Many people are now questioning the effect of FTX’s sudden collapse on the cryptocurrency industry. For example, it is still unclear if the crypto hotspots that thrive will remain or if they will suffer from a decrease in innovation.
Industry leaders in crypto-friendly regions believe that the FTX collapse will not hinder innovation, even though it is too soon to know the full extent of its impact.
For example, Dubai — which has been dubbed as one of the most innovative regions for crypto and blockchain development — continues to see ecosystem activity. Recently, The Algorand Foundation hosted its second annual Decipher Conference in Dubai. This organization is responsible for the Alogrand’s growth. The event took place Nov. 29–30, just weeks after FTX former CEO Sam Bankman-Fried stepped down and announced bankruptcy.
Decipher attracted over 1,500 participants from all parts of the globe, despite the many discussions surrounding the collapse of FTX. Algorand Foundation CEO Staci Warden told Cointelegraph the United Arab Emirates remains a vibrant blockchain capital. “This is fueled by a strong talent base in the region, a deep culture of innovation, and a diverse, engaged community,” she said.
Even with Decipher’s impressive turnout, it’s been noted that the Crown Prince of Dubai has plans to invest $4 billion to help grow the region’s cryptocurrency ecosystem. This is expected to add 40,000 jobs to the UAE’s economy over the next five years, which is impressive given that the country is already home to more than 1,000 companies operating in the metaverse and blockchain sectors.
Nilesh Khaitan, Founder of AcmeDAO — a Dubai-based platform that helps decentralized applications transact on-chain — further told Cointelegraph that rumors that the FTX collapse is impacting crypto hotspots globally may not necessarily apply to Dubai. He stated:
“It’s possible that Dubai’s crypto community has been unaffected in particular, or has even seen growth, due to increased regulatory uncertainty in other regions. Dubai may continue to see growth in its crypto community moving forward, particularly if the city offers a more attractive regulatory environment compared to other regions.”
While Khaitan remains optimistic about Dubai’s potential, he pointed out that the region still needs to focus on regulatory clarity between the UAE’s central bank and UAE Free Zone regions issuing crypto-specific licenses.
“This includes the establishment of a regulatory sandbox for crypto startups and entrepreneurs from the Virtual Asset Regulatory Authority (VARA). These challenges could be overcome through unified, strategic efforts by the government to promote Dubai as a favorable destination for crypto businesses and innovation,” he said.
Positive sentiment has been reported by other Middle East crypto hotspots. Tel Aviv is an established hub for startups and continues to put great effort into developing the entire blockchain ecosystem.
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Or Dadosh, co-founder and CEO at Ironblocks — a Web3 threat detection and prevention platform — told Cointelegraph that in Israel, there tends to be more interest in blockchain technology itself and building products on top of these networks.
“The community here is less driven by crypto trading and speculations around token performance when it comes to Web3 and blockchain,” he said.
According to a variety of cyber security companies that attended the Israel Crypto Conference, which was held in Tel Aviv on December 7, this seems to be true. Cointelegraph spoke with Ariel Shapira who was the organizer of ICC. He said that although it was smaller than last year, hundreds of people attended.
“While events like the FTX crash do have a temporary effect on crypto prices and projects’ abilities to raise funds, they never erase the optimism within the industry about blockchain as a technology. The blockchain technology is expected to transform the world, and crypto people know this. They understand the bear market is temporary,” he said.
Given this, Eylon Aviv, principle at Collider Ventures — a Tel Aviv-based venture capital firm focused on Web3 companies — told Cointelegraph that he believes the Tel Aviv crypto community will actually see an acceleration in growth. “Perhaps the phrase ‘no such thing as bad publicity’ is true, as founders are now specifically targeting problems that have arisen from the FTX fallout.”
Other than Tel Aviv and Dubai, the US seems to be moving forward with crypto hotspots. Austin, Texas is a great example of a city that continues to attract Bitcoin (BTC), miners. This was apparent during the second annual Texas Blockchain Summit that took place in Austin on Nov. 17–18.
