This article first appeared in The Edge Malaysia Weekly on August 16, 2021 - August 22, 2021

THERE is nothing token about MyEG Services Bhd’s venture into what it believes to be the start of a blockchain and tokenisation megatrend — a segment huge in potential that the e-government services company plans to quickly leverage.

For starters, under its introduction of decentralised finance (DeFi) to the Malaysian market, it plans to launch a host of products and services, starting from the MYEG Lock-Earn Wallet to the development of a blockchain platform that will facilitate cross-border trade and payment.

At the same time, it is working on a wallet that can store China’s digital renminbi and, potentially, all future central bank digital currencies (CBDCs).

Ultimately, the aim is to be able to deliver all its services — which now include automotive, immigration and healthcare — on its blockchain platform.

On Aug 6, MyEG announced plans to provide cryptocurrency services to users of digital asset exchanges (DAXs), which are licensed as recognised market operators locally and abroad through DeFi. This would give cryptocurrency holders access to crypto borrowing and lending services via smart contracts.

“DeFi services are borderless by nature. Similarly, MyEG’s DeFi services will be borderless. Nonetheless, it is a relatively new concept for Malaysians and our aim is to realise a robust, liquid and sophisticated DeFi ecosystem for Malaysian residents that includes international or borderless connections to the global DeFi ecosystem. The MYEG Lock-Earn Wallet is a first step towards this aim,” a MyEG spokesperson tells The Edge in an email interview.

With the MYEG Lock-Earn Wallet, the company will introduce ways to earn passive income on cryptocurrencies that have been purchased. It will enable individuals and institutions to earn borrowing fees on their digital assets in the wallet within the DAX.

The simplest analogy, using the traditional banking system as an example, is that it is similar to placing a fixed deposit with a bank to earn interest instead of allowing your money to languish in your savings account or leaving it idle. When it involves cryptocurrency, people who own digital assets such as Bitcoin (BTC) and Etherium (ETH) tend to leave their digital assets on an exchange or store it in a wallet for safekeeping, hoping that they will one day increase in value. Alternatively, these digital assets can be placed into the lock-earn wallet to earn interest.

According to MyEG’s website, the MYEG Lock-Earn Wallet could provide up to 5% in borrowing fee rates (BFRs) — with a minimum deposit of 0.01 BTC or 1 ETH — depending on their lock-earn tenure. That compares with current fixed deposit rates of about 1.85% annually in the traditional banking system. For example, based on BTC’s price of around RM190,000 on Friday for a whole coin, a RM1,900 investment to buy 0.01 BTC could provide up to 5% in fees annually. The same RM1,900 in a fixed deposit may fetch about RM35 in annual interest. A 5% rate would provide, however, roughly the equivalent of RM95 worth of BTC in interest, assuming the price of BTC remains constant.

MyEG’s financial services will go beyond just borrowing and lending. “MyEG is working closely with the DAXs and relevant regulators for each services’ go-to-market strategy. We foresee all services to be exclusively within the digital assets/crypto space,” the spokesperson explains.

So far, Securities Commission Malaysia (SC) has approved four DAXs in Malaysia: Luno Malaysia Sdn Bhd, SINEGY Technologies (M) Sdn Bhd, Tokenise Technology (M) Sdn Bhd, and, most recently, MX Global Sdn Bhd. Apart from BTC and ETH, SC has approved the trading of three other cryptocurrencies: Ripple (XRP), Litecoin (LTC) and Bitcoin Cash (BCH).

A check on MX Global, which incidentally is located at MyEG Tower in Empire City Damansara, shows that the exchange currently offers only BTC and ETH for trading on the exchange.

MyEG also seeks to distinguish itself from other existing fundraising platforms such as equity, crowdfunding and P2P. The spokesperson asserts: “MyEG’s DeFi services are exclusively for digital assets/crypto, leveraging the many superior advantages of blockchain technology applications over conventional or fiat-based offerings, including security, immutability, transparency and automation of transaction via smart contact.” Blockchain is a system of recording and storing information on a digital ledger that is impossible to alter or hack, whereas smart contracts are self-executing agreements written in code on the blockchain, without the involvement of an intermediary.

It is noteworthy that the DeFi services, while digital, are not to be confused with services that will be offered by digital banks. The former’s service is borderless and deals exclusively with digital assets; the latter, like existing traditional banks, handles fiat currencies and operates within the confines of specific jurisdictions.

“We are at the beginning of the blockchain and tokenisation megatrend. There will be many new, innovative products and services to be introduced and we will be in constant engagement with the local regulators to ensure full compliance at all times,” the spokesperson adds.

Asked about other pioneering products and services that MyEG plans to offer based on the blockchain technology, the spokesperson says, “Our thesis is blockchain and we believe tokenisation (digital assets) will have the same disruptive impact on asset ownership that the advent of the internet had on knowledge and the dissemination of information.

“One notable and interesting development today is China’s ongoing project to build its own national blockchain platform. So, with this in mind, one area we are actively focusing on is the development of a blockchain platform that will be compatible with the Chinese national blockchain platform, thus, enabling it to serve as a gateway for the interchange of tokens to facilitate cross-border trade and payments.”

China is working on launching its digital renminbi, which runs on a blockchain platform and is being adapted to the Chinese national blockchain network. The MyEG spokesperson says: “Our strategy is for our blockchain platform to be compatible with the Chinese digital renminbi (that is, for our crypto wallet to be able to store the digital renminbi) and other future CBDCs.” Sweden, France, Japan, Turkey and Switzerland are some of the countries already testing their CBDCs to be issued to the public.

On the prospects of this venture and its contribution to MyEG as a whole, the spokesperson says: “We expect all services of the group to be delivered on our blockchain platform within the next three years. Thus, it is not relevant for it to be segregated as a separate segment.”

On Friday, MyEG shares closed one sen up at RM1.64.

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