Alea Global Group will be holding their editionof Alea Sessions in Riyadh KSA. The one day gathering under the theme ‘The New Opportunities in Investment in the New Saudi Arabia’ will gather 100 of the GCC and MENA region’s top family offices. The event will include a session on Blockchain in Trade Finance.
Alea Global Group is a conglomerate single family business formed in 1998 in the State of Kuwait owned by a member of Al Duaij family. The one day event will discuss private debts and CLOs, trade finance, mezzanine debt, open banking, micro and macro banking environments, and Saudi Arabia’s unicorns.
The Alea Sessions is a series of irregular but responsive events held by Alea Group Group which are held when there is a need to address important topics that need to be addressed and which our followers would like to talk about. These events are usually shorter than their Family Office Summits, with a more focused programme. They may occur anywhere in the world, and also online.
Some of the highlighted speakers will include Essam Albakr Founder & CEO, Ejada Capital, Kingdom of Saudi Arabia, Mark Mobius, Founding Partner, Mobius Capital Partners, Mirna Sleiman Founder & CEO, Fintech Galaxy, UAE, Omar AlShabaan Co-Founder & CEO, The Space, Kingdom of Saudi Arabia, Talal AlBakr Entrepreneur, CEO of SCCC, co-founded Embark Ventures, Kingdom of Saudi Arabia, Abdulaziz M. Alfakhri Board Director, CFO, CIO, Investments & Finance Executive, Angel Investor, Advisor, Mentor & Public Speaker, Kingdom of Saudi Arabia, Ajay Sunkara President & Co-Founder, Nala Robotics, USA , Ashar Nazim CEO, Aion Digital, Kingdom of Bahrain as well as Rabih I. Khoury Managing Partner & Chief Exit Officer Middle East Venture Partners (MEVP), Kingdom of Saudi Arabia and many others.
One of the sessions at the event will discuss the topic of how blockchain will shape trade finance. It will discuss how to overcome obstacles and find a competitive advantage in trade finance. Panelists will include Zineb Tamtaoui, Senior Executive Officer, Head Of Middle East Region, Chez BMCE BANK International Plc, and UAE Kevin Ramsamy, CFO, Barak Fund Management, Mauritius.
This is an interesting topic to be discussed at a family office event but not surprising given the latest stance taken by Saudi Arabian Finance Minister, Mohamed Al Jadaan in a TV interview with Bloomberg during the WEF 2023.
As per the interview Saudi Arabia is open to discussions about trade in currencies other than the US dollar. He states, “There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal.”
“I don’t think we are waving away or ruling out any discussion that will help improve the trade around the world,” Al-Jadaan said.
Blockchain could just be one of the ways KSA is looking to improve trade around the world.
In November 2022, Saudi Arabian, Saudi British Bank (SABB) utilized the Contour Blockchain platform to enhance trade finance by improving letter of credit and guarantee procedures for enterprises and international businesses. SABB worked with local fintech entity Bwatech.
In addition Saudi Arabian Taajeer Group, the exclusive agent for MG cars in the KSA utilized the Blockchain enabled Contour platform in its importing of cars from China. HSBC, Chinese SAIC Motor, and KSA Taajeer group executed a successful blockchain enabled trade finance transaction on the Contour platform.
Could this be the culmination of Saudi government strategy, and some blockchain success stories. Jut follow the money and all will be revealed.
In January 2023 Binance celebrated its official entrance into Bahrain. Bahrain’s crypto ecosystem has flourished with the entrance of Binance. Bahrain has witnessed a growth on all fronts, crypto exchange users, crypto payments, crypto jobs and competitive crypto offerings. Binance received its official license in October 2022.
Growth of crypto exchange users
The official license and launch of Binance in Bahrain has added to Binance’s crypto exchange users.
Binance announced that it witnessed a 34% growth in institutional business clients in MENA in Q4 2022, the highest growth for a region where Binance operates, Nadeem Ladki, Executive Director Head of BD & Partnerships, Europe & MENA at Binance told LaraontheBlock, “While I cannot go into the specific growth in Bahrain, I can confirm that we have seen a growth in users since we officially launched in October 2022.”
