Decentralized Wallet Migration to Accelerate Web3 Adoption in APAC

Authored by Holger Arians, CEO of Banxa

Centralized exchanges have historically been the go-to platforms for those entering the crypto space for both trading and custody due to the seamless user interface compared to other, less intuitive tools. However, recent events in the industry have underscored the benefits of less centralized, non-custodial infrastructure for digital assets – simple and secure do not have to be mutually exclusive terms when discussing how this will shape any growth in crypto moving forward. For instance, Asia-Pacific (APAC) has quickly established itself as a global crypto hotspot, with reports showing that 88 percent of the population have used technologies like digital wallets, cryptocurrencies, and others in the last year. However, as formerly stated, mass adoption – and real world utility of digital assets – hinges on accessibility, scalability and security.

Understanding the decentralized wallet and custody landscape

The pandemic served as a catalyst for change in the payments ecosystem. Decentralized technology now far outpaces adoption of more traditional financial instruments like credit cards in APAC’s emerging markets. In Southeast Asia, more than six in ten people are unbanked, and only about 17 percent of transactions are cashless. With a population of 570 million and a GDP expected to reach $4.7 trillion by 2025, this represents one of the world’s most densely populated and fastest-growing regions. This high unbanked population does not have access to traditional banking and investment infrastructure, so crypto is seen as an equalizer.

Web2 technology products with intuitive user interfaces (UI) have historically advanced leaps and bounds beyond the competition, and it will be no different in Web3. The digital asset economy is currently limited by a poor user experience that only a niche group of crypto-savvy individuals can navigate. The APAC region’s high smartphone penetration and engagement solve the first hurdle of accessibility.

However in current developer-focused form, Web3 remains a labyrinth, valuable for only an advanced segment of users. This is further illustrated in the APAC region, given that many crypto products used as an entry point to the space, such as crypto wallets, are targeted at western audiences. For example, the fact that most wallets are in English only is evidence of this.

Simplifying user onboarding to reach a wider audience

Frictionless user onboarding is the next big challenge to solve. A seamless fiat-to-crypto experience that mimics the financial services products that consumers are used to is crucial, especially for those first few transactions so that people can easily get their funds into the ecosystem.

Crypto apps, specifically wallets, must be intuitive and provide a reasonable experience in order to bring in new customers. Wallets stand as the initial interface and this hurdle must be addressed before hope of widespread adoption. These house the secure digital codes needed to interact with a blockchain, known as public and private keys. These keys allow users to send, receive, and store digital assets.

There are two main types of crypto wallets, custodial and non-custodial wallets. With a non-custodial wallet, the user has control of their private keys. On the other hand, with a custodial wallet, an outside party controls a user’s private keys, therefore mandating trust over assets similar to how one would trust a bank. This, much like a traditional bank account, keeps crypto safe and accessible. Strides in this will come from understanding the user better to give a personalized and localized experience, given there are global discrepancies in the suite of services expected.

Solutions for decentralized adoption

Regardless, growth in APAC shows no sign of slowing as a survey from Visa found that over one third of APAC consumers are likely to use DeFi in the next six months. Solutions that provide an onramp for decentralized financial services and user experience as improved user experience will boost conversation rates for wallets and Web3 companies operating in APAC and beyond. As blockchain based use-cases for these decentralized technologies in financial services and beyond continue to develop and consolidate, it will become possible for platforms and institutions to integrate and facilitate end-to-end solutions for consumers. Going forward, centralized custodians and third party intermediaries can be seen as one of many seamless options, instead of what users formerly perceived as the only option. Instead of providing mere exposure to crypto as an investment tool, on and off ramps to private wallets provide users with crucial complete ownership by allowing them to hold keys. This grants users indisputable autonomy over their tokens, which is especially critical in providing security in times of global market turmoil.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.