The digital asset market has fallen by 2.57 per cent to US$2.86T over the past 24 hours. Bitcoin, the largest token by market value, dropped 2.81 per cent to US$84,261.32 during the same period. The total crypto market cap declined 2.92 per cent, and Bitcoin’s move closely tracked that broader drop. The data shows a 96 per cent correlation with the S&P 500 and a 94 per cent correlation with Gold. Those numbers confirm that this move is not unique to crypto. Traditional markets and digital assets are responding to the same set of pressures.

Bitcoin’s drop triggered a leverage flush that cascaded into altcoins. Overbought conditions and a surge in derivatives open interest then amplified the pullback. The near-term outlook depends on whether Bitcoin holds above the US$2.76T market cap support, which sits near the 50 per cent Fibonacci level. A hold could open a rebound toward US$2.94T. A break below could extend losses toward US$2.65T.

The primary driver is macroeconomic. The Federal Reserve’s recent 25-basis-point rate hike and hawkish commentary fuelled concerns about further monetary tightening. At the same time, the 10-year US Treasury yield surged toward five per cent, its highest level since 2007. That move tightened financial conditions across the board. Strong US PMI data on September 23 reinforced expectations of persistent inflation and higher-for-longer rates.

As liquidity becomes less abundant, investors reduce exposure to risk-sensitive assets. Bitcoin behaved exactly like a risk asset in this environment. It sold off alongside traditional markets as participants priced in less liquidity. This macro backdrop matters because Bitcoin and other digital assets trade as long-duration risk assets.

When rates rise, the present value of future cash flows falls. Crypto does not have cash flows, but it still competes for capital. Higher yields make bonds more attractive. That shift reduces demand for speculative assets. The key items to watch are further statements from Fed officials and any movement in the 10-year yield. If that yield remains above 5 per cent, the pressure on risk assets could continue.

Also Read: Bitcoin’s US$87,000 spike: Real breakout or a US$900 million short squeeze?

A second force turned a measured decline into a violent flush. The initial macro-driven drop triggered a liquidation cascade. Data shows traders liquidated US$237 million in leveraged long positions in a single hour as Bitcoin broke below US$84,000. Over 24h, total Bitcoin long liquidations reached US$171 million.

Another measure shows US$158.95M in BTC long liquidations in 24h, a 243 per cent spike. Bitcoin dominance rose to 59.12 per cent as traders exited altcoin positions. This is a classic deleveraging event. Forced selling by overleveraged bulls accelerated the downward move, a typical sign of a crowded bullish trade unwinding. The scale of liquidations shows how crowded the long side had become.

A single hour produced US$237 million in long liquidations. The 24h total for Bitcoin longs reached US$171 million. The US$158.95M figure and 243 per cent spike confirm the same pattern. A stabilisation in funding rates and open interest would signal that the market has flushed out leverage. Until then, high liquidation volumes could point to further weakness.

The pain spread well beyond Bitcoin. Major altcoins underperformed the broader market. Avalanche fell 8.38 per cent, and Filecoin dropped 10.71 per cent. Both assets had enjoyed strong weekly rallies, with Avalanche up 36 per cent. That strength invited profit-taking.

The seven-day RSI for the total market hit an overbought 80.24. Traders rotated out of recently high-performing assets and into stablecoins or large caps. This rotation amplified the sell-off. Total open interest rose 11.13 per cent to US$493.14B even as prices fell. That combination indicates lingering leveraged positions that could fuel more volatility.

Avalanche and Filecoin had rallied hard. Avalanche gained 36 per cent in a week. That move left the market vulnerable. The 7-day RSI at 80.24 signalled overbought conditions. Profit-taking followed. Rotation into stablecoins or large caps is a defensive response. Sector rotation into stablecoins or large caps could continue if fear persists.

Also Read: Why did Bitcoin and Ethereum move in near-perfect lockstep after the Fed rate hike?

The near-term technical picture for Bitcoin now sits at a critical point. Bitcoin is testing the 23.6 per cent Fibonacci retracement level near US$84,432 after a rejection at the US$87,363 swing high. The structure remains corrective within a broader weekly uptrend of 10.56 per cent.