Even Bahrain based CoinMENA; crypto broker also saw an increase in its user base in 2022 including the period since Binance made its foray into the country. Talal Tabaa CEO and Founder of CoinMENA explained to LaraontheBlock, “Year on Year from December 2021 until December 2022, the verified users of CoinMENA from Bahrain grew by 143 percent. In specific since the entrance of Binance in October 2022, CoinMENA witnessed 5.6 percent growth up until January 2023.”
Growth Crypto vis vie Banking services
In addition to the increase in the number of newly on boarded crypto exchange clients, the country has seen more robust competitive marketing campaigns, with lower fees aimed at attracting a bigger user base as well as enhanced banking crypto relationships.
Binance holds a Category 4 license as a crypto asset service provider (CASP) and was the first exchange in the country to be granted a category four license. This meant that users could access Binance’s full range of crypto asset exchange services, including direct deposits and withdrawals in local currencies.
Yet this did not faze CoinMENA which despite being a crypto broker still espouses good relationships with liquidity partners and banks. Talal Tabbaa, CEO of CoinMENA told LaraontheBlock, “Compared to other regions, the MENA market is one of the smallest. CoinMENA, Rain & BitOasis are technically all brokerage firms. We all have to work with global liquidity partners to place trades on behalf of our users. CoinMENA can list tokens at its own discretion following the Board of Directors’ approval, but they must comply with CBB guidelines.”
After Binance entered Bahrain and in early 2023, CoinMENA announced that users could now easily deposit and withdraw crypto through bank transfers or cards in just 24 hours. CoinMENA CEO explains, “We maintain good banking relationships which is crucial to ensure the on-ramp and off-ramp services are as frictionless as possible for our users.”
RAIN crypto broker which similar to CoinMENA has a category three license in Bahrain has on some occasions compared its offering with Binance. In a tweet by one of its founders AJ Nelson in late October in reply to a comment from a client stated, “Yes we are well aware of the problems with bank transfers. We are working directly with regulators to solve. In good time we will have a solution regarding fees, have you used Rain Pro? It has 0 maker fees and tight spreads. Lower fees and pricing than Binance.”
More Competitive Marketing Campaigns lower fees
In terms of marketing campaigns to introduce better services at lower cost, Binance for its launch campaign offered 25% discount on all trading fees for Bahrain users through a link ‘ BHLive’.
In addition Binance offered the Binance Bahrain Card allowing Bahrain clients to spend cryptocurrencies in over 60 million online and physical stores.
Furthermore in December as part of its Christmas offering, Binance offered its Arabic speaking clients’ rewards reaching $1.5 million in addition to promotions. As it noted on its twitter page Binance offers 350+ crypto assets with fees of less than 0.10 percent per transaction.
CoinMENA quickly countered these marketing campaigns with those of its own. For example in January 2023, CoinMENA offered discounted card deposit fees for 48 hours again after doing so in late 2022.
As per the advert, users would pay only 2% fee on card deposits instead of 3.5%. For Bahrain’s National Day celebrations, CoinMENA offered zero trading fees for a limited time of 48 hours. The crypto exchange had also promoted prior to that a 23% off on trading fees for a specified time period.
CoinMENA offers around 30 crypto assets for trading with fees of 0.75%.
Tabaa confirms that the entrance of Binance helped to grow the crypto ecosystem in Bahrain. He stated, “Binance spends a lot on crypto marketing and this actually benefits the entire ecosystem of players.”
Growth of Crypto Payments
Crypto as a method of payment has also seen significant growth since the entrance of Binance in Bahrain. Binance partnered with EazyPay, a financial payment service provider which has a network of thousands of merchants and over 6000 terminals, to offer crypto as a method of payment while settling transactions with merchants in fiat currency.
According to Nayef Tawfiq Al Alawi, Managing Director and CEO of EazyPay, “As a regulated entity we can only work with regulated entities such as Binance. Since our partnership merchants have been more confident to get into the crypto payment scene and in terms of transactions, while people are still testing the service on average we transact $5000 worth of crypto transaction per day over 6000 terminals in Bahrain. This is really good.”
