When the blockchain and crypto industry started anchoring in KSA around 2018, “proceed with caution” was the general sentiment of Saudi authorities. The Saudi Central Bank (SAMA) warned about the risks of trading in digital assets and warned Saudis not to pursue crypto.
Fast forward to 2023, that sentiment has drastically shifted. In this article, we will explore how KSA’s adoption of and investment in blockchain, web3, and the metaverse (part of Crown Prince Mohammed Bin Salman’s 2030 vision) are playing various roles in shaping the Kingdom’s, and maybe, the region’s future. Despite UAE’s notable efforts in acquiring the “blockchain hub” title, Saudi Arabia has the fastest-growing economy in the G20 and the largest economy in the Middle East. The kingdom is fully capable of snatching the title if it wishes to do so!
Soon after the blockchain wave hit the GCC, crypto crept behind. And with crypto comes a great deal of regulatory frameworks and legislation.
Now KSA and UAE are very close friends, but each has its own plan of becoming the next Middle East’s tech beast. Having said that, the pro-chain approach of the Kingdom may have been fuelled by UAE’s favorable regulatory frameworks and trading licenses that have been put in place for digital assets and exchanges in 2022.
Five key demographics and numbers to highlight
- Saudi Arabia has the biggest gamer community in the world with respect to the kingdom’s population. (You read that right.)
- 70% of the population are digital savvies under 30.
- Saudi Arabia was one of the strongest crypto markets in 2022, with cryptocurrency transaction volumes surging 195 percent year-on-year.
- Three million Saudis own or trade in crypto. That is a staggering 15% of the adult population.
- KSA launched investments worth $6.4 billion in future technologies.
The 2030 Vision and its financing arm: The Public Investment Fund Program (PIF)
As Saudi Arabia races to diversify its economy from oil in the face of fierce regional competition, Crown Prince Mohammed bin Salman unveiled his “2030 vision” in 2016 and announced its roadmap to harness the kingdom’s strategic position and investment power. KSA is undergoing “unprecedented reforms in the public sector’s operating model, the economy, and society as a whole”.
“We worked on improving the effectiveness and response of the government, unlocked opportunities for growth and investment, opened Saudi Arabia to the world, built and launched platforms for future growth, and increased citizens’ quality of life. These achievements belong to the sons and daughters of this great nation.” — 2030 Vision overview
More on 2030 Vision: https://www.vision2030.gov.sa/
It is safe to say that today the PIF has become 2030 Vision’s global investment powerhouse, driving the Kingdom’s economic transformation. PIF is working to unlock value in the Saudi economy by creating globally competitive national champions across multiple sectors.
“PIF is evolving into a primary driver of Saudi economic growth. We have doubled its scope and we will continue with steady steps toward realizing its Vision 2030 objectives” — Crown Prince Mohammed bin Salman.
PIF and blockchain gaming
2022 investments that caught my eye:
- In February 2022, the PIF increases its initial investment in South Korea’s blockchain and NFT-enabled gaming NCSoft Corp (the publisher of the popular online role-playing game Lineage W) and currently owns a 6.69% stake, positioning the PIF as the fourth largest shareholder in NCSoft.
- The fund also bought 5% of the South Korean gaming giant Nexon for $833M, also making it the fourth largest shareholder in one of the world’s largest interactive game companies based on market capitalization. Nexon dived into blockchain in 2022 and announced that it will start rolling out blockchain gaming using one of its top franchises, MapleStory.
- The same year, the fund took a 5.01% stake in Nintendo Co., marking its third investment in a Japanese games company.
- Savvy Games Group, owned by the PIF, announced that it will invest $37.8 billion in initiatives aimed at “making the kingdom a global hub for gaming”, through:
🔰 Setting up 250 games companies in Saudi Arabia
🔰 Creating 39,000 jobs
🔰 Raising the sector’s contribution to Saudi GDP to around 13.33 billion dollars by 2030.
2023 Stats:
DappRadar, the market analysis firm, dropped the news that gaming grew to 48% of all blockchain activity during the month of January, up from 45% in December 2022. Now here is the interesting fact: as of February 2023, the combined market capitalization of the above three companies, led by far by Nintendo Co., is $7.058 trillion. The PIF is “game” indeed, but what percentage of that will be on-chain and decentralized? We are yet to explore what 2023 will hold for this sector.
Aramco and blockchain adoption
Being recognized by Forbes as an “early adopter of blockchain technologies”, the world’s most profitable company and biggest oil producer did not shy away from taking a deep dive into blockchain!
Aramco first started harnessing this technology to standardize business processes, increase efficiency, and reduce costs. They are also using blockchain to enhance cybersecurity, data resilience, privacy, data quality, and fraud.
Of Aramco’s strategic manœuvres:
- Between 2020 and 2021, Aramco invested in a few blockchain platforms such as Data Gumbo, VAKT, and IR4LAB. Data Gumbo and VAKT are platforms that contribute to the management and automation of new contracts/invoices, bidding farewell to paper-based processes. IR4LAB, on the other hand, provides solutions that help corporations detect fraudulent resumes and professional qualifications.
