Over the last year it has become clear that blockchains and the software movement around them — usually called crypto or web3 — can only succeed with a clear regulatory regime that provides an open pathway for startups while also protecting consumers from fraud and manipulation. This regulation should be aimed at stamping out the “casino” culture that has developed around crypto, while also allowing constructive applications to reach their full potential.
A common question we hear is: “What problems do blockchains solve?” Services built on blockchains solve the same problems that other digital services solve, but with better outcomes. They can connect people in social networks, while empowering users over corporate interests. They can underpin marketplaces and payment systems that facilitate commerce, but with persistently lower take rates. They can enable new forms of monetizable media, interoperable and immersive digital worlds, and artificial intelligence services that compensate — rather than cannibalize — creators and communities.
Technology takes decades to develop — we are just now seeing mainstream applications of AI after 80 years of development. We are in the early innings of crypto. Today there are tens of thousands of crypto developers, but the numbers are growing fast and we expect to see one million developers by 2030. The infrastructure will improve, increasing performance and lowering fees, and many more applications will be built across a wide range of categories.
We have been working with policymakers and regulators across the globe, and during our discussions it has become clear that the UK government sees the promise of web3, with Prime Minister Rishi Sunak suggesting the UK can become a hub of web3 innovation. UK authorities are also willing to work with the industry to create policies that incentivize startups to pursue decentralization.
More specifically, the UK policymakers and regulators are taking an approach that is uniquely tailored to blockchain and digital asset regulation. This includes:
- Working constructively with industry to identify the unique attributes of blockchain technology and how those attributes shape the risk profile of decentralized services vs. centralized services.
- Laying the foundation for future applications of blockchain technology.
- Putting forth an innovative sandbox approach to regulation.
- Focusing on an outcomes-based approach.
- All the while continuing to keep consumer protection front-and-center of any regulation.
Recently, our General Counsel, Miles Jennings, published a piece on the importance of decentralization. I highly recommend reading it. The crux of the argument is that the benefits of web3 will only be achieved if the underlying infrastructure is decentralized. But it takes time and a runway for projects to grow from a centralized startup to a truly decentralized network. As a result, we need regulatory frameworks that facilitate decentralization, not impede it.
At a16z crypto, we live by these same rules – we have a team of experts that work with our portfolio companies in the pursuit of greater decentralization, we push for long lock up periods of multiple years for ourselves and founders, and we actively participate in decentralized governance.
While there is still work to be done, we believe that the UK is on the right path to becoming a leader in crypto regulation. The UK also has deep pools of talent, world-leading academic institutions, and a strong entrepreneurial culture. It is home to more “unicorns” than Germany, France, and Sweden combined; to some of the world’s largest financial markets and pools of capital; and to highly-sophisticated, world-class regulators. All of these make the UK strongly positioned to lead in web3.
Because of this, we announced today that we will open a16z’s first office outside of the United States, in London. This new office, slated to open later this year, will be led by General Partner, Sriram Krishnan, who along with a team, will work to grow the crypto and startup ecosystem in the UK and Europe. We’ve invested in a number of UK-based crypto companies including Arweave, Aztec, and Improbable. And we are excited to announce our newest investment in UK-based Gensyn. Founded by computer science and machine learning research veterans Ben Fielding and Harry Grieve, Gensyn’s decentralized compute protocol will enable developers to build state-of-the-art AI systems on any connected hardware. Their novel cryptographic verification system allows users to trust that the protocol’s machine learning work was completed correctly.
We also plan to host our next Crypto Startup School in Spring 2024 in London – more to come about this. We had over 8,000 applications to our most recent CSS program based in Los Angeles, with the final 26 teams coming from a range of countries including the UK, U.S., India, Germany, France, Argentina, Ecuador, and Canada. By basing the next CSS in London, we hope to attract even more great teams from the UK, Europe and beyond to build web3 projects.
There are incredible universities that call the UK home. We have an active dialog with many blockchain clubs at universities in the US and now we are excited to expand these activities abroad. We will be reaching out to universities across the UK to support these clubs, helping them develop courses and building connections to industry.
We are excited to receive support in our efforts from UK leadership. The Prime Minister, Rishi Sunak, said today:
“As we cement the UK’s place as a science and tech superpower, we must embrace new innovations like Web3, powered by blockchain technology, which will enable start-ups to flourish here and grow the economy.
“That success is founded on having the right regulation and guardrails in place to protect consumers and foster innovation. While there’s still work to do, I’m determined to unlock opportunities for this technology and turn the UK into the world’s Web3 centre.
“That’s why I am thrilled world-leading investor, Andreessen Horowitz, has decided to open their first international office in the UK — which is testament to our world-class universities and talent and our strong competitive business environment.”
Finally, we will remain heavily invested in the U.S. We continue to be committed to working with U.S. policymakers and regulators to push for more regulatory clarity for crypto startups here.
We’re excited about what’s in store, and as always, we’re excited to keep building.
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