It hasn’t stopped there, In November 2022 just after Binance entered Bahrain, CoinMENA partnered with Carlton Real Estate, a Bahrain-based real estate agency that allows investors in the Kingdom to purchase real estate property using crypto assets. Under the partnership, the real estate broker would accept stablecoins like USDT and USDC.
This only exemplifies the increase in crypto as a method of payment in the country.
Growth in crypto Job market
Binance has viewed Bahrain as a key business hub which will provide areas for growth and employment within the wider industry. Currently Binance has employed 200 people in Bahrain and is continuing to hire. It has job posts for Customer Support Specialist, Senior Treasury Manager and others in Bahrain.
Even RAIN which decreased its employee base by 50% still has around 200 employees while CoinMENA has around16 employees and is also currently hiring with job openings for software engineer in January 2023 as well others.
Conclusion
Changpeng Zhao CZ in a recent tweet stated, “Bahrain is a hidden gem, super safe, very clean, well developed, good food, superb service, nice people and crypto friendly!”
While CoinMENA affirms that it has known that international players would be entering the region given the poor financial services, high fees and large unbanked population coupled with young demographic population and high smartphone penetration. To him this only shows the market is maturing and accelerating growth.
Binance in 2022, processed a whopping $65 billion in trading volume on average every day, at a speed of approximately 0.7 million transactions per second. The entrance of Binance into markets such as Bahrain has for sure added to the growth of the crypto market and ecosystem.
Recently a press release came out discussing the launch of the Gulf Crypto bank which is espoused to be an integrated banking system for both fiat currencies and digital currencies.
As per the release users can withdraw, deposit, swap, do external and internal transfers immediately, securely and with minimal fees. Users will also be provided with a visa or mastercard that can be used at any ATM or online. Another noteworthy feature is the ability to withdraw crypto assets to any external wallet by creating a wallet inside your bank account. The Bank will also offer personal and corporate loans based on the Islamic laws.
They state that they are participating in the Fintech Crypto Summit in Bahrain as a diamond sponsor and are seeking investment for their coin, GulfCoin. The only summit being mentioned in Bahrain on February 15th is the Fintech and Crypto Summit. Their website doesn’t mention any speakers or sponsors and the event is supposedly only two weeks away!
Looking further into their whitepaper they claim that they are licensed and registered in England, Georgia, Estonia, UAE and Singapore! As they state “Indeed, it is an actual bank project with all the licenses and capital officially registered in England. The Gulf Crypto Bank is registered and licensed in all countries that allow the exchange and circulation of cryptocurrency, such as Georgia, Estonia, the United Arab Emirates, and Singapore.”
Red signs, first they are definitely not regulated in the UAE because the UAE has not regulated crypto banks as of yet! Secondly in their whitepaper and on their website there are no mentioning of who the team members are which is a big red flag! Finally they don’t have any social media channels! But most importantly where are their financials for this project!?
There is another GulfCoin project that also seems iffy. The CEO of that project is Hani Asfar. Yet even this project has the last dated press release as March 2022. In an interview he notes that GulfCoin is being used in 500 locations in the UAE! As stated in the article Asfar says, “Speaking specifically of Dubai, there will be more than 500 locations where token holders can spend Gulf Coin. Plans are underway to make Gulf Coin available in other countries very soon.”
Always do your research because scammers are everywhere! Just because they can pay for a press release or a story on a media outlet does not mean they are legit. Plus just because they say they are licensed in certain countries does not mean they are. Check the licensing authorities ask around.
UAE based International Financial Centre (DIFC), has launched its “DIFC Metaverse Platform” and the first phase is a metaverse accelerator program where it will choose 50 metaverse projects to help develop the metaverse sector in UAE.
The platform is part of a comprehensive strategy being developed by Dubai International Financial Centre (DIFC) to accelerate Dubai’s status as a global metaverse leader.
