background that you worked in the legacy world and now work in crypto. Walk us through just where'd you grow up? How did you get into finance originally? and then why transition to a crypto industry? Sure. So hi, everyone. My name is Annabelle Hong, and I'm a partner at Amber Group. So a little bit about my background. I was born and

raised in China, then went to the States for college. So I went to Carnegie Mellon and studied math and finance, and just went into the traditional finance world because that was what makes the most sense, given my background. And then I did FX structuring in New York, for Deutsche Bank and then for a number of years and that really gave me insight into how traditional markets work and in FX you know the trading style and got to know a lot of the top institutional clients on the back of it as well but after a few years I just felt like you know maybe you know I could spend another 10 years being on the same trading floor doing kind of similar deals um but what else or where is growth and i've always been interested in crypto or

bitcoin actually um from when i was in college a lot of my computer science friends were telling me oh my gosh look at this new distributed system and you know crypto on the crypto side and i took a look at the white paper and i was more interested in the i guess in the new way that economics could work in a decentralized fashion and the game theory behind it behind a consensus mechanism that enabled a truly trustless system for everybody in the world to participate in so I thought that was really genius but never really considered as a full-time career until 2018 when a few of my Carnegie Mellon alums reached out so they were building a decentralized exchange on Ethereum, and they were working with ConsenSys. It's called AirSwap. It's a

decentralized peer-to-peer trading venue. And I really liked the team and joined them, moved to Asia, moved to Hong Kong to lead Asia extension for them, and really approached crypto from more of a layer two protocol or more of a technology and product point of view as opposed to, I see a lot of my peers in finance, traditional finance who moved to crypto, mostly trading Bitcoin or other crypto as an asset class and didn't really get to know

the underlying technology behind it. And I really see DeFi or blockchain as the, you know that it really revolutionized finance and technology as we know it so that was really exciting for me and um you know really decided to to go into it full-time and after spending a year um in in DeFi world and that was back in 2018 right nothing like what we saw last year in 2020 um so the user experience is poor because the online tech is still quite nascent and there's no really liquidity anywhere. So I decided to join Amber, which is a crypto finance company based in Hong Kong. And it's really more of a global platform being at both the intersection

of DeFi and CeFi. So you really get to see a lot more market activity, got to service more clients from there. And I really clicked with just with the Amber co-founders. We all had really similar background. Born and raised in China, went to school in the States or the UK, worked on Wall Street for a few years, and then really just saw crypto for its potential. And we all pivoted to crypto full-time. I love it. And so when you think about Amber Group today, what does the product suite look like? And what are you guys trying to accomplish? Right. So Amber Group was started in 2017 and it was a bunch of um you know fx traders etc on wall street and when we started it was initially just a sales and trading style desk where we have traders on the desk everything

we're servicing um we're servicing our institutional clients offline through our through our you know traders and and in 2019 that was about almost three years of servicing um height there with individuals and institutional clients in the space. And that's when we realized that we really saw the need to digitize and platformize a lot of our offerings because people are used to, you know, maybe making a trade on a website or on their phone. So that's when we built our first product called Ember Pro, which is a web and portal. And then it offers trading functions as well as some time deposit, so where you can earn on your collateral as well.

And in 2020, that's when we launched our second product, the Ember app, which is a mobile app that's easier to use, more designed for people who needed a space. That's also when we saw an influx of actually both institutional and retail investors from the traditional space come into crypto. um on the back of this amazing rally um so yeah with our product suite whether the website or our trading desk offline or our amber app we really aim to serve a various a variety of clients maybe they're new or maybe they're more like crypto og so whoever they can find something

that's relevant for them and we aim to be the gateway to crypto finance for more people to come to the space and because we really believe in it we believe that people more users can really capture long-term value from the world of crypto finance absolutely so you're based now in in asia um maybe talk a little bit about what is the crypto scene like in asia uh what is kind of of different than the United States? What is similar to the United States or North America when you think of those two different geographies? Yeah, it is quite interesting. So I first got involved in crypto in New York, and then it was very, it's a very different crowd than what you see here in Hong Kong and the rest of Asia. I would say in New York, or in the US in general,