If Bitcoin holds above the US$84,000 support, it could retest US$87,000. A daily close below the US$82,000 to US$84,000 support band would shift focus toward the 38.2 per cent to 50 per cent Fibonacci retracement zone between US$79,600 and US$82,600. A deeper correction could reach the US$79,600-US$81,100 range. The US$84,432 level is the 23.6 per cent Fibonacci retracement. The rejection at the US$87,363 swing high set up the test.

The weekly uptrend remains positive at 10.56 per cent. A hold above US$84,000 keeps the US$87,000 retest in play. A close below US$82,000 to US$84,000 opens US$79,600 to US$82,600. The deeper zone is US$79,600 to US$81,100. The market will watch whether Bitcoin can absorb selling pressure and defend this zone.

The total crypto market cap faces a similar test. The key level is the 50 per cent Fibonacci retracement at US$2.76T. A hold above this support could lead to a rebound toward US$2.94T. A break below could extend losses toward US$2.65T. The pivot point sits at US$2.86T. Rising open interest alongside falling prices suggests that leveraged positions remain in the system.

The next 24h close relative to US$2.76T will matter. So will any shifts in spot ETF flow data. A rebound above the pivot at US$2.86T could target the recent high of US$2.94T. The 50 per cent Fibonacci at US$2.76T is the line. A rebound above the US$2.86T pivot could target US$2.94T. A break below US$2.76T could send the market to US$2.65T. Open interest at US$493.14B, up 11.13 per cent, shows leverage remains. ETF flow data is the next input.

My view is that this is a corrective pullback, not a reversal of Bitcoin’s strong weekly trend. The downturn has multiple drivers. Bitcoin liquidations started it. Altcoin profit-taking after a strong week worsened. The high correlation with traditional assets points to a macro-sensitive environment. Bitcoin and the broader crypto market remain connected to global interest rates and liquidity cycles.

For now, the evidence favours a liquidity-driven pullback, amplified by excessive leverage, rather than a change in the longer-term trend. Let’s see.

—

Editor’s note: e27 aims to foster thought leadership by publishing views from the community. You can also share your perspective by submitting an article, video, podcast, or infographic.

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Singapore’s food waste problem is often framed as a consumer habit or a logistics issue. For Life Lab Resources, it is also a feedstock problem, and one that could help ease another pressure point in Southeast Asia: rising demand for more sustainable aquaculture feed.

The Singapore-based startup has raised US$1 million in fresh funding to expand its capacity to process treated food substrates and produce nutrient-rich feed for fish and other aquaculture species.

The round was led by Decarb123, which invested through DC123FW. Keng Eng Kee Holding also participated, alongside follow-on backing from AC S323, an angel syndicate led by Huang Shao-Ning.

Also Read: Winnow buys Lumitics as hotel kitchens turn to AI to cut food waste

The financing is modest by venture capital standards, but the signal is larger than the cheque size. It points to growing investor interest in circular-economy startups that can turn waste streams into industrial inputs, particularly in markets such as Singapore, where land, food security, and waste management are tightly linked.

For Life Lab Resources, the funding is meant to increase production capacity rather than finance a speculative bet. The company said the capital will allow it to process more treated food substrates and supply more aquaculture feed to farmers. It also plans to develop more circular food products, though the near-term focus appears to be on feed.

Why feed matters

Aquaculture is one of Southeast Asia’s most important food sectors. The region produces a large share of the world’s farmed fish and shrimp, and demand continues to grow as incomes rise and consumers look for affordable protein. But the industry has a feed problem.

Conventional aquaculture feed often depends on fishmeal and fish oil, ingredients made from wild-caught fish. These inputs are nutritious and widely used, but they are exposed to price volatility, supply constraints, and environmental concerns. Soy and other plant-based ingredients are common alternatives, but they come with their own land-use and nutrition trade-offs.

That is why startups and researchers across the region are experimenting with new inputs, from insect protein and microbial ingredients to agricultural by-products and upcycled food waste. The goal is not simply to make feed cheaper. It is to reduce dependence on stressed supply chains while maintaining the nutritional quality farmers need to raise healthy stock.

Life Lab Resources sits within this broader shift. By converting food waste into usable feed ingredients, the company is trying to solve two problems at once: diverting waste from disposal and creating a more circular input for aquaculture.

