This
summer,
athletes
from
around
the
world
will
meet
in
Paris
for
the
Olympic
Games.
One
competition
is
the
pentathlon,
in
which
athletes
compete
in
four
distinct
contests:
swimming,
fencing,
riding
and
running
and
shooting.
It’s
a
test
of
strength,
agility
and
speed.
Matthew
Homer
is
a
VC
investor
and
adviser
to
founders
in
the
crypto
space.
He
was
formerly
the
first-ever
executive
deputy
superintendent
for
research
and
innovation
at
the
New
York
State
Department
of
Financial
Services.
Among
financial
jurisdictions
there’s
a
similar
sort
of
multidisciplinary
competition
already
underway.
In
this
race,
however,
jurisdictions
are
competing
for
the
prize
of
becoming
capital
to
the
next
generation
of
financial
services:
tokenized
finance
operating
in
open
and
decentralized
systems.
Like
the
pentathlon,
the
winners
will
demonstrate
an
ideal
blend
of
strength,
agility
and
speed.
Contestants
include
established
financial
hubs
like
London,
New
York
and
Hong
Kong,
which
dominated
the
pre-digital
era.
But
hungry
challengers
—
E.U.
member
states,
the
United
Arab
Emirates
(UAE),
Singapore,
Bermuda
and
California
—
are
also
in
the
race.
It’s
a
remarkable
shift
from
18
months
ago
when
some
doubted
crypto’s
future.
With
Team
USA
(largely)
boycotting
this
financial
olympiad,
a
fresh
set
of
champions
has
a
rare
chance
to
emerge.
In
this
competition,
there
are
four
distinct
contests:
regulatory
effectiveness,
founder
depth,
market
size
and
capital
market
strength.
As
a
former
crypto
regulator
responsible
for
enhancing
New
York’s
regulatory
system
and
now
a
venture
capital
investor,
I
understand
how
difficult
it
is
to
win
in
all
four
of
these
categories,
especially
those
outside
of
your
direct
control.
Here’s
what
to
look
for
in
each
contest
and
how
participants
are
currently
performing.
Regulatory
effectiveness
Regulatory
effectiveness
is
evaluated
based
on
two
key
factors:
credibility
(being
tough
but
fair)
and
accessibility
(clear
and
navigable
for
both
existing
players
and
newcomers).
Striking
the
right
balance
between
these
aspects
is
challenging.
If
regulations
are
unworkable
to
comply
with,
markets
find
ways
to
circumvent
them.
Conversely,
if
entry
is
too
easy,
it
leads
to
a
low-quality
ecosystem.
An
effective
regulator
sets
high
standards
but
collaborates
with
regulated
entities
to
help
them
meet
those
standards.
Transparency
and
accountability
are
crucial.
Two
regulators
leading
the
way
in
this
area
are
Dubai’s
Virtual
Asset
Regulatory
Authority
(VARA)
and
the
Bermuda
Monetary
Authority
(BMA).
VARA,
in
its
two-year
existence,
has
already
granted
17
licenses
and
taken
at
least
a
similar
number
of
enforcement
actions
—
a
remarkable
achievement
for
a
new
entity.
Pool
of
founders
The
second
contest
evaluates
a
jurisdiction’s
ability
to
cultivate
or
attract
a
robust
pool
of
high-quality
founders.
Unlike
regulatory
effectiveness,
which
can
be
swiftly
influenced
by
government
actions,
becoming
a
magnet
for
founder
talent
occurs
over
generations
and
involves
factors
beyond
direct
government
control.
The
factors
that
contribute
to
founder
talent
have
been
extensively
studied
and
include
existing
entrepreneurial
networks,
cultural
practices,
quality
of
life
and
access
to
customers,
partners
and
resources.
While
California,
New
York
and
London
maintain
clear
leadership
in
these
rankings,
places
like
Dubai
and
Singapore
are
emerging
as
clear
scale-up
destinations.
These
cities
attract
more
mature
companies
and
founders
who
may
have
started
elsewhere
but
find
these
locations
better
suited
for
the
growth
phase
for
their
companies.
As
these
companies
relocate,
they
will
eventually
foster
a
new
generation
of
early-stage
founders
within
those
regions
as
their
employees
and
networks
go
on
to
establish
their
own
ventures.
Market
size
Market
size
is
the
third
contest
in
this
competition.
Even
if
your
regulatory
environment
is
flawless,
it
won’t
attract
future
financial
giants
unless
there’s
a
substantial
customer
base
to
serve
your
jurisdiction.
Large
markets,
such
as
the
U.S.
(with
a
population
of
over
335
million)
and
the
E.U.
(with
over
445
million
people),
have
an
advantage.
However,
smaller
jurisdictions
can
still
be
competitive,
especially
for
companies
serving
institutional
clients
or
retail
customers
in
other
countries
where
permitted.
Capital
market
strength
The
final
category
is
capital
market
strength.
Startups
and
scaleups
both
need
investment
to
grow.
Capital
chases
opportunities
in
locations
with
effective
regulation,
strong
founders
and
large
markets.
However,
other
factors
also
play
a
crucial
role,
such
as
the
physical
proximity
of
founders
to
funding
sources,
investor-friendly
legal
frameworks
and
favorable
exit
conditions
(such
as
robust
M&A
and
IPO
opportunities).
Research
conducted
by
Galaxy
reveals
that
although
U.S.-based
companies
still
receive
the
majority
of
venture
capital
in
the
blockchain
sector
(both
in
terms
of
deal
count
and
capital
share),
their
share
has
significantly
declined.
If
we
consider
macro
rankings
of
capital
availability
as
an
indicator
of
where
capital
may
be
shifting,
then
the
UAE,
Qatar,
China
and
Singapore
are
noteworthy
contenders
to
watch.
Unlike
the
Olympic
pentathlon,
this
competition
won’t
necessarily
have
a
single
“winner”
right
away,
or
possibly
ever.
Instead,
winners
are
likely
to
emerge
in
various
categories.
For
instance,
Bermuda
could
become
the
leading
hub
for
stablecoin
issuance
while
Dubai
might
excel
in
offshore
institutional
trading.
There
will
be
regional
capitals
too.
What
matters
is
that
the
financial
services
map
could
be
redrawn
in
a
way
that
looks
markedly
different
from
today.
The
United
States
is
likely
to
rejoin
the
race
eventually,
making
this
a
time
bound
opportunity
for
new
jurisdictions
to
establish
and
solidify
their
leadership
positions
before
it’s
too
late.
