the insider

East and West Battling to Become the Biggest Crypto Hub

East and West Battling to Become the Biggest Crypto Hub

By 2021, the FinTech market grew to be the size of over $110 billion, and experts are forecasting a reach of over $330 by 2028. When we talk about FinTech, we can’t leave cryptocurrencies and the technology behind them: the blockchain. The crypto boom started in 2020 when institutional capital started flowing into the space. 

Cryptocurrencies reached the mainstream media after they became more accessible to everyone and institutional capital flowed into the space. They also called the attention of jurisdictions all across the globe. While some governments like the Chinese tried to ban it, other states in the western and eastern atmospheres, such as the UK, France, or The United Arabs Emirates, are working towards becoming the largest crypto hub in the world. But, why? Let’s have a look: 

FinTech Startups in the West, is London Still the King for the Industry?

While FinTech startups and crypto projects usually see European cities as a great start for their businesses, London remains the number one option for the industry, and there are two main reasons for that:

  • London has the biggest number of software developers than anywhere else on the continent. 
  • London has liquidity: there are already over 3,000 FinTech companies in London, and the average early-stage funding per startup in London is over $650k, while the global average is barely $490k.

On June 7, the UK government opted for live testing blockchain technology to see how well they integrate into traditional financial markets. Gwyneth Nurse, Director of Financial Services said that the integration of Distributed Ledger Technology (DLT), which blockchains are a type of DLT, can greatly aid the UK in becoming the crypto hub in Europe.

While the UK and the European Union, in general, are attractive spots for FinTech companies, the lack of regulatory clarity for cryptocurrencies obliges potential projects to search for jurisdictions with better regulatory frameworks.

However, it wasn’t long ago when the EU announced that they are “getting closer” to establishing a proper regulatory framework for cryptocurrencies for the twenty-seven countries that represent the EU. An agreement is expected to be adopted by the end of this June.

FinTech Moving to the East

South Korea, UAE, Israel, and more eastern countries are becoming popular options for FinTech startups to set up shop. In the Middle East, Saudi Arabia is becoming a hotbed for the FinTech community, especially when it comes to digital banking. In 2021, the fintech sector in the Middle East accrued over a 30% compounded annual growth rate (CAGR), and some analysts predict the total capital funding could reach up to $2 billion by the end of 2022.

The reason why more FinTech companies are moving to eastern countries, especially those in the Middle East, is that they see them as untapped potential. The Middle East, for example, is a region that has lagged behind the United States or Europe when it comes to digital banking, so financial technology is always a popular topic within the region.

In Asia, South Korea’s new president-elect said he has “great plans for crypto” and that the Korean government is working towards a new regulatory framework that can turn the country into a crypto hub. 

Final Thoughts: West vs East FinTech

Both scenarios present key advantages and also challenges for FinTech companies. While western European countries are still the number one option for FinTech startups, the lack of a proper regulatory framework for the industry is concerning. 

As we previously stated, eastern countries are seen as the untapped potential that can provide more freedom to FinTech companies in the future. The Middle East is one of the jurisdictions where FinTech is blossoming. Saudi Arabia seems to take the lead here as more Venture Capitalist firms are investing in local startups and projects, so we could probably see a future where Saudi Arabia becomes the frontrunner in advanced banking, cryptocurrencies and blockchain solutions.