Last month a deal was announced between Thailand’s SCBX – Siam Commercial Bank – and Korean web3 venture building firm Hashed. Outside of Thailand, it would be easy to conflate SCBX with SCB 10X, its venture arm. However, this is a bigger deal because SCBX is the bank’s holding company, not the venture subsidiary. And Hashed has a controversial history associated with the crypto crash.
The two firms plan to pool resources for research and explore how to deploy any research outcomes for SCBX’s affiliates.
“SCBX’s key milestone is to establish itself as a leading regional financial technology group. To achieve this goal, it is crucial for the company to conduct new experiments and transition into a technology-focused entity,” said Dr. Arak Sutivong, Deputy CEO of SCBX. “Through this partnership, we will collaborate on research and development of cutting-edge technologies that will shape the future of finance.”
Hashed’s roller coaster web3 ride
Regulators might want to keep one eye open on this one. Hashed unquestionably has strong technical expertise. It’s currently exploring Ethereum account abstraction in its ShardLab. Hashed has experience working with banks through the KODA digital asset custody joint venture with Korea’s Kookmin Bank. However, it has a bit of a history, particularly around its involvement with the Terra USD stablecoin and Luna, the triggers of the crypto crash.
The Anchor Protocol was a DeFi borrowing/lending protocol similar to Aave but dedicated to the Terra blockchain. Hashed was a key participant in the protocol, which offered attractive and unsustainable interest rates of 19.5% to depositors of the Terra stablecoin. Arguably, this high return drove the popularity of Terra’s algorithmic stablecoin UST and the booming Luna token price. And it attracted allegations that Terra was a Ponzi scheme. After Anchor launched, the stablecoin grew from a $1.2 billion market capitalization to $18.6 billion. Fourteen months elapsed between Anchor’s launch and the collapse of Terra in May 2022.
Less than three months earlier, Hashed proposed to prop up the Anchor Protocol’s interest rate with a $450 million grant from Luna Foundation Guard, the organization behind the Terra blockchain. In this blog post, a Hashed analyst argued that it was appropriate that more than 50% of the algorithmic stablecoin sit in the Anchor Protocol. There is no mention of concentration risk or any other type of risk in the post.
To be clear, we’re not suggesting wrongdoing by Hashed, and it lost around $3.6 billion from Terra’s collapse. It just might have a higher risk tolerance than is appropriate for a bank. Hence, while the SCBX deal is interesting from a technology point of view, from a financial stability perspective it might need a little oversight.