Venture capitalists (VCs) around the world are investing in cryptocurrencies and blockchain companies as digital disruption catalyzes the windfall complemented by a pandemic rebound.
The first half of this year saw investments increase by more than double for all of 2020, according to KPMG’s Pulse of Fintech study. So why rush? Will we see the trend spread to the Middle East?
Arshad Khan, CEO of Arabian Bourse, said: “There has been an increase in venture capital investments in the virtual asset sector in recent years. Motivated by significant technological capabilities amid growing public acceptance and approval for cryptocurrencies, venture capital funds around the world have sought to increase their stake and exposure in the space, with billions of dollars invested in exchanges, digital asset infrastructure providers, virtual assets funds and digital wallet companies.
Khan adds, “Moreover, the global trend has also manifested itself in the Middle East, with notable venture capital investments, including from UAE-based crypto investment funds becoming active. Increasing institutional involvement in buying and selling is also attracting interest from venture capital. “
For example, Rain – licensed by the Central Bank of Bahrain as a crypto asset brokerage firm – has raised $ 17.9 million to date from investors like MEVP, Coinbase and many others. Kristin Lorie, Vice President of Marketing at Rain, said, “At Rain, we believe the cryptocurrency industry will be as transformative, if not more, than the internet. What the internet has done to data, we believe cryptocurrencies will do to finance, banking, and the markets. With such a large addressable market and the market still so early, venture capital investments around the world will continue to increase as more and more people understand the above.
KPMG points out that a significant amount of institutional money has poured into the crypto space, showing the broadening of the investor base. Investor awareness and knowledge of the industry is increasing, with investors now having a much better understanding of not only crypto assets, but also the operational and procedural side of crypto – from custody and storage to storekeeping, in through the competitiveness and maturity of service providers.
Gabriel Abed, Ambassador of Barbados to the United Arab Emirates, said: “The rise of crypto VCs in space comes from the understanding that the future is clearly in the direction of blockchain innovation. The projects that we have seen over the years are now emerging from the experimental phases and entering the real utility market which ultimately attracts institutional investors. The main attribution to this is the legitimacy of the industry and the fact that it can no longer be ignored by governments, regulators or institutions.
Venture capital investment has been very important in the blockchain and crypto space as many companies have raised over $ 100 million in fundraising including BlockFi ($ 350 million), Paxos ($ 300 million) dollars), Blockchain.com ($ 300 million) and Bitso ($ 250 million). China has continued to move forward by testing its central bank digital currency (the “digital renminbi”, digital yuan or e-CNY).
In the remainder of H2’21, continued maturation of the cryptocurrency space is expected with a stronger separation between cryptocurrencies; use of blockchain technologies; and the evolution of exchanges centered on areas such as TVN.
Frederick Pye, President and CEO of 3iQ Corp, shares that he has spent 13 years in the vast blockchain experience and has witnessed significant maturation and growth in technology and industry since the white paper revolutionary of Satoshi in 2008.
Obviously, the headlines revolve around the price of bigger blockchain assets like BTC and ETH, but the real mark of progress is the actual use of blockchain in solutions that are objectively better than what could be built with it. traditional technology.
“We’re finally starting to see the launch of some solutions natively built on the blockchain, but with enough finishing and security to capture mainstream use. Stablecoins (digital assets backed by traditional fiat held in a bank) are a great transition step. As the award headlines continue to generate interest and as powerful new solutions using technology continue to be deployed and adopted, this trend is only just beginning, ”said Pye.
Pye has been a very strong supporter of cryptocurrency and claims that VCs venturing into the crypto space are the most significant business trend over the past 30 years.
“In the past, risk cycles have focused on technologies that take advantage of traditional network and database structures. Basic technology has evolved, but most of the innovations have been in front-end solutions for consumers and businesses. Despite the integration of existing core technology, these risk cycles still took 5-7 years to develop and mature. The blockchain industry is actually looking to redo the basic fundamentals on which we build technology. It’s incredibly exciting and offers an opportunity to remake most industries vertically with objectively better solutions, however, it will take longer for the trend to develop and mature. As a team that has worked in the industry since 2012, it is very gratifying to see an ever increasing flow of global capital being willing and interested in making this investment, ”concludes Pye.