The model is especially relevant in Singapore. The city-state imports more than 90 per cent of its food and has made food resilience a policy priority. At the same time, food waste remains one of its major waste streams. Turning that waste into feed is not a silver bullet, but it fits neatly into Singapore’s push to extract more value from resources that would otherwise be discarded.

The circular-economy bet

Circular-economy startups often sound compelling on paper but can be difficult to scale. Waste streams are inconsistent. Processing costs can be high. Customers in traditional sectors such as agriculture and aquaculture are price-sensitive. A feed ingredient that works in a lab still has to perform reliably on farms, meet safety rules, and compete with established suppliers.

That makes capacity expansion an important milestone. If Life Lab Resources can process larger volumes of treated food substrates, it has a better chance of proving that its model can work beyond pilot scale. For aquaculture farmers, reliability matters as much as sustainability: feed has to be available, safe, nutritionally consistent, and sensibly priced.

Also Read: DELOS sparks ‘Blue Revolution’ in Indonesian aquaculture with Series A led by Monk’s Hill Ventures

The involvement of investors such as Decarb123 suggests an appetite for businesses at the intersection of climate, waste reduction, and food systems. Keng Eng Kee Holding’s participation is also notable because it ties the round to Singapore’s food and beverage sector, where waste is generated daily and circular models could eventually become part of operating practice.

Follow-on investment from AC S323 adds another layer of continuity. In early-stage climate and foodtech, repeat backers often matter because technical validation and commercial adoption can take longer than in pure software businesses.

Regulation will shape the pace

The biggest constraint may not be demand, but regulation. In Singapore, companies that manufacture feed for food-producing animals require a licence, and the Singapore Food Agency sets rules for some alternative feed inputs, particularly waste-derived materials.

These rules exist for good reason. Feed safety is directly linked to food safety. Inputs must be managed carefully to avoid contamination, disease risks, or harmful residues entering the food chain. For a company working with treated food substrates, compliance is not a side issue; it is central to whether the business can scale.

That regulatory burden can slow young companies down, but it can also become a barrier to entry once standards are met. In a sector where trust is critical, licensed and compliant operators may have an edge over informal or poorly controlled waste-to-feed models.

Singapore’s stricter environment could also become a proving ground. A startup that can meet the city-state’s safety requirements and demonstrate commercial viability may be better positioned to work with partners elsewhere in Southeast Asia, where aquaculture production is much larger but regulatory systems vary widely.

A crowded field, but not a settled one

Life Lab Resources is not alone in chasing the alternative feed opportunity. Across the region, companies such as Nutrition Technologies, Entobel, Protenga, and Inseact have built businesses around insect-based protein and other upcycled ingredients for animal and aquaculture feed. Globally, firms including Ÿnsect and Innovafeed have attracted significant capital to produce insect protein at industrial scale.

These are not like-for-like competitors. Some focus on black soldier fly larvae, others on specific agricultural by-products, while Life Lab Resources’s approach centres on treated food substrates. But they are all competing for a place in the same changing feed supply chain, one where farmers, feed mills, and regulators are testing whether alternative inputs can match conventional ingredients on nutrition, safety, cost, and scale.

For Life Lab Resources, that means the opportunity is real but execution will be unforgiving. The company must show that its feed performs consistently, that its supply of waste-derived substrate can be managed at volume, and that its economics work without leaning on sustainability claims alone.

Southeast Asia’s food systems are looking for practical fixes

The timing is favourable. Governments and companies across Southeast Asia are looking for ways to reduce food waste, improve food security, and lower the environmental impact of agriculture. Aquaculture is central to that discussion because it is both a major source of protein and a resource-intensive industry.

Yet the most successful solutions are likely to be practical rather than ideological. Farmers will adopt alternative feeds if they help maintain yields, protect animal health, and make economic sense. Food businesses will join circular waste models if collection, treatment, and compliance are manageable. Investors will stay interested if startups can move from promising pilots to repeatable production.

Also Read: Arus Oil is powering Malaysia’s circular economy by transforming used cooking oil into clean energy

Life Lab Resources’ US$1 million round does not answer all those questions. What it does show is that capital is still available for focused, infrastructure-heavy climate and foodtech companies when the problem is clear and the pathway to revenue is visible.

In a region where food demand is rising and waste remains stubbornly high, the idea of turning leftovers into feed is easy to understand. The hard part is building the system around it. That is the work Life Lab Resources now has more room to pursue.

