Texas quietly tries to steal Silicon Valley’s thunder as the go-to state for crypto

Mance Harmon graduated from college in 1993 when the World Wide Web was in full swing, so she remembers the frustrations of trying to explain it to her parents. It didn’t make sense to them until they got an email account, but now, everyone intuitively understands the Internet, he said.

“Crypto is in the same space,” said Harmon, now co-founder of Dallas-Fort Worth’s largest blockchain company, Hedera. “As the number of applications grows and people begin to take control of their identity and privacy, they will begin to appreciate it in a different light.”

D-FW has made a name for itself as a business-friendly area with a large pool of talent. But is the traditional environment enough to attract younger cryptographic companies that favor a more informal work environment, open minds, and creative solutions?

“Cryptographic culture is one of the strangest cultures I’ve ever been in,” said Rasikh Morani, CEO of The Arcadia Group, a Dallas-based blockchain software development company.

“It’s amazing. But it’s also very rare,” he said. “There’s no other industry in which I would be sending anime pictures to my clients or my clients’ investments.

The complexity of Crypto means that some disconnect it, not wanting to get involved in something they don’t understand. This has allowed some of D-FW’s biggest claims about cryptography to go unnoticed:

  • Hudson Jameson, one of Ethereum’s best-known faces, is from Dallas. For five years until 2021, he worked at the Ethereum Foundation.
  • Coinsource, the world’s largest Bitcoin ATM operator, operates from Fort Worth.
  • In 2021, the new Dallas cryptocurrency company Zabo reached an agreement to be bought by the main US cryptocurrency exchange Coinbase.

If you ask industry experts if Dallas-Fort Worth is becoming the “right” place for encryption, you rarely get a simple yes or no answer. But you hear the same songs.

How Dallas Accumulates

The first point we all agree on is that there is no place for cryptography because it was specifically designed to be done from anywhere.

“The unfortunate reality is that many, if not most, cryptographic companies are headquartered overseas and may have an office in the United States, due to regulatory uncertainty,” Mark Cuban said.

In 2021, the businessman’s Dallas Mavericks team began accepting the Dogecoin cryptocurrency as payment for tickets and merchandise and signed a five-year partnership with the listed cryptocurrency platform Voyager.

Second, they agree that Texas is definitely the place to be if it only focuses on cryptographic mining, because the state is willing to negotiate “fantastic” rates for heavy energy activity.

“Being in Dallas has been a big selling point for investors because they know it’s becoming the U.S. mining epicenter.” and that he has already raised the mine. $ 50 million.

Blockmetrix founders David Kiger (left), Keith Spickelmier, CEO and founder Nevin Bannister, and vice presidents Axel Nussbaumer and Owen McCrory are expanding their Dallas-based cryptographic mining business. Bannister said being in Dallas has been a “big selling point for investors,” as it is becoming known as an epicenter of the industry. (Liesbeth Powers / Special Contributor)

Data from the state’s network operator, the Electric Reliability Council of Texas, or ERCOT, confirms its growing mining presence. The United States has about 3,500 megawatts of Bitcoin mining capacity, and more than 40% of that is with ERCOT, according to estimates by Lee Bratcher, president of the Texas Blockchain Council.

Texas cryptocurrencies voluntarily shut down to keep electricity flowing to homes during freezing

Third, Dallas is generally a bigger place for blockchain-focused businesses. These are companies that are using blockchain, technological cryptocurrencies are built to create software and business applications. On the other hand, Austin is the epicenter of cryptography-focused developers.

“Dallas is likely to make a lot of money in space with hedge funds, private equity and family offices,” said Patrick Zielbauer, who manages the global strategic accounts for Blockfills, an Austin-based company that connects crypto investors. companies.

Fourth, Texas is a place on the regulatory side with companies across the board praising the Texas Blockchain Council for setting the gold standard on how to influence state policy.

“Texas has become the epicenter of the crypto in terms of leadership, especially on the regulatory side,” Harmon said. “When we started TBC, we had the vision that if we could influence the regulatory environment in Texas, the rest of the nation would follow. And that strategy is on track. A lot of people have their eyes set on Texas for the work that TBC is doing.

The Richardson-based nonprofit lobby was launched in late 2020 and now has more than 90 corporate members and more than 450 individual members, with about a third of its total members in the Dallas-Fort Worth area, president of TBC Bratcher. .

Regulations are key

When the partnership was launched, Bratcher said in a statement that Silicon Valley had lost its competitive advantage, paving the way for Texas to be the favored state of the industry if regulations were right.

The states with the most welcoming regulatory frameworks are the ones that will become the “affirmative” in the long run, said Shahzad Nathani, head of business development for Richardson-based blockchain startup Shardus.