Although the turnout was lower than last year’s Texas Blockchain Summit, there was still optimism about the future of the crypto sector. This may have been fueled by United States Texas Senator Ted Cruz’s friendly stance toward Bitcoin. During the summit, Cruz announced that he likes Bitcoin “because the government can’t control it,” further sharing that he makes weekly purchases of Bitcoin.
Lee Bratcher of the Texas Blockchain Council, summit organizer, said to Cointelegraph Austin is home many companies that encourage self-custody. Bratcher believes that Austin is home to more crypto holders who keep their assets on a hot wallet or a hardware wallet.
“The number of people that are building great Bitcoin and digital asset companies in Austin insulates it a bit from the chaos in the centralized exchange ecosystem,” he remarked.
Miami — one of the fastest-growing crypto hubs in the world — is also making strides. Miami is still the most popular destination for NFT artists around the globe. Art Basel was recently held in Miami and featured many NFT artworks.
The FTX collapse did not seem to have a significant impact on Miami’s spending habits. Jumana Al Darwish (serial entrepreneur, Web3 investor) said that although Art Basel Miami was filled with emerging talent and blue-chip artists, galleries were playing safe with what they had on display. She explained:
“With post-pandemic economic recovery in place and crypto winter being in full swing coupled with the latest FTX scandal, one could sense that visitors were more conservative versus the impulse buying behavior that had taken place in previous years.”
This shouldn’t come as a surprise, though, as a recent report from the Financial Times has also suggested that Miami nightclubs have taken financial hits following the failure of FTX.
It’s also interesting to point out that once-popular crypto cities like San Francisco have been gaining traction. Tegan Kline, co-founder and head of business at Edge and Node — a Web3 software development company — told Cointelegraph that Edge and Node recently opened a Web3 house in San Francisco to provide a coworking space for startups and entrepreneurs:
“Some U.S. hubs like Austin and Miami have taken away from San Francisco, but the startup ethos of San Francisco will never die. It is one of the few places in the world where you can talk about your crazy startup idea at dinner and they don’t kick you out, but rather offer to help — be it by financing, looking for talent, etc.”
Furthermore, Web3 is seeing growth in countries like Singapore. Oliver Xie, founder and CEO of decentralized insurance platform InsurAce, told Cointelegraph that although Singapore’s crypto ecosystem has been affected by the FTX collapse, there is now a stronger focus on Web3.
“Within the government, there are signs of a pivot away from crypto, the Deputy Prime Minister in a recent parliament hearing also said Singapore no longer seeks to become a global crypto trading hub, but rather will be focusing on real innovations with new Web3 technologies,” he said.
There are ongoing challenges for crypto hotspots
While it’s notable that crypto-friendly cities continue to thrive despite recent events, there are still a number of challenges that may result in slow growth. These ecosystems need regulatory clarity to succeed.
Yoav Zucker, Collider Ventures’ chief marketing officer, stated to Cointelegraph that regulations remain a major problem in the Israeli market. Although Israel’s chief economist recently developed a list of recommendations as to how policymakers should tackle digital asset laws, Tzucker still believes that regulation is lacking.
“I think that this is the main barrier for Israeli founders in the Web3 ecosystem.”
Even in regions such as Dubai — which has established laws on virtual asset regulation and has created authorities like the Virtual Asset Regulatory Authority (VARA) — regulatory clarity still needs to advance. Linda Adami, the founder and CEO of Dubai’s Web3 platform, said that although companies like Binance and Kraken have been granted licenses in Dubai they need more local companies.
“Similarly to how Emirates Airlines established Dubai as a tourism and service hub, what will be the future Dubai-grown Web3 native success stories,” she said.
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Although crypto regulations are still a hot topic in the U.S., Bratcher said that emerging crypto cities such as Austin lack the capital flow found in New York City and San Francisco.
“Austin needs a continuation of the inflow of venture capitalists and capital from Silicon Valley in order to further establish itself as the epicenter for the Web3 digital asset ecosystem.”
Klein pointed out that although this might be true, the increasing amount of crime in San Francisco and the homelessness are driving talent away. Yet, she believes that Edge and Node’s Web3 house may serve as a solution to this problem, stating, “We have many events and initiatives happening at the Edge and Node House of Web3 regarding how we can use Web3 tools to work toward solutions to help heal San Francisco.”