I think people are, a lot of projects, they're focused more on R&D, building out different techs. We see, even with last year, the whole DeFi boom, right? Most of the innovation are coming from the States. And then there are people building different chains out there and different blockchains out there other than Ethereum versus in Asia, or I guess in China. First of all, it's very casual business reference. So you see a lot of exchanges based in Asia, a lot of miners, a lot of trading shops, just because I guess those are the more, you know, readily cash flow driven businesses. this. But one thing I do feel, you know, the biggest difference is just the sentiment

and the drive of people. Like I think in the States, just because there are a lot of regulatory constraints and concerns, people sometimes are more hesitant towards driving business forward. But in Asia, I think people are more eager to, you know, to test things out, to get things going underground. So we do see, you know, a lot of early adopters coming from Asia. Maybe the tech came from the States, but I think a lot of people are more eager to participate in the ecosystem from Asia. So that, I think it's a great combination. I think, again, taking DeFi as an example, last year, right, a lot of the liquidity mining programs or yield farming programs, I think it is driven from innovation from the States, but we see a lot of participants from Asia and that really brought the ecosystem and bought a community forward. So, yeah, it's quite interesting to see that dynamic.

For sure. And so when you think through in the Asian market specifically, what is the advantage? Is it a certain type of regulatory regime? Is it a certain type of founder? Maybe is it some sort of cultural kind of framework or experience that people have as to why there's certain types of projects and kind of innovations that happen in Asia versus North America? Is there any kind of answer to like, why is it different? um i think i think mentality culturally maybe i think um i think we we see in asia i guess in korea and japan it is hard for people to find yield anywhere especially like i guess in japan right all the yields are negative and i think people are perhaps more inclined to find yield opportunities and more acceptable to new things. So that's why I think the crypto adoption in Korea and Japan are among the highest in the world. And I think in China, just because we have seen an incredible decade of the boom in internet product itself. So I think a lot people are leveraging that experience right from um you know the tencent alibabas etc and leveraging

that um and applying it to crypto to build um more products like exchanges or wallets or more crypto finance um service servicing apps um so i think you do see you do see that i think first of all people are more eager to to do things more they're they're more open to accept new things um and i think regulatory uh constraints definitely play a role um you see you see with japan right they they were really active in crypto and now with more stringent regular regulatory requirements in place i think that activity has since um you know died down a little bit. But I think everybody obviously in Asia are still cognizant of the regulatory requirements, but I think they're just more willing to test out new things.

Absolutely. And so when you look at the user base in Asia, it feels like there was a massive advantage in terms of just the digital economy already, right? Whether it was gaming or other pieces to it. Forget crypto for a second. Help people understand what else is going on in the digital economy in these Asian regions that give people kind of a predisposition to something like crypto and maybe a little bit more trust, a little bit more open-mindedness. Yeah, for sure. And I think, first of all, I think within Asia and China is leading this whole growth, right, that we skipped the whole desktop phase and went straight to smartphones, went straight to mobile. So everybody here has a mobile phone, smartphone. I don't carry physical cash with me anymore.

Everywhere I go, you scan a QR code and you pay and you transfer all digitally. And it's quite interesting, actually, when I first returned to Asia, and I didn't even have my Alipay or WeChat Pay set up and I was trying to just pay my cab and then he didn't want to accept my cash and said you know I just just go and I felt like wow and they just really don't you know the whole the user behavior here is so different now just you know on the back of the whole smartphone and the internet product development and that perhaps give people like you said and more disposition into using things that are digital. People buy things online now.