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Southeast Asia’s startup funding market is showing signs of life again, but the recovery is not reaching most founders.

Venture-backed companies in the region raised US$7.25 billion across 217 equity deals in the first half of 2026, according to the Southeast Asia Startup Funding Report H1 2026 by Kickstart Ventures and DealStreetAsia. That is the strongest half-year total since H1 2022 and nearly four times the US$1.86 billion recorded a year earlier.

On the surface, it looks like a sharp rebound after two difficult years. Look closer, however, and the picture is far more uneven. Deal volume fell 5 per cent year on year and is now nearly 62 per cent below the H1 2022 peak of 572 transactions. The number of equity deals is the lowest the report has recorded since 2018.

Also Read: Late-stage deals revive in Southeast Asia, but early-stage founders remain under pressure

The message is clear: capital is back, but it is not back for everyone.

A recovery led by a few large cheques

The rebound was heavily concentrated among a small group of companies. The five largest rounds accounted for 75.5 per cent of all equity funding, while the top 20 took 89 per cent. The remaining 196 transactions shared just US$800 million.

Much of this reflects a global shift in investor appetite. Capital is flowing into AI, compute infrastructure, semiconductors, robotics, defence technology and other areas seen as strategically important. KPMG recorded US$227.4 billion in global venture investment in Q2 2026, the second-highest quarterly total on record, with AI companies driving many of the largest financings.

Southeast Asia is participating in that cycle, but mainly through infrastructure and enabling technologies rather than a broad-based revival across consumer internet, fintech or software.

The clearest example is DayOne, the data-centre operator whose US$4.5 billion Series C round accounted for 62 per cent of all equity funding in the region during the period. The deal is tied to the global buildout of AI and cloud-computing capacity, where investors are backing the physical infrastructure required to train and run large AI models.

Without DayOne’s round, Southeast Asia’s equity funding would have stood at US$2.75 billion. That would still be 80.1 per cent higher than H1 2025, but far less dramatic than the headline figure suggests.

Minette Navarrete, President and Managing Partner at Kickstart Ventures, said the region is benefiting from investors seeking stability, diversification and supply-chain resilience. But she warned against mistaking capital concentration for market strength.

“Deal volume remains a better measure of market momentum, and on that measure, capital has returned but not broadly, and that tells us Southeast Asia’s recovery is still finding its footing,” she said.

Singapore pulls further ahead

Singapore once again dominated the region’s funding landscape. Companies headquartered in the city-state raised US$6.7 billion across 145 deals, representing 92 per cent of disclosed equity funding and 67 per cent of deal volume.

That lead partly reflects Singapore’s role as Southeast Asia’s financing hub. Many companies based there raise money to support regional or global expansion, not just domestic activity. Even so, the gap between Singapore and the rest of the region has widened sharply.

Indonesia, Southeast Asia’s largest digital economy by population and internet users, recorded only 17 deals and US$104 million in funding. No Indonesian company appeared among the region’s top 20 equity rounds. That points to an acute shortage of growth capital in a market that, only a few years ago, was producing some of the region’s biggest venture-backed names.

Malaysia showed the strongest breadth outside Singapore, with 27 deals worth US$203 million. Vietnam raised US$340 million across ten transactions, making it the second-largest market by value, although Vinpearl’s US$255 million round made up three-quarters of that total.

Also Read: When debt replaces equity: How SEA startups mask a funding winter

Thailand and the Philippines showed a similar dependence on single large deals. Amity Solutions accounted for about 77 per cent of Thailand’s US$130 million, while Salmon represented 75 per cent of the Philippines’ US$80 million.

Andi Haswidi, Head of Research at DealStreetAsia, said the US$7.25 billion headline should not distract from the weaker base underneath.

“Every market outside Singapore depended on one or two transactions to make its total. That is characteristic of what a market without depth looks like in any conditions,” he said.

The early-stage warning sign

The most worrying signal is at the early stage, where the next generation of growth companies is supposed to form.

Early-stage deal count fell to 195 in H1 2026, down 11 per cent year on year, 63 per cent below the H1 2022 peak and well short of the 353 deals recorded in H1 2024. If fewer startups are being funded today, the region could face a thinner pipeline of Series A, growth-stage and exit candidates in the years ahead.