The DIFC Metaverse Platform is aligned with the Dubai Metaverse Strategy, which aims to add $4 billion to Dubai’s GDP, support 40,000 virtual jobs by 2030 and attract 1,000 companies specialized in blockchain and metaverse technologies. The platform also supports the objective of the recently launched Dubai Economic Agenda D33 to generate economic value worth AED100 billion from digital transformation annually.
The Metaverse Accelerator Program, the first initiative to be launched under the umbrella of the platform, will start accepting applications this month. In the coming years, the program seeks to attract more than 500 applications, identify 50 of the most promising graduates from the program and stimulate investment opportunities that will help the sector grow.
The Metaverse Accelerator Program will run over a period of six months, during which the cohort of start-ups will be introduced to training and workshops to upskill and reskill themselves in both technical and intrapersonal aspects of the metaverse. The program also aims to facilitate partnerships between start-ups and corporates to create proofs-of-concept and new metaverse solutions.
The program demonstrates DIFC’s commitment to support innovative metaverse start-ups by introducing them to the region’s largest players. The program also helps them explore partnerships, gain exposure to investors, access a regulatory sandbox and obtain marketing support.
His Excellency Omar Sultan Al Olama, Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications, Chairman of the Dubai Chamber of Digital Economy, Vice Chairman of the Dubai Higher Committee for Future Technology and Digital Economy, stated that the UAE adopts advanced technologies in its aim to keep pace with global changes, reflecting the directives of its leadership, in transforming the country and Dubai to become a leading hub for utilizing the best technology and developing capabilities.
H.E Al Olama added that this Metaverse platform is the first in a series of initiatives that aim to strengthen Dubai’s position as a global platform for the latest digital trends and accelerate the pace to achieve the objectives of the Dubai Metaverse Strategy.
Arif Amiri, CEO of DIFC Authority, said: “The Dubai government has shown great foresight in introducing a metaverse strategy that has the objective of making the emirate a global hub for technology and innovation. The development of the integrated DIFC Metaverse Platform will accelerate the achievements of Dubai’s aspirations in this sector. The initiative is a natural extension of our Innovation Hub proposition that has shaped the technology and innovation landscape in the Middle East, Africa and South Asia region.”
The DIFC Metaverse Platform includes three key initiatives. The first is an accelerator program with a dedicated physical studio for metaverse technology that will promote the development of a creator community and venture building. The platform will also address the metaverse policy development and legislation on open data, digital identity and company law frameworks in the metaverse. Further, the initiative will foster the development of a metaverse community that will explore ways to enhance the metaverse experience for customers.
UAE based Venom Ventures Fund, a Web3 and blockchain innovation fund managed by Abu Dhabi-based investment fund manager Iceberg Capital Limited, has invested $5 million in Everscale, a premier blockchain platform that aims to solve the scalability issues bogging down the Web3 industry.
The $5 million will be used by Everscale to expand its development teams and boost the number of projects.
Everscale has been diligently working on expanding its reach and integrating its technology solutions in Asian countries over the past two years, while also building a strong community. Its dynamic sharding technology enables it to efficiently adapt to varying workloads, thus making it an easy and practical option for creating large-scale Web3 and other types of applications.
Venom Ventures Fund Chairman Peter Knez, ex-CIO of BlackRock, said, “For us, this is a strategic investment aimed at the technological development of projects and teams around technologies that we focus on and actively develop. In particular, we are talking about the Venom blockchain project and its ecosystem, which is planned to be launched soon and for which Everscale is a potential Layer 2 solution.”
Venom and Everscale teams will be working together on the further development of the core and the ecosystem bringing the adoption of blockchain closer to real business use cases. Current initiatives such as digital asset tokenization platforms, a full framework for CBDCs and stablecoins and payment solutions with crypto to fiat gateways are already making good headway.
Commenting on the investment, Everscale Foundation Board Member Moon Young Lee said, “This is a milestone for both the Everscale and Venom networks. The technological capabilities of Everscale are immense but they have been underappreciated by a wider audience. Now, Everscale will be able to operate as an experimental network where updates and complex technical solutions can be introduced before they are brought to Venom. This investment will allow Everscale to gain the recognition that it deserves.”
