The global startup ecosystem is booming than ever before. Startups are increasingly deploying new solutions to cater to existing market needs, and venture capitalists are in full support. In 2021 alone, startup funding reached a hallmark of $621 billion.
While much of this funding attention has been directed towards new-age fintechs, the crypto ecosystem is getting its fair share. Funding for global blockchain and crypto startups hit a whopping $25 billion last year. Amid this funding wave is Saudi Arabia and its budding crypto ecosystem.
Here, we will discuss Saudi Arabia’s fast-expanding crypto space and the ecosystem’s progress on venture funding.
Saudi Arabia’s Crypto Space
Saudi Arabia has long been established as a global leader in technological advancements. This includes emerging technologies like the metaverse, Artificial Intelligence (AI), and most recently, crypto. While the Saudi Arabian government initially took a cautious approach toward crypto due to the asset’s volatility, regulators seem prepared to embrace it.
For instance, the Saudi Arabian Central Bank recently hired Mohsen Al Zahrani, a former Accenture director, to lead its virtual assets and digital currency program. Many experts in the crypto space have suggested that this move indicates that the Saudi Arabian government may now be open to embracing crypto within its financial system.
However, even when the Saudi Arabian government was not exactly receptive toward crypto, the country’s crypto ecosystem grew steadily. However, this growth was mainly confined to the number of crypto investors within Saudi Arabia. While many crypto and blockchain startups operate in Saudi Arabia, few are indigenous to the country. This trend is due to Saudi Arabia’s initial ban on cryptocurrency.
Venture Capital Funding in Saudi Arabia’s Crypto Ecosystem
Markets are flooded with tech solutions, and venture capitalists are eager to channel their funds into these solutions. While the growth of Saudi Arabia’s crypto ecosystem has been minimal in recent years, this situation might change in the coming years. This is due to some factors.
First, Saudi Arabia’s regulatory approach to crypto is likely to be more friendly in the coming years. The recent hire by the SAMA indicates that Saudi Arabia might be interested in creating a conducive environment for crypto to thrive. If this is achieved, crypto startups will likely emerge in the Kingdom. Given the favorable regulatory environment, venture capitalists will also be more inclined to invest in Saudi Arabian crypto startups.
Another factor that will likely contribute to the increase in venture funding for Saudi Arabia’s crypto ecosystem is the existence of market demand. Currently, there are about three million crypto investors in Saudi Arabia. These investors will need crypto solutions to ease their trading and investment activities. Essentially, crypto startups that emerge to meet this demand are likely to be profitable. Venture capitalists are keen on startup profitability, so this might be a significant factor in their investment decision.
Saudi Arabia’s crypto space has enormous potential. If the Saudi Arabian government eventually embraces crypto, the regulatory stance will attract much-needed funding to the Kingdom’s startups.