- Aramco also partnered with IBM and deployed its own corporate blockchain platform to scale up its blockchain solutions. Strategic collaborations between the two also included establishing an innovation hub in Riyadh, Saudi Arabia.
- Aramco used its partnership with WEF to become one of the first companies in the region to scale and pilot WEF’s blockchain deployment toolkit. It is no surprise that Forbes included Aramco in its blockchain top 50 in 2021, and it is worth mentioning that Aramco was the only company from the Middle East to make it to that list.
Although Aramco has been funding start-ups in the tech domain for years now, the biggest announcement came in February 2022, with the company launching the billion-dollar global VC fund: Prosperity7 Ventures. The fund has a long-term view to back the development of next-generation disruptive technologies by supporting entrepreneurs in building transformative companies that are scalable, interoperable, and prosperous. The VC’s investment areas revolve around blockchain, deep tech, B2B, B2C, AI, fintech, and MedTech.
Saudi Arabia and The Metaverse
According to Strategy& Middle East, part of the PwC network, the metaverse will inject $15bn into Gulf economies in 2030, and Saudi Arabia is expected to dominate with a $7.6bn contribution. The report highlights travel and tourism as the top reapers of the metaverse with an estimated gain of $3.2bn.
“There could be metaverse tours of AIUla, Saudi Arabia’s first UNESCO World Heritage Site, or of fashion festivals, spas, wellness retreats, and entertainment and sports events. Metaverse visits would inspire in-person travel. Later, travelers could return through the metaverse to relive their experiences.” — Jad N. Baroudi, PwC - Strategy& Middle East
In September 2022, Saudi Arabia’s National Day was celebrated over the course of three days in the metaverse! Organized by The Bold Group and hosted on Decentraland, the festivities included a virtual museum, NFTs, virtual merch, as well as POAPs.
“Fusing our past with our future, we are honoring the storied history of the Kingdom, preserving our heritage and displaying it with pride for people to engage within the new digital realm.” — Abeer Alessa, CEO of The Bold Group.
Abdullah Alswaha, the Kingdom’s Communications Minister, was adamant about stressing how KSA is “doubling down” on talent and technology in the industrial metaverse in WEF last month. The minister was also very proud of the increase in the number of women in tech and metaverse projects in the country. In April 2022, the participation rate of females in the tech sector stood at 28 percent in Q3-2021T, and to 32 percent in Q1–2023. That is above the European average rate, which is 17.5 percent.
“We have jumped from 7 percent women empowerment in tech and stem to 32 percent, surpassing the EU, G20, and even the Silicon Valley average. It’s not a surprise that in terms of women founders, the Kingdom today globally ranks number one.” — Abdullah Alswaha
The Kingdom’s metaverse adoption is clearly on a roll, as WEF’s 2023 annual meeting was filled with promising announcements.
🔰 The Board of King Abdulaziz City for Science and Technology (KACST), Chairman of the Board of The Research, Development, and Innovation Authority (RDIA), and Børge Brende, President of WEF, signed a letter of Intent to establish a new accelerator program in order to help ignite innovation in the Kingdom.
🔰 The Kingdom’s role was highlighted as a Pioneering Partner in the Forum’s Global Collaboration Village, which will leverage the metaverse to serve the global community. Saudi Arabia’s house will open doors to opportunities, investment, and collaboration between national stakeholders and international entities. The house will also organize events that will enable people to interact with one another and share knowledge.
🔰 Saudi ARAMCO was highlighted as the first company to build a house in the Global Collaboration Village.
NEOM
Neom — the $500bn Saudi megacity under construction — will include a 170km straight line city, to be known as The Line, an eight-sided city that floats on water, and a ski resort with a folded vertical village, among other grand projects with challenging architecture. Neom Tech & Digital, now rebranded to Tonomus, invested $1bn in 2022 in AI and the metaverse.
Shortly afterward, XVRS, a 3D cognitive digital twin metaverse platform, was announced to the world. The platform is envisioned to enable a ‘mixed-reality’ urban living model through phyigital architectures powered by hyper-connected technologies and AI features. XVRS aims to offer users the ability to be in different locations across the metaverse in real-time (via teleportation) as an avatar, hologram, or robotic avatar. This project will very much position Neom as the world’s first cognitive community.
“The metaverse would allow people from across the globe to visit Neom virtually before investing in the city. Digital Twin technology is already being used in the construction of The Line, and will help improve the lifestyle of residents once the city is complete.”
“XVRS is the only iteration of the metaverse currently in development that will be a mixed-reality, 3D digital twin of a physical place — in our case, the NEOM community. It will be comprised of next-generation digital assets that users can interact with in the real world. We are delighted to share with the world how NEOM and Saudi Arabia are using cutting-edge technologies to have a positive impact on our lives.” — Joseph Bradley, CEO of Tonomus.
Last month, Tonomus Venture Studio (TVS), the building and investing engine of Tonomus, announced a new metaverse venture competition. TVS will build a portfolio of ventures as well as a global talent capability by launching a new generation of entrepreneurs. The metaverse competition is the first of a series of competitions that will feed into the Studio’s cognitive ecosystem’s pipeline, focusing on:
🔰 Web3
🔰 Hyper connectivity and hyperscale data centers.