Designed as a network of blockchains, Venom has no limit to the number of other auxiliary networks at the Layer 2 level and no limit to the economy type or operation at the Layer 2. This particular architecture means that mass adoption is now achievable on the Venom blockchain.
Everscale is ideal for hosting high-scale web3 and other load-intensive projects. Over the past two years, Everscale has emerged as one of the leading blockchains in Asia, with a thriving community and robust ecosystem of DeFi platforms.
Bahrain real estate developer Bin Faqeeh Real estate Investment Company announced that clients can buy apartments or houses using cryptocurrencies. Bin Faqeeh will be offering crypto payment services with Bahrain financial service provider EazyPay POS terminals.
Binance Co-Founder and CEO, Changpeng Zhao tweeted about Bin Faqeeh Real Estate Company accepting Crypto Payments via Binance Pay through Eazy Financial Services. EazyPay and Binance had signed a partnership in Q4 2022 to offer crypto payment services to EazyPay’s 5000 plus POS terminals.
Prior to this Bahrain CoinMENA crypto broker partnered with Carlton Real Estate, a Bahrain-based real estate agency, allowing clients to buy real estate property using crypto assets. Under the partnership, Carlton real estate would accept stablecoins like USDT and USDC.
The UAE as well has been offering clients the ability to pay for real estate in cryptocurrencies. In May 2022 UAE Properties developer Nakheel and Abu Dhabi based crypto exchange Hayvn partnered to offer crypto payment options for Nakheel clients. Nakheel clients are able to pay for their rent, service fee, and real estate purchases in cryptocurrency.
Other real estate developers in UAE also are offering crypto payment services, such as DAMAC, SAMENA developers and more. In March UAE based Real estate and industry experts estimated that crypto payments for Dubai real estate increased by 300 percent in 2022. Majority of buyers are using stablecoins such as Tether, USDT as well as Bitcoin and Ethereum.
Even UAE Property Consultancy firm, Your place partnered with Utrust, a cryptocurrency payment solution designed to modernize the finance and payments industry offers clients the ability to pay for properties in Dubai UAE using cryptocurrencies. Recently Utrust is now enabling crypto payments for luxury hotels in the UAE. BM Hotels & Resorts luxury hotel chain is accepting digital currencies using Utrust.
In an SEC Filing dated January 27th 2022, USA based Marathon digital Holdings, a digital asset mining entity, announced that it had entered into a shareholder’s agreement with FSI ( FS Innovation), the BTC mining subsidiary of UAE ADQ a sovereign fund, to form an Abu Dhabi, ( ADGM (Abu Dhabi Global Markets) based company.
As per the filing, the joint UAE ADGM based company will establish and operate one or more mining facilities for digital assets. The business entity will be in the field of digital asset/crypto mining.
The initial phase will consist of two digital asset mining sites comprising 250 MW (megawatts) in Abu Dhabi UAE.
Marathon Holdings will own 20% of the joint company in UAE only. The cost of the project will be $406 million.
This new comes after UAE based Phoenix Technology which embarked on establishing a $2 billion crypto-mining farm in the UAE, announced in November 2022, that the biggest crypto mining project in the region will be completed in the next six months, Q2 of 2023. The press release at the time noted, “The project will be finalized within six months, giving the region a taste of technological advancement and development.”
In February 2022 Phoenix had announced it was part of the group of entities developing the UAE crypto mining farm in an interview with well renowned crypto and Blockchain lawyer Irena Heaver.
Crypto mining is an integral part of the development of crypto economies, and the MENA region is opening up to exactly these economies. Already the GCC and MENA region has become an attractive destination for crypto mining.
During Binance Week 2022, Khalifa AlJaziri, AlShehhi, Commercial Affairs Regulatory Sector Projects advisor at the Ministry of Economy in UAE, claimed that the Dubai World Trade Center Authority (DWTCA) would be legislating the crypto mining sector. He stated, “We are setting the guidelines and rules needed to regulate crypto mining within this crypto framework.
