Cryptos fuel MyEG earnings

AS MyEG Services Bhd chalks up another year of record profits, its financials have drawn scrutiny, largely because of the cryptocurrencies that fuelled the company’s profit growth.

The e-government service provider also has digital assets –or cryptos worth RM256.7mil – sitting on its balance sheet, representing nearly one-fifth of its current assets.

The sheer influence of cryptos on MyEG’s finances has caught attention, amid scepticism on digital assets as a good store of value.

After all, it is still rare for a Malaysian company to receive payment in cryptos.

It is then worth asking, how exposed are MyEG’s financials and cash flow to the risks associated with digital assets, including sharp fluctuations in crypto prices?

Are the shareholders of MyEG, especially the minorities, well informed about the risks?

In the financial year ended Dec 31, 2024 (FY24), MyEG’s net profit surged 43% year-on-year (y-o-y) as revenue was up 31.3%.

Interestingly, the revenue from Malaysia only increased by 1.2% y-o-y. Revenue from abroad nearly tripled – thanks to MyEG’s blockchain platform Zetrix.

Zetrix generates fees by providing Web3 services such as ZTrade, ZCert as well as Digital ID registration and transaction, apart from the sale of Zetrix tokens.

More than one-third of MyEG’s revenue in FY24 was from Web 3-related services, group managing director Wong Thean Soon tells StarBiz 7.

Wong, an engineering graduate from the National University of Singapore, also says that Zetrix is paid either in cryptos or fiat currencies for the service fees and sale of Zetrix tokens.

“The cryptos are usually stablecoins but we also accept bitcoin and ether.”

Prices of bitcoin and ether can fluctuate wildly. Stablecoins, however, are cryptocurrencies whose value is pegged to another asset, such as a fiat currency or gold, to maintain a stable price.

There are hundreds of stablecoins, the most popular being tether or USDT. One USDT equals US$1, with very minimal fluctuations.

Wong notes that the digital assets worth RM256.7mil on MyEG’s balance sheet are entirely stablecoins such as USDT.

The digital assets were amassed from the sale of Zetrix tokens. They also include amounts held for future payment to vendors.

The stability of USDT, to a large extent, insulates players like MyEG from the risk associated with cryptos.

An auditor tells StarBiz 7 that accounting standards consider cryptos either as intangible assets or inventory. In the case of a broker, cryptos can be commodities.

Cryptos are considered inventory if the owner intends to sell in their “ordinary course of business”.

Inventories are typically measured at the lower of cost and net realisable value.

In the case of MyEG, the auditor says it is appropriate to include the digital assets in the balance sheet, particularly as current assets.

“Given the volatile nature of crypto price, current assets are more reflective than the non-current asset classification.

“This is assuming the intention of the company is not to hold it for a long term.”

The auditor further notes that as long as the cryptos are in the form of digital assets, there is no cash flow involved.

“The cryptos would need to be converted back to fiat money or ringgit, for example, for declaring dividends.”

What is Zetrix?

Zetrix is a Layer-1 blockchain that is the first international supernode connected to China’s national network, Xinghuo Blockchain Infrastructure and Facility. The connectivity enables Zetrix network’s on-chain assets and transactions to cross seamlessly into Xinghuo, connecting governments, businesses and their people to a global blockchain-based economy.

Wong says that Zetrix has been actively used since the launch of its Mainnet in April 2022.

Besides government applications, there are consumer applications running on Zetrix, including Decentralised Autonomous Organisation), Digital Exchanges, non-fungible tokens, decentralised voting applications used by political parties, as well as global organisations like Ms Universe.

To date, some 4.5 million transactions have been carried out on the Zetrix blockchain.

The intellectual property of Zetrix is owned by Zetrix Sdn Bhd, which in turn is 56% owned by MyEG, 30% by Bubi Network Technology and 14% by Star Jewel Capital Inc.

Zetrix launched an initial exchange offering on Singapore-based cryptocurrency exchange Coinstore in 2023.

The tokens are currently traded on Coinstore and MEXC, but not in any of the licensed exchanges in Malaysia.

Capitalising on the Zetrix blockchain technology, MyEG in collaboration with Mimos Bhd have developed the Malaysia Blockchain Infrastructure (MBI).

MIMOS is an agency under the Science, Technology and Innovation Ministry.

Wong says both MyEG and Mimos will continue to develop MBI to enable safe, secure and compliant data access and data sharing between public and private sector services on private and public blockchain networks.

The MBI is designed to cater to three core elements towards a long-term ecosystem, enriching data connectivity while preserving data protection and controls.

Leveraging on MBI, MyEG and Mimos are also building the MyDigitalID SuperApp.

Wong says that it will be a consumer-friendly one-stop interface for all services that integrate the MyDigitalID Single Sign-On module.

MyDigitalID SuperApp is aimed at consumer services by the private sector and will also support end-consumer services by the government.

“The MyDigital SuperApp team works closely with service providers to enable the connectivity which includes financial services, utilities and other online services or digital goods.”

MyEG aims to widen the usage of Zetrix by leveraging on Malaysia’s role as the chair of Asean to promote region-wide adoption of its blockchain solutions.

“The group has already participated in various Asean and China-Asean discussions involving key decision makers as part of efforts to realise this initiative,” says Wong.

He foresees the next wave of applications to have an even more profound and revolutionary impact on human lives as agentic artificial intelligence (AI) is embedded into blockchain platforms.

He says MyEG will continue to focus on developing and deploying real-world blockchain applications that are further enhanced with AI capabilities.

“In the near to medium term, we are focused on enabling faster, seamless and more secure cross-border commerce as well as digital identity issuance and verification.

“However, as blockchain is still at the early stages of evolution, major new verticals will emerge in the years to come, many of which we may not even be able to imagine today.

“The group is excited for what’s to come and is looking forward to realising our Web 3 vision by working closely with our global partners, especially in China.

“The US government has also recently deployed US government applications on blockchain, hence we look forward to being the global market leader in this space as the rest of the world follows suit.”