Cryptocurrency, blockchain ventures top VC investments

File photo
File photo
Frederick Pye, chairman, and CEO, 3iQ Corp.
Frederick Pye, chairman, and CEO, 3iQ Corp.
Arshad Khan, chief executive officer of Arabian Bourse.
Arshad Khan, chief executive officer of Arabian Bourse.

Sandhya D'Mello

Published: Fri 17 Sep 2021, 11:44 PM

Last updated: Fri 17 Sep 2021, 11:45 PM

Venture Capitalists (VCs) globally are investing in cryptocurrencies and blockchain ventures as the digital disruption catalyses the windfall complemented with a rebound from the pandemic.

The first half of this year itself saw investments surge to more than double the whole of 2020, according to KPMG’s Pulse of Fintech study. So why the rush? Will we see the trend spilling over to the Middle East?

Arshad Khan, chief executive officer of Arabian Bourse, said: “There has been an increase in VC investments in the virtual asset industry in recent years. Motivated by the significant technological capabilities amidst a growing public acceptance and endorsement of the cryptocurrencies, venture capital funds around the world have sought to increase their stake and exposure in the space, with billions of dollars invested into exchanges, digital asset infrastructure providers, virtual assets funds, and digital wallet companies.”

Khan adds: “Moreover, the global trend has also manifested in the Middle East, with notable VC investments taking place including that of UAE-based crypto investment funds which are getting active. Increasing institutional participation on the buy and sell-side is also driving VC interest.”

For instance, Rain  — licensed by the Central Bank of Bahrain as a crypto asset brokerage — has raised $17.9 million to date from investors like MEVP, Coinbase, and many others. Kristin Lorie, VP 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 did to data, we believe cryptocurrencies will do to finance, banking, and markets. With such a large addressable market and the market still being so early, VC investments across the globe will only continue to rise as more and more people figure out the above.”

KPMG highlights that a significant amount of institutional money flowed into the crypto space, showing the broadening of the investor base. Investor awareness and knowledge of the sector is growing, with investors now having a much better understanding not only about crypto assets, but also the operational and procedural side of crypto — from custody and storage to storekeeping and the competitiveness and maturity of service providers.

Gabriel Abed, Ambassador of Barbados to the UAE, said: “The rise of crypto VCs in the space is coming from an understanding that the future is clearly in the direction of blockchain innovation. The projects that we have seen over the years are now exiting experimentation phases and entering into the real market utility which is ultimately attracting institutional investors. The main attribution for this is the legitimacy of the industry and the fact that it can no longer be ignored by governments, regulators or institutions.”

VC investment was very strong in the blockchain and crypto space as numerous companies raised $100 million-plus funding rounds, including BlockFi ($350 million), Paxos ($300 million), ($300 million), and Bitso ($250 million). China has continued to move forward with testing its central bank digital currency (the ‘digital renminbi’, digital yuan, or e-CNY).

In the remaining of H2’21 continued maturation of the cryptocurrency space is expected with stronger separation between cryptocurrencies; use of blockchain technologies; and evolution of exchanges focused on areas such as NFTs.

Frederick Pye, chairman, and CEO, 3iQ Corp shares that he has spent 13 years into the great blockchain experiment and has witnessed significant maturation and growth in the technology and industry since Satoshi’s groundbreaking whitepaper in 2008.

Obviously, the headlines are around the price of the bigger blockchain assets like BTC and ETH, but the true mark of progress is the actual use of blockchain in solutions that are objectively better than what could be built with traditional technology.

“We’re starting to finally see the launch of some solutions that are natively built on blockchain, but with enough polish and security to capture mainstream use. Stablecoins (digital assets backed by traditional fiat held in a bank) are an excellent transition step. As the price headlines continue to drive interest and additional powerful solutions using the technology continue to get rolled out and adopted, this trend is just getting started,” said Pye.

Pye has been a very strong supporter of cryptocurrency and says the VCs venturing in the crypto space is the most important venture trend of the last 30 years.

“In the past, venture cycles have been focused on technologies leveraging traditional network and database structures. The core technology evolved, but most innovation was in front-end, consumer, and enterprise-facing solutions. Despite piggybacking of existing core technology, these venture cycles still took 5-7 years to grow and mature. The blockchain industry is actually looking to remake the core fundamentals that we build technology on top of. This is incredibly exciting and offers an avenue to remake most industries vertical with objectively better solutions, however, it will take a longer time for the trend to grow and mature. As a team that has been in the industry since 2012, it is very gratifying to see an ever-increasing flow of global capital be willing and interested in making that investment,” concludes Pye.


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