The UAE is not the only country that has shown interest in crypto mining. Oman Investment Authority (OIA) took part in a $350mn equity round in Crusoe Energy Systems. The US firm helps oil and gas producers cut flaring by using stranded natural gas to power cryptocurrency mining. Crusoe systems set up operations in Oman as well.
US based Tykhe Block Ventures which recently raises $30 million for its Blockchain growth fund is allocating $10 million of that to Blockchain and Web3 start-ups in MENA region.
Tykhe Block Ventures (part of Heru Finance) is a blockchain-centric multi-strategy fund established in Wyoming, USA. The fund invests in ventures within the Web 3.0/ blockchain sector with a focus on decentralization technologies, digital assets, and their key enabling infrastructure. The fund has invested in 25+ blockchain projects including dWalletLabs, Trust Machines, FanTiger, and RMRK.
The fund is led by Prashant Malik, well-regarded in the technology world as the Inventor of Cassandra (Now Apache Cassandra). He is also one of the top angel investors in SEA (50+ investments, 8 unicorns).
As per their LinkedIn post the company states it is thrilled to announce the first close of our $30 Mn Blockchain Growth Fund.
In addition, Tykhe is also in the process of setting up an office in Dubai UAE and plans to launch a $100 million fund later in 2023.
The company was founded in 2021 by tech investor Prashant Malik. Malik believes that the blockchain sector will prove resilient to the fallout from the bankruptcy of crypto exchange FTX, stating that the companies that have imploded of late are all centralised entities and, therefore, not related or correlated to the decentralisation ethos of blockchain technology.
Prashant Malik in a press release published on Cointelegraph MENA Arabic stated, “ In 2021 My partners and I launched a Blockchain Fund which did well, which led us to believe in the importance of funds to grow the Blockchain sector. We launched $30 million fund because investors are interested just like the interest was in social media when it first started.”
Investors in MENA region tend to increase their investments in Blockchain sector as per a recent survey by LaraontheBlock.
In a recent survey entitled “MENA Investor Survey 2022-2023 for crypto Blockchain sector” carried out by laraontheblock with 83 MENA venture capitalists, fund managers, and family offices, 50% of those surveyed stated they will be allocating more funds to blockchain and crypto projects and entities in 2023. 19% of those surveyed stated in 2022 they had invested more than 50% of allocated capital and funds into crypto and Blockchain projects.
The findings of the “MENA Investor Survey 2022-2023 for crypto Blockchain sector” sheds light on the different areas of interest for MENA investors which will give startups and entities a better view on whom and where capital will be heading by investors in the MENA region.
This comes as cryptocurrency adoption has skyrocketed in the Middle East and North Africa (MENA) region. According to a survey by blockchain analytics platform Chainalysis, MENA countries have the fastest-growing cryptocurrency industry in the world, accounting for 9.2% of global digital currency transactions from July 2021 to June 2022.
Vast Majority of MENA VCs invested in crypto and Blockchain in 2022
75% of survey respondents confirmed that they invested in crypto and blockchain entities in 2022, while only 25% stated they hadn’t. The MENA region has become the center for crypto trading, investing and regulation. The UAE led crypto regulation in 2022 and was the first country in the region to launch a blockchain strategy back in 2017.
The stance taken by MENA investors in the survey is in line with global figures. In 2022, despite the slowdown in crypto VC funding, it exceeded the figure for 2021. Cointelegraph Research’s VC Database showed that a total of $36.1 billion was raised in 2022. This is in contrast to the $30.3 billion worth of funding in 2021.
Crypto projects globally attracted $19.9 billion in venture capital (VC) investments in the first nine months of 2022, 41% higher than a year ago, according to Pitchbook data.
Crypto and Blockchain entities are the Future
54% of respondents replied that they invested in crypto and Blockchain entities because it is the future, while 42% stated it was because these technologies solve real business problems. Only 18% believed that it was because while risky the return on investment was high. ( note that more than one response for some respondents
The MENA region witnessed sizable investments in crypto and Blockchain entities in 2022. For example crypto exchange RAIN received $110 million in investments and included investors from MENA such as MEVP. BitOasis also raised $30 million with UAE based Wamda Capital and others.