Yet the amount of capital going into early-stage companies rose. Startups at this level raised US$1.72 billion, up 56.4 per cent year on year. Median pre-seed funding reached a series high of US$900,000, while median seed funding rose to US$3.7 million.

Investors, in other words, are writing larger cheques for a smaller group of companies. Founders who clear the bar may get more runway. Those outside investors’ preferred sectors or networks may find the door harder to open.

Series A remains the bottleneck. The median Series A round fell from US$11.6 million in H2 2025 to US$8 million, while the average dropped from US$17.6 million to US$12.9 million. Bigger seed rounds, therefore, do not necessarily mean more startups are graduating to institutional Series A financing.

Investors may instead be giving selected companies more time to prove product-market fit before facing a tougher priced round.

A broader but tougher capital stack

Another shift is the changing mix of capital providers. Sovereign funds, corporates, private equity investors and private credit providers are playing a larger role alongside traditional venture capital.

That can give founders access to deeper pools of money and strategic industry relationships. But these investors often assess risk differently from venture funds. They may care more about commercial traction, infrastructure value, strategic relevance or predictable cash flows than about high-growth narratives alone.

Debt is also becoming more common. Debt financing rose to 23 transactions from 17 a year earlier, with total value reaching US$1.36 billion. The implied average debt deal fell to US$59 million from about US$99 million in H1 2025, suggesting debt is being used by a wider set of companies rather than only a few large borrowers.

For Southeast Asian startups, this is both an opportunity and a constraint. The funding market is no longer only about persuading venture capitalists to bet on growth. Founders may need to assemble different types of capital for different stages of expansion.

Still waiting for a broad recovery

The macro backdrop is not weak. Developing Southeast Asia is expected to grow by about 4.6 per cent in 2026, while data-centre investment and technology exports are supporting markets such as Malaysia, Thailand and Vietnam.

But startup funding remains highly exposed to global conditions, including US interest rates, exit markets, currency risk and liquidity among limited partners. Until exits improve and more capital returns to regional venture funds, fundraising is likely to remain selective.

Also Read: 48 PE investors, US$3.96B deployed, and not a single IPO exit in five years. Something is broken.

The first half of 2026 shows that Southeast Asia can still attract large pools of capital when companies sit at the intersection of AI, infrastructure and global strategic demand. What it has not yet shown is a full recovery for the wider startup ecosystem.

For most founders, the funding winter has not ended. It has simply become more selective.

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The global race to lead artificial intelligence is usually framed as a contest between countries: the US versus China, with Europe, India and a handful of others trying to carve out space. A new ranking argues that this view misses where much of the action is actually happening.

The Observer’s inaugural AI Cities Index, released today, maps AI capacity at the metropolitan level, scoring 57 cities across 36 countries. The report looks at three broad areas: investment, innovation and implementation. Put simply, it asks which cities are attracting money, producing breakthroughs, and building the institutions and infrastructure needed to use AI in the real world.

Also Read: Why Singapore, Indonesia, and Vietnam are losing the AI race they think they are winning

The answer still begins in the US. San Francisco and New York take the top two positions overall, underlining America’s continued strength in frontier AI research, venture capital and commercialisation. But the more striking finding is how quickly East and Southeast Asian cities are closing the gap.

Six of the world’s top 10 AI cities are in East and Southeast Asia: Seoul, Tokyo, Singapore, Shanghai, Shenzhen and Beijing. Together, they point to a shift in AI power away from a few US technology clusters and towards a more distributed network of Asian hubs, many of which lean on state coordination, industrial depth and public-sector adoption rather than venture funding alone.

The city as the new AI battleground

The Observer says the index builds on the Global AI Index, which has benchmarked national AI performance for seven years. Its city-level approach matters because AI ecosystems are rarely spread evenly across a country.

The US may be the world’s most influential AI market, but much of its cutting-edge activity is concentrated in and around San Francisco. China, by contrast, has three cities in the global top 10: Beijing, Shenzhen and Shanghai. South Korea’s AI strength is heavily concentrated in Seoul, while Singapore functions as both city and national AI platform.

