Executive Summary
The 2020-2021 DeFi summer was predominantly a story of Western and East Asian capital chasing yield in a novel financial system. The participants were, by and large, already banked, already crypto-native, and already sophisticated. The next DeFi cycle will be different — not because the technology has changed, but because the user base is expanding.
Southeast Asia's 300 million unbanked or underbanked adults, combined with the region's established crypto literacy (the Philippines and Vietnam consistently rank in the top five globally for grassroots crypto adoption), create the conditions for DeFi to fulfil its original promise: financial services for those whom traditional finance has failed.
The Remittance Gateway
Southeast Asia receives approximately $140 billion in remittances annually, making it one of the largest remittance corridors in the world. The Philippines alone received $40 billion in 2024, representing nearly 9% of GDP. The average cost of these transfers, according to World Bank data, remains stubbornly above 6% — a tax on the region's poorest workers that has persisted for decades despite the rise of fintech challengers.
Stablecoin-based remittance is the most compelling immediate use case for DeFi in Southeast Asia, and it is already gaining traction. Protocols enabling USDC or USDT transfers from the Gulf, from Japan, and from the United States to Philippine, Indonesian, and Vietnamese wallets have demonstrated cost reductions of 70-80% versus the legacy correspondent banking network. The question is no longer whether this will work — it is how fast the regulatory and last-mile distribution infrastructure can scale to support mass adoption.
We are watching this closely. The first DeFi protocol to crack the remittance corridor will not be a DeFi protocol in the way that term has historically been used — it will look more like a consumer finance app with DeFi rails underneath.
Crypto Adoption: The Grassroots Reality
Data from Chainalysis' Global Crypto Adoption Index consistently places Vietnam, the Philippines, Indonesia, and Thailand in the top twenty globally — often outranking countries with far higher per-capita incomes. This is not institutional adoption driven by ETF flows; it is retail adoption driven by genuine utility.
In the Philippines, Axie Infinity at its peak was providing a meaningful supplementary income to hundreds of thousands of players in provinces where formal employment opportunities were scarce. While the Axie model ultimately proved economically unsustainable, it demonstrated something important: Southeast Asian consumers are willing to engage with complex, experimental financial primitives if the incentives are sufficiently compelling.
The region's crypto-native retail base is an asset that is systematically undervalued by Western DeFi builders who design products for users with Metamask wallets, hardware wallets, and familiarity with gas fees. The protocols that will win in Southeast Asia will abstract away this complexity entirely.
The Regulatory Landscape: Cautiously Optimistic
ASEAN's regulatory patchwork is frequently cited as a barrier to DeFi adoption, and the concern is not without foundation. Singapore's MAS operates one of the most sophisticated crypto regulatory frameworks in the world; next door, Myanmar's regulatory environment for crypto is effectively nonexistent in the wake of the 2021 coup. This fragmentation creates compliance complexity for protocols seeking regional scale.
However, the direction of travel is broadly positive. Thailand's SEC has moved from hostility to active engagement with DeFi protocols. Indonesia's Commodity Futures Trading Regulatory Agency (BAPPEBTI) has established a licensing framework that, while imperfect, provides legal certainty. The Philippines' BSP has issued guidance on virtual asset service providers that is more progressive than equivalent frameworks in several EU member states.
Regulatory fragmentation is a short-term headache; regulatory convergence toward pro-innovation frameworks is the long-term trajectory. Singapore, which has consistently positioned itself as the region's crypto hub, exerts significant normative influence on its neighbours.
Where We See Opportunity
Our conviction is highest in three areas. First, stablecoin infrastructure: protocols and applications that make stablecoins easy to hold, earn yield on, and transact with in local-currency equivalents. Second, on-chain credit: underwriting tools that can assess creditworthiness using on-chain transaction history — a particularly powerful capability in a region where formal credit bureaux are thin. Third, yield products designed for retail: simple, transparent, and mobile-first DeFi yield products that compete with the low-yield savings accounts that currently represent the primary savings vehicle for the region's middle class.
The common thread across all three is user experience. The DeFi protocols that will win in Southeast Asia will not be the ones with the most sophisticated tokenomics — they will be the ones whose products feel as simple and reliable as the super-apps the region's consumers already use daily.
Layer 7 Ventures is a research-driven firm focused on AI and cryptocurrency in Southeast Asia. Views expressed are those of the firm and do not constitute investment advice.