Everything is done through mobile apps, every little thing. And I think payment is perhaps the most different because in the States, people still pay with their credit cards and all that. But here, you know, there's no cards, no physical cash. It's all done on the app. And the Chinese government is also pushing out digital currency, right? We call it DCEP. And they have run trials in Shenzhen and now in Beijing, pushing out on a national scale, a government scale that, you know, everybody should just use E-CNY. So that is that would be quite interesting to see.

Absolutely. And so when you think through those digital payments, is that actually a hurdle for crypto adoption in terms of what's the difference between spending the digital currency via like an Alipay or something like that? What's the difference between, let's say, the Chinese government's kind of digital central bank currency or crypto? Those three things, the user experience seems pretty similar. It's actually like this underpinning technology that may be different in who controls it, was it centralized, decentralized? So is that like a benefit and a tailwind for crypto adoption? Or is that actually a headwind and potentially an obstacle in your opinion? That's a great question.

I think it is a bit of both ways. First of all, with the central banks of the government pushing out digital currency and digital assets in general i think that definitely bring people's attention to what digital assets are what it means how do i use a wallet how do i you know transact um because dsap the underlying tech is still blockchain although it is arguably very very different from from crypto um as we know it just because right one is um extremely centralized and one is the opposite um so i think it is good in terms of user education um to a certain extent and then i think people are going to start realizing that um now if dsap truly eliminated cash then every transaction everything

they do will be recorded somewhere and you know and that might prompt people to think about decentralization or you know having some sort of privacy even though the expectation the level expectations um of privacy in china and and the states or rest of the world is perhaps a little different but i think it will get people to start thinking um about about what that all means so i think it is not going to immediate um headwind um but but we but we shall see um and i think people here are looking into Bitcoin as more of a alternative asset investment and opportunity for yield as well. So less so on the kind of decentralization aspect yet. But we have seen a lot of family offices and kind of with individuals looking to Bitcoin as either

inflation hedge or store of wealth or you know just um another portfolio diversification to add and the case for it is so strong that nobody can ignore it and you know we've seen just every day there are new institutions coming out saying they're backing bitcoin right like i think yesterday was black rock and and who knows who's going to come out today and tomorrow So I think that everyone is definitely paying attention to crypto on its own, and then maybe just curious about how digital currency will work. Yeah. And so when you think through the adopters of this, there's obviously the institutional world and then there's the retail world. I know you guys have a ton of institutional clients. Talk a little bit about kind of what you're hearing from that crowd as we see the prices of the liquid assets go up and many of these businesses do pretty well. yeah um i think on the institutional side um most of our clients um they are of the view that they're they're holding at least bitcoin for the for the long run and um given it's a broad

bull market so a lot of people who are investing in defy etc um has been um benefiting a lot from this year. So everyone is quite active. So trading Bitcoin and some DeFi coins on top of it, that's what we've seen mostly. And there are new money coming in every day from traditional finance space. So I guess the institutions in the traditional sense, and they're mostly looking to purchase Bitcoin to add to their portfolios. And I think on the retail side, as we've seen where there's record signups for Binance and Coinbase and our own platform has also seen an increase in the user signups. I think they're definitely paying attention and looking to get into space as well. I think just that the whole market sentiment, first of all, it feels a lot more

healthier, a lot healthier than what transpired in 2017, I would say. But this growth, this rally, again, is incredible. So we feel really good about this year. And hopefully, we will see more people accepting Bitcoin and coming to the space. Absolutely. What's been the biggest surprise for you over the last, you know, call it year or so, as we saw this public health crisis throughout the globe, we saw governments and elected officials step in with, you know, incredible amount of monetary stimulus. You're literally on the other side of the world. I think I've talked way too much and basically bored the hell out of people here of what's going on in the United States. But how has that been in the last year? And what's been most surprising in Asia?