This is particularly relevant for Southeast Asia, where AI adoption is unlikely to be driven by national scale alone. Singapore’s fifth-place ranking for implementation shows how a smaller market can punch above its weight when policy, talent, digital public infrastructure and enterprise adoption move in the same direction. For neighbouring markets such as Indonesia, Malaysia, Thailand, Vietnam and the Philippines, the question is not whether they can replicate Silicon Valley. It is whether they can build city-level clusters with enough talent, cloud capacity, industry demand and policy support to make AI useful beyond pilot projects.

Also Read: Korea’s startup ecosystem is training founders, not just funding them

The index defines implementation as the presence of institutions, systems and practitioners needed to operationalise AI across business, government, education and communities. That distinction is important. Building a powerful model is one thing. Putting AI into factories, hospitals, classrooms, banks and public services is another.

Seoul’s implementation edge

Seoul emerges as the most prominent non-US city in the ranking. While San Francisco tops the overall index, the South Korean capital ranks first globally for AI implementation.

That result reflects South Korea’s long-running investment in digital infrastructure, advanced manufacturing and semiconductors. Seoul is home to a dense cluster of semiconductor headquarters and related technology firms, including Samsung Electronics and SK Hynix, two of the world’s most important memory chipmakers. Both sit at the centre of the AI hardware boom, as demand for high-bandwidth memory and advanced chips rises with the growth of generative AI.

The city has also created the Seoul AI Innovation Committee to support small and medium-sized enterprises that cannot easily fund in-house AI talent or infrastructure. This is the kind of policy plumbing that rarely attracts the same attention as a new chatbot or chip launch, but it may prove more important in determining which economies actually benefit from AI.

For founders and operators in Southeast Asia, Seoul’s example is instructive. Many businesses in the region are not trying to train frontier models. They are trying to automate customer service, improve logistics, detect fraud, optimise energy use or equip workers with better tools. The winners may be cities that help ordinary companies adopt AI safely and affordably, not just those that host the biggest research labs.

Tokyo ranks third and Singapore fifth in the implementation table, while Shanghai, Shenzhen and Beijing also appear in the top 10. The report contrasts these cities with San Francisco and New York, where adoption is described as more fragmented and often still at pilot scale, despite deep private-sector innovation.

US still leads in capital and breakthroughs

None of this means the US is losing its AI lead. San Francisco remains the world’s strongest AI city overall, ranking highly across innovation, investment and implementation. New York also scores well across the board, helped by its deep capital markets, enterprise customer base, universities and growing AI startup scene.

On innovation, the report describes a more direct contest between Chinese cities and US technology hubs. San Francisco ranks first, followed by Beijing, New York and Shenzhen. This mirrors broader industry trends: the US continues to produce more frontier AI models, but Chinese labs and companies have narrowed the performance gap.

The Observer cites wider research showing that the performance gap between Chinese and American AI models has fallen to 2.7 per cent, down from as much as 31.6 per cent in 2023. The US still produced more frontier models in 2025, with 50 compared with China’s 30, but China’s count doubled year on year.

That narrowing gap matters for Asia’s startup ecosystem. If high-performing AI models become cheaper, more open and more widely available, the advantage may shift from those who own the models to those who know how to apply them in specific markets. Southeast Asian startups, often built around fragmented languages, regulations and customer behaviours, could benefit from this shift if they can localise AI effectively.

Europe struggles for space

Europe’s showing is comparatively modest. Only London and Paris make the global top 10. That reflects a familiar challenge: Europe has strong universities, research talent and regulatory influence, but has struggled to match the US in venture-backed scaling or East Asia in coordinated industrial deployment.

The ranking also suggests that state support alone does not guarantee implementation strength. Cities with prominent technology ambitions, including Tel Aviv and Dubai, do not make the top 10 for AI implementation.

Patricia Clarke, The Observer’s technology editor, said the index shows that AI power is being redrawn around cities rather than countries. “Some of tomorrow’s most important AI decisions may not be made in Washington or Beijing, but in Seoul, Shenzhen and a handful of other emerging hubs,” she said.

Also Read: A Southeast Asia AI adoption outlook vs alternative global hubs

For Southeast Asia, that is both a challenge and an opening. Singapore is already in the top tier for implementation, but the region’s larger markets still need deeper AI talent pools, stronger cloud and data infrastructure, clearer rules and more patient capital for applied AI. The cities that get those basics right may not dominate headlines like San Francisco, but they could determine how AI changes everyday business across the region.