Texas, Wyoming and Oklahoma stand out as crypto-friendly, he added.

“What matters is the political and regulatory environment,” he said.

For example, last year, China’s move to tighten regulations on mining and cryptocurrency trading created a crazy struggle among cryptocurrency miners to find facilities in the U.S.

“Even in the last two years, there has been a shift in the sense that Texas has begun to embrace the cryptographic community,” Harmon said. “It’s very pro-crypto right now.”

The inaugural Texas Blockchain summit was held in Austin in October to talk about how cryptocurrencies and blockchain technology can contribute to the Texas economy. Speakers included Texas Sen. John Cornyn and Ted Cruz, as well as Wyoming Sen. Cynthia Lummis.

“We believe Texas can lead the world in establishing a climate of innovation around blockchain technology,” Bratcher said in a statement ahead of the event.

2021 announced a series of victories for TBC.

The Texas legislature has passed two key bills, signed by Gov. Greg Abbott, who he tweeted in February 2022 that “The Lone Star State is ready to be a world leader in blockchain and cryptocurrency.”

The first bill created a Blockchain working group to make recommendations to the legislature and the governor’s office. The second bill defined what a virtual currency is, making it easier to do business with it. Both bills have received widespread bipartisan support from state lawmakers.

Shortly afterwards, the Texas Banking Department stated that banks chartered in Texas have the authority to provide custody or custody services for virtual currencies.

“The Texas crypto community has been able to organize and start using money politically, and that’s the language these people speak,” said Ali Agha, CEO of Dallas blockchain company Olypsis Technologies. “I think there’s a libertarian ethos at the heart of the blockchain and the cryptographic community that naturally attracted them to Texas.”

Institutional interest

Another sign of greater confidence and acceptance in the cryptographic and blockchain space is the growing number of institutional investors who want some exposure to them.

“The change in legacy institutions that want to participate is one of the most remarkable things I’ve witnessed,” Zfillbauer of Blockfill said. “Banks and institutions of a more traditional nature are looking for ways to engage these customers in a safe and low-risk way.”

According to PitchBook, venture capital funding for cryptocurrency companies has increased in 2021, and companies have invested more than $ 27 billion worldwide, more than the previous decade combined.

According to a CB Insights report, funding for US cryptocurrency and blockchain companies has increased by 730% in 2021 from 2020 to $ 14 billion. The average size of the deal in the United States was $ 5 million, according to the report.

It’s “incredibly competitive,” said Giorgi Khazaradze, CEO of Dallas-based crypto startup Aurox, which received a $ 5 million cash infusion in February. He said the startup launched in September 2020 has attracted significant interest from investors from the beginning.

“Many companies are raising $ 10 million to $ 20 million from venture capitalists without a product,” he said. “And it reduces the speed with which you can hire developers and build a product.”

Aurox co-founder Giorgi Khazaradze said the company has received intense interest from ...
Aurox co-founder Giorgi Khazaradze said the company has received intense interest from venture capitalists since day one, as traditional companies aim to gain some exposure to the crypto and blockchain industries.
(Lawrence Jenkins / Special Collaborator)

The vote of confidence from institutional investors came despite the ongoing “cryptocurrency crash” that occurred alongside the broader market crash that occurs in response to rising interest rates and geopolitical uncertainty.

Since reaching new highs in November, global cryptocurrency market capitalization has fallen from $ 2.9 trillion to $ 1.2 trillion, according to CoinMarketCap. Bitcoin has lost more than half its value since its November peak. Coinbase cryptocurrency exchange said this week that it planned to slow down hiring given market conditions. The value of Coinbase shares has dropped 75% this year.

But institutional investors continue to double in some cases. Investment firms such as Credit Suisse and Jefferies are hiring in-house cryptographic analysts. Fidelity, BlackRock and Charles Schwab have announced that they are working on exchange-traded cryptocurrencies.

Leaders in the cryptographic and blockchain space of Texas have said that people in the industry know that it is a party and party industry. That is the fifth major drop in cryptocurrencies since Bitcoin was launched in 2009, and the latest crash won’t scare them, they say. For some companies, such as those that use the blockchain to create software, cryptocurrency inflows and outflows do not affect their business.

Arcadia’s Morani said he was at a conference in Miami in January 2018 when the market fell. “We were scared to make payrolls,” he said. But the company survived.

“Now I have three and a half years of payroll reserved because I’m not going to be that guy who lets people go in the middle of a bear market,” he said. “The only thing is that when it goes down, you’re not growing that much. But we’re ready.”

The Dallas-based crypto mining startup, founded eight months ago, is raising $ 43 million in funding

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