🔰Computing capability, data privacy, and intelligent analytics.
🔰 AI, robotics, and networking equipment
🔰 Cloud infrastructure, digital twin technology, and gaming.
TVS’s competitions seek ideas that leverage the metaverse across a broad range of industries such as tourism, enterprise training, e-commerce, real estate, construction, arts and culture, entertainment, and many more. Four winning teams will be invited to TVS’s 12-week incubator program.
More on the program here: TONOMUS.NEOM.com
Blockchain and Healthcare
KSA is a prominent healthcare provider in the MENA region. For several years, the Kingdom has been relentlessly working to deliver innovative patient treatment and boost international partnerships.
Last week, King Faisal Specialist Hospital & Research Centre has announced the introduction of innovative healthcare solutions at LEAP 2023, Saudi Arabia’s most prominent technology event. As a primary supporter of Vision 2030’s healthcare transformation goals, KFSH&RC is set to:
🔰 Introduce a virtual reality program to aid children with autism in developing essential life skills
🔰 Reduce healthcare access limitations and enhance staff training through metaverse adoption
🔰 Use blockchain technology for the hospital’s reward system for patients and staff.
These initiatives are part of the “patient experience” pillar. KFSH&RC’s two other pillars are Operational excellence and quality of care.
KFSH&RC has also recently deployed a blockchain-based digital credentialing solution for all of its residents. the hospital can now publish digital certificates directly on the blockchain where they can be verified by residents.
“KFSHRC is now able to securely issue, manage, track, and verify hospital credentials in a much faster, efficient and convenient manner. Residents receive a secure email that allows them the ability to view their verified credentials on the blockchain and/or download it directly to their digital mobile wallets.” — KFSHRC statement
KSA also recently launched the biggest virtual hospital in the world and the Middle East’s first-ever virtual hospital. SEHA virtual hospital (SVH) connects 130 hospitals around Saudi Arabia, offers 24-hour remote monitoring via IoT, and has the capacity to treat more than 400,000 patients a year. More on the topic here.
Cryptocurrencies
The Halal argument
Digital assets have been controversial in the Muslim world. Because of the high degrees of volatility involved in crypto markets, some Islamic scholars have argued that trading crypto is effectively the same as gambling and is therefore haram. Last year, crypto was deemed haram in the world’s biggest Islamic country, Indonesia. The jury is still out.
Meanwhile, according to a recent Chainalysis report, Saudi Arabia was the largest cryptocurrency market in the Gulf in 2022. I believe that the Kingdom started taking proactive steps last year to leverage this unstifled thirst for crypto. The biggest step was SAMA’s appointment of Mohsen al-Zahrani as the head of the central bank’s virtual assets and CBDC program.
Al-Zahrani is a former managing director at Accenture. He is leading the Kingdom’s virtual assets and central bank digital currency strategy, with a team mandated to engage the world’s biggest crypto firms in order to regulate the sector.
“Saudis aged 15 to 34 represent over 36 percent of the population. Younger people have technology in their DNA and none of the engagement friction or crypto cynicism of their parents. They are also risk-takers. If Saudi gets this right, it can dominate the web3/crypto assets space” — Khalid Howladar, Partner at Acreditus
Today, there are many crypto exchanges operating in KSA that offer investors easy access to digital assets, such as OKX, Binance, BitOasis, and Rain.
CBDC
For the past year, SAMA has been closely monitoring the CBDC space. In a recent press release, SAMA disclosed that it will focus on exploring the potential of a wholesale CBDC offering to rejuvenate the local payments ecosystem. The banking regulator noted that the early stages of the experiments would involve reviewing the legal implications of a potential launch and a brief foray into the technical aspects.
Project Aber
Despite the rivalry, there has been noticeable early cooperation between the UAE and KSA in Project Aber. Four years ago, the Saudi Central bank and the Central Bank of the UAE collaborated on a joint digital currency and distributed ledger project called Aber. The initiative confirmed how DLT could enable cross-border payments between the two countries, using a new dual-issued digital currency as a unit of settlement between commercial banks as well as domestically. An important aspect of Aber was the technical and active business involvement of commercial banks from a very early stage. More on the topic here.
Saudi Arabia’s focus on developing its blockchain infrastructure is poised to pay off in the near future. With large investments and a favorable environment for innovation, the kingdom is well on its way to becoming the blockchain beast of the Middle East.
Saudi Arabia’s focus on technological development is also aligned with the broader societal reforms as part of Crown Prince Mohammed bin Salman’s 2030 vision. Some of these reforms aim to empower women in the tech industry and provide opportunities for the country’s young, tech-savvy generation to take an active role in the fourth industrial revolution. With a highly educated and diverse talent pool, the kingdom is fully capable of participating and making a significant impact in this rapidly evolving space.
The commitment of the government, as well as its robust support for technology startups, will likely drive the development and growth of the industry. As a result, businesses and individuals will have access to cutting-edge blockchain solutions, making the country a leading player in the technology space.