Well, yeah, it's completely, I don't even know where to start just seeing where the states, you know, I spent almost a decade in the US. So I felt like it was my second home. And it was just really quite devastating to see it become like this. And whereas, I guess where the outbreak started is actually my hometown so my parents are from Wuhan and I was almost on my way to go back there for Chinese New Year last year so again right that's also my home base I felt like just um quite um sad to see the world like this last year and but you can see the level of centralized governmental control um here in China and just putting everything in place immediately Wuhan was shut down from Jan 23rd until April 8th

Everyone stayed at home For the rest of the metropolisans in China We all stayed at home for at least a month, I think And then everybody reacted really fast And then got the situation under control And within China, we were basically free to travel We were free to travel since May last year, pretty much. So it's been normal for us for almost a year now.

And I think I remember in February and March, a lot of my friends in New York were just like, oh, I just should come back, which I'm glad I didn't. and um and then you just compare the the level you know the the policies and procedures that different governments put out um you compare that and and you see where we are now um you know i i don't want to comment further on on that but um but but yeah it's definitely different world, very different here versus the States. For sure. When you kind of talk to your friends in the United States, is there anything that really sticks out to you as maybe what crypto investors believe in the Western world that you see as being in direct contrast to what's going on in the East? And not so much what's being built or what's being adopted, but just

are there philosophical differences are there uh kind of mindset differences maybe there's even like perspectives of the world in terms of the west believes that you know bitcoin is going to be the successful thing and the east thinks something else is there anything that jumps to mind as to what's the contrasting uh kind of mental frameworks people use in the different regions i would think the underlying rational um feels quite universal across the globe people believe in Bitcoin for, you know, as a store of value, as a store of value that's better than gold perhaps. And people, especially the younger generation likes the idea of a complete new asset class. And so I think that on that level, it is quite universal. But I do think

people perhaps approach it from from slightly different um aspects of it uh people in the western world they value decentralization um more um i actually like to compare decentralization with privacy um it's not a necessity people don't need it but um but for some people right it is really important and they really value it um i think that that concept is perhaps a little weaker here in in asia or in china so i think people still approach it from more of a financial um you know or yield opportunity versus and in the states perhaps people really believe more so in its design and its original vision um etc but i i do think um people are investing in it, be it retail institutions, be it the Western world or Asia. People really are believing

in Bitcoin. And I do think that we have found market validation for that narrative. Absolutely. What's the thing you're most excited about in the crypto industry right now? just just so much i think every day um you wake up to see um a different price level you know news from um more um just just traditional heavyweights coming into space and and um kind of and telling that you were right all this time where i think a lot of people did a 180 um different banks or different asset managers who really dismissed the idea of our innovative new asset class maybe three or four years ago. And it's just really incredible to see that. And I think there's still a really long way to go. And that's what really excites me. Some people ask me, where do you

think is going to be the big thing in five years? And I really believe it's going to be something that we haven't seen yet today, right? Just the speed of innovation. I don't even know what's going to come out of the space in a month's time, let alone five years. I think that's what really drives us to continue to be innovative in this space, to adapt to the newest market trends,

to give users what they want and to really grow with the industry. Absolutely. Before I let you go, I always ask everyone the same three questions. The first is, what is the most important book that you've ever read? That's a great question. I grew up reading a lot of literature, I guess Chinese ones,

and after I learned English, English ones as well. But I'll throw out a book that I really liked and I've read a couple times. It's called Fortune's Formula. It is about a bunch of mathematicians and people working on information systems, information theories, and then try to game the casino, so to speak, by playing blackjack, counting cards, et cetera. It's a really fun story, but I think most importantly, it is about trading. It talks about the likes of John Kelly, Kelly Criterion. It really taught me how to size my bets, either on sports betting or trading in general. And then talks about Ed Thorpe, which is a legend and who is a mathematician and turned into basically discovered or approved Black Scholes by himself on equity options pricing and then started his own hedge fund and made incredible returns over the years.

