GamesHUB #19 | UAE Blockchain Adoption and Evolution with Tykhe Block Ventures

When we started the fund, we registered the fund in the US. We wanted to be a licensed fund. We were talking to a lot of family offices. They were straight up asking us if the crypto fund is a licensed registered fund and SEC and other regulatories in the US.

I can’t register it as a fund. So my next choice was UAE. In the UAE, you can go to places like DIFC, Dubai International District. HGDM is another organization in Abu Dhabi. You can purchase and apply for these licenses here, you can run a crypto fund here, you can set up a crypto startup here, you can do so many things in a much more sophisticated and organized way.

So that was the reason why we shifted to the UAE. And the thing about the UAE is although all the government organizations here, they run like corporations. As people are estimating that blockchain tech will contribute roughly 2 trillion or so to the world economy, this is a huge opportunity for them to invest in.

I think in 2021, they started seriously looking at blockchain. Each ministry started giving out clear directives on implementing blockchain. They brought a lot of awareness within this ecosystem. They brought a lot of education within this ecosystem and started implementing blockchain technology within all these ministries. I think in 2021 itself, almost 50% of all the transactions across all these ministries were on blockchain itself.

I think instead of over complicating it, they simply took whatever rules and regulations they had in the normal financial world. If you want to give financial advice, there is a license. Similarly, if you want to crypto financial advice, there is a license. If you want to manage other people’s money, run a normal fund, there is a license. Traditionally, there is a similar license if you want to manage money and run a crypto fund.

They just kind of replicated whatever existed in the traditional frameworks rather than debating on whether a token is security or not, which is what we see happening in the west. So in that way, this is still nascent, but they were able to implement and set up frameworks and regulations pretty fast.

In 2022, I think the Ministry of Economy here launched an initiative called NextGen FD. So the fund that you’re talking about as part of that initiative. So they had some career guidelines. They wanted to attract the next gen startups and entrepreneurs.

They are ready to help you with visas, banking services, and commercial agreements. There’s zero corporate tax. I think since then, around 700 to 800 crypto companies have already set up finance blockchain.com, and they even set up a Dubai virtual asset regulation authority, like overarching this entire setup.

When you get all these ingredients in one place, it’s just a very, very nice place to be. If you are a builder, it’s a nice place for you. If you’re an investor, it’s a nice place for you. It’s just supremely perfectly cooked.

The full form of this country is the United Arab Emirates. Dubai is an Emirate, Abu Dhabi is an Emirate. They have separate businesses, they have separate bank rolls and they have separate plans.

They are competing with each other. In terms of all these crypto regulations and licensing, Abu Dhabi has been a little front runner and nobody really talks about it. Dubai is on the front page a lot, but Abu Dhabi has been slowly giving out licenses since the last year and a half to two years.

Dubai has only started giving out the licenses this year. They’re already front running in that aspect. A lot of conferences happened in Dubai because this is more touristy, so you get to hear about Dubai more. But I think Abu Dhabi is where the actual things have been happening for quite some time now.

When I talk about crypto funds like us who understand this web three space really well, I’ll really end up investing in Defi NFT space or NFT infra, Bitcoin DeFi. And there are a lot more verticals that we as crypto funds understand, but when a fund, which is governed by a sovereign wealth fund, they start such an initiative.

I think what they’re looking for are companies who are actually building real life use cases using blockchain tech rather than people building things for blockchain developers or web three users.

How governments have evolved here is just going to make it easier for them to just invest in companies who are building tech, which can be useful in the oil and gas industry.

Most of the oil and gas industry here is truly used as blockchain to the state. And most of the shipping industry here already has started implementing blockchain technology within themselves. So I think as a fund, their focus would be majorly towards that.

When we launched the fund in the UAE, we already committed and we had plans that we commit at least 25% of the fund to the startups, which are coming from this region. I’ll quickly want to talk about our general partner.

Our general partner’s name is PR Malik. He’s a Silicon Valley veteran. He was an ex Facebook guy, first 15 employees at Facebook. He built something called Apache Cassandra when he was at Facebook. It is now the world’s biggest distributed database system that exists out there. Netflix runs on it, Instagram runs on it, Facebook Messenger runs on it, Apple Cloud runs on it.

So all the initiatives in this region, what they want to do is they want to create this UAE blockchain ecosystem into the next Silicon Valley of socks. And my general partner kind of fits that build where he was already in Silicon Valley and built a lot of successful startups there. So we really want to invest in companies who are coming in from this region, and also we come with that expertise that we can help these companies being built and to scale properly.