Australian Financial Review
By Carrie LaFrenz
Dec 13, 2021
Venture capitalist Mark Carnegie has moved to Singapore, where he is launching a listed Asia-based digital asset platform, shunning Australia for what he says is a “pro-crypto” regulated market.
Wong Fong Fui – the billionaire known as F.F. Wong who is chairman and CEO of the Singapore-listed Boustead conglomerate – will invest $S10 million ($10.23 million) via a notes deal into the new crypto company, which will use the fresh funds to support its proprietary trading initiatives.
Singapore has a licensing regime for crypto exchanges while Australia does not – despite the value of global crypto markets ballooning $US2.5 trillion ($3.5 trillion) over the past 12 years.
Mr Carnegie’s move offshore came the week before Treasurer Josh Frydenberg’s apparent support of decentralised autonomous organisations, or DAOs, which are virtual member-owned communities.
DAOs are used to co-ordinate financial contributors from around the world through automated contracts, underpinned by blockchain technology.
Responding to the Treasurer’s announcement, Mr Carnegie told The Australian Financial Review: “Have you seen the speed with which that’s happening here? We’re living in it. This is a gold rush in Web 3.0.
“Everyone’s radically looking for certainty. And there are some jurisdictions in the world, such as Dubai or Singapore, that recognise the speed with which people have to do this.”
There are not many jurisdictions that legally recognise DAOs, but the US state of Wyoming earlier this year passed legislation that now views DAO’s as LLCs.
Mr Carnegie has been a vocal critic of the Australian government and regulators, saying they are out of touch with the lightening speed at which the crypto markets are moving.
“I spent nearly a year on Zoom talking to Australian regulators [the ASX and ASIC] about when they were going to be in a position to come up with regulations for DAOs and Web 3.0,” he said.
“I was told that it was going to be early to mid-2022 when they were ready to list a Bitcoin ETF or have regulatory capacity or legislative capacity. I came to Singapore because they were pro-crypto regulation and I found a completely and utterly different environment.”
The new Singaporean group, MHC Digital Co, is a joint venture between Mr Carnegie and Young Rich List debutant Sergei Sergienko. The pair know each other well, since they co-own crypto exchange TimeX Exchange and are co-founders of MHC Digital Finance Group.
MHC Digital Finance’s assets – including its Digital Asset Fund, its Market Neutral Fund, up to a conditional 35 per cent interest in the Blockchain Opportunities Fund and TimeX – will all be consolidated into MHC Digital Co, a Singaporean domiciled company.
MHC Digital Co will offer funds management and trading strategies, including “staking”. According to Coinbase, staking is when holders of certain cryptocurrencies stake part of their asset to earn rewards. This usually happens via a “staking pool”, which is similar to an interest-bearing savings account.
The company will also offer corporate finance services such as NFT securitisation and metaverse investment and advisory.
The metaverse is the next stage of internet – an online world where people can participate in augmented reality, virtual activities or purchase digital goods. SoftBank Group Corp earlier this month said it was investing $150 million in a South Korean metaverse platform. Other big tech companies such as Microsoft have plans to develop tools to interact on metaverse platforms.
Mr Carnegie said talks are underway with partners to develop a securitisation program for non-fungible tokens (NFTs) to possibly be used as a flagship product to be presented to Singapore’s central bank.
In this latest venture, Mr Carnegie has partnered with Singapore-listed group Intraco Ltd, an investment and trading vehicle that has two main shareholders: high-profile businessmen Tony Chew and the president of the Singapore Chinese Chamber of Commerce and Industry, Roland Ng.
In a highly structured deal, subject to exercising its option and shareholder approval, Intraco will hold a 51 per cent interest in MHC Digital, and the remaining 49 per cent will be held by Mr Carnegie and Mr Sergienko.
Mr Wong will receive warrants in Intraco in consideration for facilitating the transaction, which if exercised, will give him a significant shareholding in Intraco.
If all goes to plan, there will be five significant shareholders in Intraco including Mr Carnegie, Mr Sergienko, Mr Wong, Mr Chew and Mr Ng. About 20 per cent of Intraco is held by the public.
Mr Frydenberg’s backing of DAOs comes six weeks after a parliamentary committee chaired by Andrew Bragg claimed they would spur innovation, create jobs and boost tax revenue. But Treasury wants to complete its own consultation process with the sector by mid-next year, after which it will decide the design of the nation’s licensing and custody regimes.
In early December, the RBA talked up a possible “central bank digital currency” – dubbed eAUD – in the retail market, given the surge in consumers looking to pay using “tokens” held in digital wallets.
Mr Carnegie responded that while the senate report was “good” it was vague on the treatment of DAOs, and regulators failed to understand the set of issues facing the country.
He added that other Australian businesses are “quietly restructuring” operations to move to Singapore, while others are being formed in Singapore because Australian regulators have not given clarity about how it breaks down DAOs and NFTs.
Mr Carnegie’s move and the listing of this new company is all about taking crypto to the masses within a regulated framework.
“Ultimately, like Binance, and like Coinbase, we want to work in a regulated environment. We think regulations are important for Web 3.0. We found a regulatory environment which is supportive, and that is in Singapore,” he said. “Keeping regulatory protection only for sophisticated investors seems to be a crazy way of doing things.”