Middle East and the future of Crypto

Middle East crypto

Based on last night’s Super Tuesday published results, it seems like the crypto fundraising groups won a decisive victory. Rep.Katie Porter’s attempt to become the Democratic Senate candidate for California failed because of negative ads from asset PACs that are worth almost $10 million, where other crypto-fan candidates all around the country achieved initial victories.

Blockchain regulation will remain a controversial issue in the U.S., even if, in November, the pro-crypto candidates assume the power, where wide, openly popular bills face difficulties in passing the U.S. restrictive legislative process.

In last week’s Web Summit conference, I had the opportunity to participate in a flagship tech conference hosted by Qatar, which is the first Middle Eastern country. This was a sign of the region’s ascendance, where an independent wealth of Saudi Arabia and the United Arab Emirates was serving high-risk funds around the world as limited key partners and domestic and foreign startups started to grow around the zone.

The main interest and favorite field of several Gulf countries, in particular the emirates of Dubai and Abu Dhabi, is Crypto. During the pandemic, they used this opportunity to introduce themselves as digital asset hubs. Note that even when the FTX collapsed and every government started to keep its distance from the cancer-like industry, these two started a new competition by creating and establishing new regulations.

To find out why the Gulf region tried to embrace blockchain even when the bear market was in charge and what it could mean for global industry, I started to interview eight investors from the Middle East and the U.S. on the sidelines of the conference.
The Race Capital’s general partner, who is based in San Francisco, Alfred Chuang, who had regular trips to Gulf countries during the pandemic, said: “If you want to leapfrog the Western countries, you have to take some risks in places where they won’t,” and “I’ve never seen the Middle East be this aggressive before.”

As the limited partners of top venture companies in the U.S. in Crypto, from Haun Ventures Co to Andreessen Horowitz, the greatest independent investment funds in the Middle East, such as Sanabil of Saudi Arabia and Mubadala of the United Arab Emirates, established their foothold there to spend billions of dollars. Some of the democratic, idealistic Silicon Valley investors don’t want to believe that they took money from governments that are involved with human rights abuses issues, and it was because of the capital’s outflow that created an awkward dynamic among them. One of the Amsterdam-based crypto venture fund founders, Etienne Tantrums, said, “They’re still seen as closed societies and slightly authoritarian, But still, these guys come here.” He also added the fact that the UAE, especially, has no effort to spend any money outside of the Gulf zone, and on the other hand, they are trying to attract outside companies to Dubai and Abu Dhabi to set up offices under their open regulation conditions. This list shows big names such as Binance, Bybit, Paxos, and Coinbase.

He claimed that the region’s investors told him that both private and governmental companies were spending the venture capital for local development. The CEO of Dubai Future District Fund, which is a venture fund of funds and investment vehicle for Dubai, Sharif El-Badawi, mentioned the Crypto Oasis they created with over 1,000 blockchain companies in Dubai. He said: “It’s really a greenfield here,” he said. “There’s a lot of opportunity to build for locals, too.”

Moreover, some investors told me that with the help of new technologies like tokenization, we can build economies from the basis, and this impression comes from the developing nature of Saudi Arabia, Qatar, and the UAE markets. When I wandered around the city, I saw Doha’s new skyscrapers in its business district, and this logic made sense to me.
The founder of venture firm Plus VC in Bahrain, Hasan Haider, is doubtful about his decision, even though he had invested in one of the greatest exchanges of the region, “Rain.” I heard from him that “I don’t see a lot of the use cases being real use cases,” and “How is consumer adoption going to come?”The Dubai-based famous Virtual Assets Regulatory Authority (VARA) has started to put a finger on the supervision of Crypto. El-Badawi told me that, “They don’t have enforcers yet.” It seems like, after the FTX collapse, Saudi Arabia stopped its regulatory efforts. However, companies are still hopeful for upcoming progress.

There are concerns about existential overhang in the Middle East; for example, the risk of adding this volatile industry to the region may lead to setting up shop, like what happened in the Bahamas and the lesson they learned in 2022. But, the founder of Dubai-based Global Ventures, Noor Sweid, said, “You’re better off trying and failing than failing to try,” shook off the concerns.