Significant developments in the UAE such as the launch of Dubai’s Virtual Assets Regulatory Authority (VARA), and the announcement of the Dubai metaverse strategy, which aims to attract more than 1,000 blockchain and metaverse companies as well as support more than 40,000 virtual jobs by 2030 has also played a role in enticing investors towards blockchain, crypto and metaverse as did the launch of Crypto Oasis ecosystem and the DMCC crypto center bringing in 1400 crypto and Blockchain entities to the
19% of surveyed spent over 50% of their capital on Blockchain and crypto entities
Interestingly when asked what percentage of capital or funds available in 2022 was invested in crypto and blockchain, a whopping 19 percent stated that they had invested more than 50 percent of funds into crypto and Blockchain entities. While the majority 33% invested between 5-15% of their capital into crypto and blockchain entities.
27% invested between 1-5 percent of their capital into crypto and Blockchain, while 21% invested less than 1%.
While the percentages maybe small compared to other areas, Nickel Digital Asset Management noted that UAE institutional investors, family offices, and wealth managers plan to increase their exposure to crypto dramatically by 2023. And while sovereign funds do not yet see digital assets as investable with just 7% of global sovereign investors have any exposure to digital assets through investments in blockchain companies, this is changing.
In May 2022, J.P. Morgan’s global investment strategy outlook elevated digital assets as the preferred alternative asset class alongside hedge funds for 2022. For the first time in history digital assets displaced other alternative strategies. In the report it is noted that digital assets are expected to offer the greatest potential for generating alpha and hedge funds expect as much as 10 percent of their strategy to include crypto.
A PWC Global Crypto Hedge Fund report in August 2022, found that more than a third of traditional hedge funds now invest in digital assets, this was double the figure of 2021
Global crypto leader at PWC left his role to set up a $75 million digital assets fund Nine Blocks Capital in Dubai UAE. Henri Arsalanian, founder noted that it was Dubai’s crypto openness that influenced his decision.
Majority of MENA Investors invested in Blockchain infrastructure
MENA investors surveyed were asked where they allocated funds in 2022. 64% of respondents stated that capital was invested in Blockchain infrastructure projects. Following Blockchain infrastructure was DeFi. 38% of respondents stated they allocated funds to DeFi projects. Equally 33-36% invested in metaverse and crypto assets.
In addition 22% replied they invested in Non-Fungible tokens or NFT projects, while 17-18% of respondents stated investments went into e-gaming, tokenization projects, crypto mining and blockchain crypto payments.
Only 8% stated they invested in decentralized messaging and social media platforms.
The findings of the survey fall much in line with Cointelegraph’ s recent blockchain funding VC report which found that blockchain Infrastructure projects took half the pot of investments in November 2022. While the Web3 sector saw the most deals closed. The global blockchain infrastructure sector secured $483.9 million in venture capital in 2022.
According to Galaxy Ventures, Crypto and Blockchain sector saw $5.5 billion of venture capital invested in Q3 2022 through 518 deals. Despite the QoQ (quarter on quarter) decrease, the $5.5 billion invested in Q3 is $2 billion greater than the 7-year average of $3.1 billion and more than $2 billion higher than the 2020 peak.
MENA investors will invest more in 2023
51% of those surveyed stated they would allocate more funds to blockchain and crypto entities in 2023. Only 15% replied they would not. In addition 33% were unsure. This means that potentially 84% of those surveyed could be investing more in blockchain and crypto in 2023.
Already investment companies such as TradeDog Group, the parent company of TD VC, have launched new funds. TradeDg Group launched their $100 Million Web3 blockchain special situation fund. The fund will re-structure and invest in projects with good products and businesses but struggling token markets.
Even UAE Cypher Capital VC announced in December 2022 the launch of a new $200 million fund which will focus on infrastructure and middleware investments in Web3. At the time they had invested in Rekt Studios and Fenix Games, while UAE Shorooq Partners also announced in March 2022 that they would be investing $150 million in Web3 startups. Many other investors across the MENA region have been following suite including Mubadala and G42 both based out of UAE.
