The Middle East has been making strides in Web3. The United Arab Emirates (UAE) established digital assets regulators such as the Virtual Assets Regulatory Authority (VARA) in Dubai and the Abu Dhabi Global Market (ADGM) in Abu Dhabi. Last year, ADGM-based Hub71 launched a $2 billion initiative to support Web3 startups in the region. Thanks to its favorable stance towards cryptocurrency, innovation, and tax incentives, the UAE has become a hotspot for crypto and blockchain projects and funds. And now Saudi Arabia, its rival, is ambitious to prove it can become its own Web3 hub.
U.K.-based Outlier Ventures recently announced it is launching its own Web3 accelerator program in partnership with Saudi’s National Technology Development Program (NPDP). “The level of dedication, education, and international experience of the highly skilled workforce, as well as the people coming to the Kingdom, is very interesting to see,” said Outlier Ventures CEO Stephan Apel.
“While the Web3 ecosystem in the Kingdom is still developing, we observe an extraordinarily fast rate of development and a huge potential,” Apel told CoinDesk.
Saudi Arabia’s $95 billion Public Investment Fund (PIF) has reportedly held partnership talks with Andreessen Horowitz (A16z), one the leading VC backers of Web3 startups. Animoca Brands, a leading Asian Web3 gaming VC, has partnered with King Abdulaziz City for Science and Technology (KACST) in the capital, Riyadh to advance the gaming ecosystem in the country.
Speaking at The Outer Edge Summit, held at The Garage, a 28,000 meter squared startup district in KACST, Robby Yung, CEO of Amonica Brands lauded opportunities in Saudi Arabia and the Middle East. “We are coming here a little bit late, we recognized the opportunity here a decade ago but didn’t have the resources to tackle a new market at that time,” he said.
“Here’s a really big piece of the world map… Since 2020, the UAE has become a gathering place for Web3 as a community because of the regulatory framework. Here, you have a huge country and over 60% of them are under the age of 30. Those are gamers, those are our people. So, we want to be on the ground, we want to understand how we can communicate with them. We felt it was important to start here as a point of contact,” Yung told CoinDesk during Animoca’s Outer Edge Summit in Riyadh.
Meanwhile Golden Gate Ventures, a Singapore-based VC firm, has expanded its offices to the Gulf region and sees Saudi Arabia as the next frontier.
“Overall, investment appetite in Saudi Arabia is very healthy, although we haven’t seen Web3 as prominent as in other parts of the region. With the increased investment in artificial intelligence, we’ll see more investments in Web3 follow swiftly,” Micheal Lints, a partner at Golden Gate, said.
Saudi Arabia has advantages and disadvantages when it comes to attracting Web3 investment. It ranks in 62nd place in the World Bank’s “Ease of Doing Business” country index, outperforming for criteria like “setting up a business” (38th place overall) and “getting electricity” (18th). It does less well for “getting credit” (80th place) and “trading across borders” (86th). Its policies on women in the workplace, and alcohol, may make it unattractive to startups used to operating in less socially-restrictive environments.
A metaverse NEOM
XVRS, the metaverse platform for NEOM, the $1.5 trillion desert city that was announced in 2017, is one of Saudi Arabia’s largest Web3-related projects to date. More than $1 billion has been invested in the creation of an immersive digital twin of NEOM, it has been reported. The space will offer immersive entertainment, a social platform, and a built-in digital marketplace for crypto and NFTs, the project backers say.
During the Saudi Ministry of Investment Association’s inaugural Leap Summit, in February, the Hashgraph Association announced a five-year partnership to support local tech startups, including DeepTech, a $250 million venture studio. Leap Summit, Saudi Arabia’s annual tech conference, attracted more than 220,000 attendees this year – nearly double that of Las Vegas’ Consumer Electronic Show (CES).
Legislation
While the Kingdom’s legal provisions for cryptocurrency are unclear, a report from blockchain analytics firm Chainalysis reveals growing appetite for crypto among the Saudi population of 36 million. Saudi crypto investors amassed more than $350 million in crypto gains in 2023, overtaking the UAE, which recorded approximately $204 million in during the same period, the analysis shows.
Binance, the world’s largest cryptocurrency exchange, is eyeing the country as a source of growth, according to Bandar Al Tunis, Development Lead for Binance in Saudi Arabia. Binance is talking with regulators, including the SAMA central bank and the capital markets regulatory authority, along with the Ministry of Communications and Information, he said. Al Tunis hopes for “high-level” regulation for digital currencies in the country as soon as this year.
“I think it’s one of the most important places in the world in terms of opportunity, in terms of growth, in terms of the willingness of the leadership, in terms of nimbleness of the leadership and the capability of the local population,” he said.
“We are hopeful [the regulatory framework] will happen this year. Obviously that’s not something that we have control over, but we’re on the ground. We’re ready.”
Saudi Arabia’s proactive approach to fostering innovation, coupled with strategic partnerships and its Vision 2030 initiative, positions the Kingdom as a significant contender in the global Web3 landscape. But time will tell if the current expectation, driven by government impetus, results in a sustainable Web3 industry.