“Regulations have propelled the UAE to be a key player within the global crypto community” – Cypher Capital

CNME Editor Mark Forker spoke to Bill Qian, CEO of Cypher Capital to find out how continued investments in Web3 infrastructure will help drive the new digital economy, have investors lost trust in cryptocurrency – and why the UAE’s open-minded approach to regulation has made it a global hub for crypto exchanges.

Can you provide us with a broader overview on what Cypher Capital does – and how its investments in Web3 infrastructure will help drive the new digital economy? 

Cypher Capital is a forward-looking investment firm that focuses on identifying and supporting innovative projects within the Web3 ecosystem.

Cypher Capital recognizes the transformative potential of Web3 and seeks to play a proactive role in its development.

In terms of Cypher Capital’s investments in Web3 infrastructure, the company strategically allocates resources to projects and technologies that underpin the Web3 ecosystem’s growth.

These investments encompass a wide array of areas, including blockchain platforms, decentralized finance (DeFi) protocols, non-fungible tokens (NFTs), decentralized identity solutions, and more. By contributing financial backing and expertise to these foundational technologies, Cypher Capital helps to build the essential building blocks of the new digital economy.

The impact of these investments is multifaceted.

Firstly, they contribute to the creation of a more democratized and inclusive digital economy. Web3 technologies enable greater participation, allowing individuals around the world to access financial services, participate in digital markets, and exercise ownership over their data and digital identities.

Secondly, Cypher Capital’s investments foster innovation and collaboration. By funding and supporting projects that explore novel use cases and applications for blockchain and decentralized technologies, the firm encourages the development of groundbreaking solutions that can potentially reshape industries, from supply chain management to entertainment.

Cypher Capital’s investments in Web3 infrastructure are not just financial endeavors, but strategic contributions to a new digital era.

By nurturing the growth of decentralized technologies, the firm actively participates in shaping an economy that empowers individuals, fosters innovation, and promotes trust in the digital realm.

There has been an evolution from Web 1 to Web 3, but can you shed light on the evolution of the UAE’s relationship with the international cryptocurrency community over the last couple of years? How has that relationship evolved over time?

I think regarding the UAE, initially, the country has not been that significant in the global crypto community. However, over the past 20 to 36 months, a series of changes to visa regulations has played a pivotal role in propelling the UAE into a central position within the global Web 3 and cryptocurrency community.

This transformation can be attributed to the implementation of more permissive regulations by the UAE, in stark contrast to other nations like China that have imposed bans on cryptocurrencies without clear justification.

And I think the US is way too aggressive rather than managing it in a proper way. In contrast, the UAE stands out for its sophisticated and open-minded approach, welcoming global entrepreneurs, and investors.

So that’s one thing. And also, the country, in general, not only for the crypto community but also for technology investments and start-ups, the policies here are very good and relaxed because it is very easy to set up an offshore company and levies zero corporate tax. It is also easy to issue a working visa in general in the UAE.

On top of that, I think that the time zone here is also very favorable for founders based in the country as it is convenient to deal with Asia, Europe and the PST and the Eastern Time.

Has investor confidence been rocked by high-profile crypto scandals such as FTX and Binance? Have investors been put off by concerns over cryptocurrency, or does the industry remain in a good place?

I think there has been a positive and negative driver for crypto in the past 12 months. But from the result perspective, I do want to remind every audience that Bitcoin is the most outperforming asset class this year. I think it has doubled already.

Bitcoin is the most outperforming asset class. It outperforms US equity, global real estate, or corporate bonds, and many others.

However, the counter argument would be that Bitcoin will drop a lot like the last season, right? But this is sort of like a signal of the resilience of crypto.

I want to elaborate on one example. During the week of the collapse of the Second Valley Bank, Bitcoin went up because people are losing face more or less to the traditional financial institution.

And I feel like at the end of the day, being backed by a centralized credit is not that credible as compared to those backed by the mathematics, which is Bitcoin.

So, I think those are the pros of the crypto world. But of course, like any other, there are a lot of drawbacks to digital currency as well. For instance, FTX, Lunar and also the controversy about the Binance etc.

And we feel like this is literally a dark forest. It’s like the Wild West Gold Rush. So, at the end of the day, people can win the game as long as they don’t have the bottom line.

They can play any kind of unethical game with their coding capability. So, this is negative. But this can turn out positive in the long term because of FTX, or Lunar, etc. Now the regulator. This is not a dark forest, as I can just leave it away. I have to tap into and protect the retail investor and their interests.

I would definitely concur with you that crypto is legit industry. However, how does it go to the next level, what is the future of cryptocurrency?

I think the key thing about crypto in the future – I would divide it into 3 categories. The first one will be the use case. So far, for crypto, it’s still like another brand new digital Fintech.

Apart from fintech, trading, etc., there’s no other daily life use case. I mean for the Web too. You know there are no other daily life use cases, not only about payment through Apple Pay, which is a Web 2 experience, right? But we also check Netflix, we check WhatsApp, all those are the daily active use cases.

But for Web Three, we still lack the real, highly frequent daily use case, which we need to work along with the founders and developers in the future. And let’s imagine that in the foreseeable future, there will be like a billion users who are using the web suite. And let’s say that the website is going to be double digit trillion dollars. So that’s one driver.

The second thing would be the rules of the game. Before there was literally no rule of the game. SBF can move all the money from the user account to do their leverage, et cetera. And those kinds of things have certainly been forbidden in the traditional Fiat and the financial industry since maybe 100 years ago. We only see those kinds of scams in the traditional finance industry, maybe back in the 19th century.

But it’s never the case in the 20th century. But in crypto, those kinds of scams are still happening. So, I think the rules of the game would be very important. The third thing would be the backbone, which is the technology used.

So, the reason that we invest in a lot of technology and founders is because we have a strong faith at the end of the day. Of course, the use case needs some inspiration. I mean, like Facebook or WhatsApp.

You know, those kinds of ideas are inspired by some certain great founders, but also these inspirational use cases need to be delivered through sophisticated technology and infrastructure.

You described the UAE’s regulation towards cryptocurrency as being ‘open-minded’, and that is why it has become so attractive to crypto exchanges. However, can you elaborate more on how the UAE is ahead of the curve when it comes to digital asset regulation?

The country welcomes all the global founders instead of just pushing them away without any sort of sophisticated research or decision-making process.

I think this attitude is great enough to accept and attract a lot of the founders. The thing is a lot of founders got very harsh treatment in other jurisdictions via different investigations, and civil charges. So, I think at the end of the day, the founders have a strong passion and are very self-motivated.

The reason to set up a start-up is the environment that welcomes them, and also where they have access to a good facility, the investor community, the start-up, and the incubation ecosystem.

When will we see adoption in the use of cryptocurrency amongst the mainstream, and what are some of the various usages of it in terms of industry verticals outside of FinTech?  

I think there are a lot of well adopted products. They are adopting crypto into their use case. Just several days ago, PayPal announced that they’re going to launch a stable point as well.

Imagine like, more than 400 million global users obviously including users from the MENA region.

They began to transfer the money to all their global friends. Before the cost was like 1 per cent or 2 per cent, but now literally, with the help of the stable point, it will decrease to nearly zero. And the speed is going to be instant as well. So, I think for those kinds of adoption, change is significant to lead to the next season of crypto.

I think the next season of crypto adoption, not only in the MENA region but globally, is going to be a massive adoption. Either in fintech or peer-to-peer money remittance, or other range of the use cases, like the social network and entertainment.