Global players such as Goldman Sachs plans to spend tens of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and dampened investor interest. Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.
MENA investors view Blockchain infrastructure as biggest growth sector in 2023
According to 29% of survey respondents, Blockchain infrastructure projects will witness the biggest growth in 2023. Data gathered by BuyShares.co.nz, found that the global spending on blockchain solutions is expected to surge by 235% and reach $14.4bn by 2023.
Following, 21% view metaverse projects as high growth sector technology. This is in line with findings from Grand View Research, which states the global metaverse market is forecast to grow at a compound annual growth rate (CAGR) of 39.4% from 2022 to 2030.
Meanwhile 18% of those surveyed think DeFi will witness strong growth. DeFi has been the largest market cap activity within Web3, with a peak total value locked (TVL) of over $175 billion in 2021 shrinking to $39 billion in 2022. Yet Digital asset research firm Reflexivity Research in its recently published 2022 Annual Year in Review / Forward Outlook 2023 believes that given the blow to trust in CEXs, investors will be drawn to decentralized alternatives. The report believes DeFi TVL could make its way back to $75 billion or $100 billion.
12% of those surveyed view blockchain and crypto payments as one of the growth sectors for 2023. Cross-border payments and settlements are considered the most prominent blockchain use case. According to the IDC Worldwide Blockchain Spending Guide, Blockchain enabled cross border payments accounted for 15.9% of the $4.67-billion blockchain market in 2021. Juniper Research estimates that B2B cross-border payments on blockchain will account for 11% of the total B2B international payments by 2024.
When it comes to investment in tokenization projects 8% of those surveyed believe that tokenization sector will be a growth sector in 2023. 5% of those surveyed believe NFT sector will grow in 2023, only 3% of those surveyed believe crypto mining will be a growth sector.
Conclusion
In conclusion from the responses of 83 VCs, investment funds, across the MENA region that included names such as Oman Investment Authority, Equinox, Synaptech Capital, CypherCapital, Helion Ventures, Carter Capital, AlIImtiaz Investment Group, True Global Ventures, Roshan Investments, Crypto Oasis, Ghaf Capital Investments, Vault Investments, and many more, the reflection is a positive outlook when it comes to crypto and Blockchain and a growing interest in investing in projects. So while 2022 might have been one of the toughest years on crypto and Blockchain, it has not killed the appetite of investors in MENA!
As per an article in Bloomberg, Bitcoin and Ethereum options exchange Deribit, is setting to enter Dubai UAE in Q3 2023, as UAE regulators provide the regulatory environment that will allow them to operate in the country.
As per the report, the exchange plans to open a Dubai office staffed by a team of 10 people composed of both local hires and the company’s existing talent, Deribit Chief Legal, Compliance and Regulatory Officer David Dohmen told Bloomberg. The move could take place as soon as this summer.
The Panamanian exchange is also planning expansion into Brazil, the U.K. and Singapore, said Dohmen.
The total volume of bitcoin options on Deribit rose to $4.25 billion during the week of January 15th 2023, the highest since second week of November 2022.
That’s a 375% rise from the low of $895 million registered in the final week of December, according to data source provider Amberdata. Deribit is the world’s largest crypto options exchange, accounting for nearly 90% of the global trading volume and open interest.
The impressive recovery in volume has mainly been driven by an uptick in demand for call options or bullish bets offering protection against price rallies.
“The share of calls relative to put volume is currently at more than 66%, its highest level in over a year,” analysts at Kaiko Research said in a note to clients on Monday. “This is yet another indicator that sentiment has improved in January.”
The dollar value locked in the number of open options contracts, also known as open interest, has increased to $5.92 billion, the highest since Oct. 27. Bitcoin’s (BTC) price has rallied by nearly 40% this month.
Options are derivative contracts that offer the purchaser the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. The call option gives the right to buy, while put options offer the right to sell.
Options are widely used by both institutions and individual investors and often provide an accurate picture of sentiment in the broader market.