The AI race is still led by the US. But if The Observer’s index is any guide, the next phase will be fought less by countries in the abstract and more by cities that can turn AI from promise into infrastructure.

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Indonesia’s SME lending ecosystem looks different in 2026 than it did five years ago. The peer-to-peer lending sector that produced KoinWorks, Investree, Modalku, Akseleran, and dozens of others has consolidated. The number of OJK-licensed P2P lenders has fallen sharply since 2022. The platforms that remain — KoinWorks among the most prominent — operate inside a tighter regulatory perimeter, with a more institutional funding mix, and with a credit posture that resembles traditional non-bank lending more than the original P2P model.

After fifteen years inside Indonesian risk functions, I have watched this transition with more interest than most parts of the industry. The SME credit gap the original P2P model was designed to address is still real — arguably larger now than it was in 2018.

What the P2P era built

The Indonesian P2P sector that emerged after OJK’s POJK 77/2016 did something the traditional banking system had not. It built credit access infrastructure for SMEs that conventional banks were not set up to serve — too small for commercial banking, too formal for microfinance, too thinly documented for traditional underwriting.

KoinWorks, founded by Benedicto Haryono and Willy Arifin in 2016, was one of the platforms that built deliberately for that segment from early on. Its emphasis on productive SME credit, on developing alternative data underwriting capability, and on maintaining a measured growth trajectory gave it a more durable position than many peers when the sector consolidated.

What changed

Three structural shifts have reshaped the sector.

Funding mix institutionalised. The original retail-investor-to-SME model has been steadily replaced by institutional funding — banks, asset managers, structured-credit vehicles. The platform’s role shifted from retail marketplace to credit origination intermediary.

Also Read: What I’m learning about the second wave of insurance digital transformation in Indonesia

Regulatory perimeter tightened. POJK 10/2022 and subsequent rules raised capital requirements, codified credit risk management expectations, and required clearer governance. Smaller platforms could not absorb the compliance cost. Consolidation followed.

Credit posture matured. The early sector underestimated default risk in the segments it served, partly because alternative data models were younger than the underwriting confidence they produced. Surviving platforms rebuilt credit policy around tighter limits, more conservative scoring, and active portfolio management.

Lessons learned

Six principles from this decade are worth carrying into the next chapter of Indonesian SME credit.

Discipline beats velocity. The platforms that survived grew slower than the market wanted them to. The ones that did not are mostly no longer licensed. Underwriting discipline is not a brake on growth — it is the condition for it.

Funding mix is survival, not treasury. A platform with multiple institutional funding lines has options. A platform with one funding line of any kind has a deadline.

Regulator engagement compounds. The platforms that spent time with OJK before the rules tightened got more flexibility when they tightened. Time-with-supervisors is the most under-priced asset in fintech.

Alternative data is a hypothesis, not a verdict. Models built on novel data require longer back-testing than founder optimism typically permits. Models should be continuously revisable, never declared proven.

Also Read: A 90-episode series in 3 weeks: How AI is speeding up Indonesia’s creative economy

The credit gap is durable, the model is not. Indonesia’s SME credit gap will exist as long as the banking system is structured the way it is. Founders who anchor on the gap rather than on the specific model will adapt faster.

Consolidation cycles repeat. The 2022-2024 P2P shake-out was not a one-off. The next category — embedded finance, vertical lenders, supply-chain credit — will go through its own version of this cycle inside five to seven years. The platforms that prepare for it instead of treating this round as the last one will still be operating after the next.

The macro stakes

KoinWorks and the platforms that came up with it gave Indonesia’s SME segment an underwriting infrastructure designed for them rather than adapted reluctantly from larger products. That contribution has not been fully absorbed by the formal banking system, and the gap remains for the next generation to address.

The lessons from the P2P era — discipline, diversification, alignment, humility about data, durability of the problem — are the foundation. The opportunity to build on them is still open. The institutions that build well in the next five years will be the ones that treat the previous five years as research, not as critique.

—

Editor’s note: e27 aims to foster thought leadership by publishing views from the community. You can also share your perspective by submitting an article, video, podcast, or infographic.

The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of e27.

Join us on WhatsApp, Instagram, Facebook, X, and LinkedIn to stay connected.

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