so it's a it's a great story um that um married um mathematicians into the finance world and there's some like mafia and casino games behind it so it's a great read but i've learned a lot um from from it so you know recommend everybody to take a read nobody's recommended that one that's a great suggestion uh probably the the math uh nerd of me who who likes that I love it. Second question is about sleep. It comes from our friends over at Eight Sleep. They've got a thermoregulated bed that essentially you can make it really hot or really cold. I used to sleep like six or seven hours or really five or six hours. And then I started sleeping on it. I sleep on it like it's ice cold, literally as cold as you can basically make it. And I sleep

like a baby now, eight, nine hours a night. I am a full-on convert to the sleep religion. what is your sleep schedule do you use any sort of sleep products or aids or anything I think I'm blessed in the way that I just passed out and I need six hours of sleep and I'm good to go kind of so yay but I do like co-therapy actually so the another book I was gonna mention was called what doesn't kill you make make you stronger in a sense and it's talks about breathing exercise and co-therapy that triggers a lot of the revolutionary strength that we had, but lost because we use technology to make our lives so comfortable, right?

We cannot endure heat or cold anymore. We, you know, we're always full actually we have excess like energy intake every day. And that book really walks you through how you can trigger a lot of that um, strength at that better your immune system and, and get better sleep, um, and just better energy level actually. So, um, I sleep well, perhaps due to the co-therapy or other things or, you know, exercise. Um, but you know, I want to check out that, um, that, that thermal badge. I used to do cryotherapy in New York, in New York, but I don't really see that, um, anymore in Asia, but i really liked it as well yeah eight sleep they are uh fantastic i highly highly i don't

know if they ship to china but uh but they are fantastic uh third question is a little bit more fun and you'll get to ask me one to finish up uh aliens are you a believer or a non-believer believer um i guess from a statistic you know statistics point of view right there are so many galaxies planets stars um it is unlikely that we don't we don't see another um i guess form of life or aliens um and in that sense but um but i not sure like if actually going back to to the book question there's another book that i would also recommend here it's called three bodies it's actually written by um i'm sure you've read it right it's written by a chinese author one of the best sci-fi books i've read and the dark forest theory um it is from a game three point

of view right i think if there are aliens either you know they're a lower form of like lower intelligence and we found them and you know we're going to you know annihilate that or one day someone who's with higher intelligence is going to discover us, then I guess, well, that's the end for us. But I do believe in the dark forest theory. We actually see that within DeFi and in the DeFi gas war. So that's also an interesting detour. But yeah, that's my answer to the question. I love it. I'm a believer too. So I hear you. You could ask me one question to finish up what do you got for me um so so many actually i guess you know you've been in this space and you've been a big one believer for um you know one of the biggest advocates we've seen

the space um let's throw one question back at you right what what excites you the most what gets you going i think that we are all drastically underestimating how important it is that uh these Wall Street institutions are showing up. And I don't look at it from like, I'm cheering on the financialization of Bitcoin specifically, as much as it is, the more that these financial institutions say, we like Bitcoin, we want to hold Bitcoin, the less likely nation state attacks against Bitcoin will be. And so I think that in some weird way, Wall Street is protecting Bitcoin over time. And so I think that's a really, really, you know, kind of fascinating way to think through the game theory on a global basis. You know, does this thing survive? And I tend to

be an optimist. I tend to agree that, you know, Bitcoin will end up kind of ascending to global reserve status over a period of time, which is pretty cool to think about and watch. Yeah, awesome. I agree. I figured you did. I figured you did. All right, Annabelle, where can we send people to find you on the internet or find out more about what you guys are building? Sure. You can find more information about Amber Group and our product suite on ambergroup.io, our website. You can follow us on Twitter at ambergroup underscore IO. You can follow me on Twitter as well at underscore Annabelle Huang. We're on Medium. We're on Telegram. We're on the website. Email us. Drop us a note. Awesome. Listen, thank you so much for doing this. We'll have to do it again in the future. Thanks for having me again. Great chatting with you.