The recent announcement from Rishi Sunak regarding the UK’s focus on positioning itself as a global hub for Web3 is promising news for the industry, particularly given the recent enforcement activity in the US. We are also encouraged to see the Prime Minister emphasising that this opportunity extends beyond just ‘crypto,’ highlighting the next phase of the Web and capitalising on the recent vacuum created in the US. We would like to congratulate the Prime Minister on attracting A16Z to establish their first office outside of the US. Their presence and capital will significantly contribute to further developing the local ecosystem.
However, there is a significant challenge ahead to practically realise this vision and make it a long-term success, especially in an increasingly competitive environment where jurisdictions like the UAE and Hong Kong are making strides in this space. Out of the 7,000 applications we receive annually for our accelerator, at most 20% are based in the UK at the time of application. And where we are forecast to back over 2,000 Web3 founders over the next decade, who we estimate will go on to hire 40,000 staff and raise a further $50bn in additional funding, as stands we expect that the majority will choose to locate elsewhere in the world over their lifecycle.
As the leading global web3 investor and accelerator, headquartered in the UK for the past decade, we understand the complexities involved in delivering this vision better than anyone. To encourage founders and investors to commit to the UK as a long-term base and generate sustained GDP impact, we need a serious decade-long strategy. Ideally, this strategy should involve cross-party collaboration across both houses of Parliament, extending beyond the term of one Prime Minister or political party, to ensure that Web3 principles are permanently embedded in UK policy and law.
While we support the Prime Minister and the UK Government in seeking inward investment, the hard work of making the UK a Web3 hub begins with supporting its existing local industry and champions. Although the consistent hands-off and outcomes-based approach of governments and regulators has allowed local operators like us room to innovate, the reality is that, despite a burgeoning community, the UK currently falls short of being a crypto hub, despite its natural advantages, due to the lack of meaningful governmental support. Consequently, we have witnessed a continued exodus of founders and developers to cities such as Berlin, Lisbon, Dubai, and Singapore in recent years.
Yet it is still our belief that we have a huge opportunity. The UK holds an advantage over the European Union and its MiCA framework, as a second mover that can respond to the strengths and weaknesses and more likely keep pace with innovation at a technology and capital market level. In particular, utilising decentralised and censorship resistant stablecoins as a foundational bridge between the Web2 and Web3 economies, rather than an approach purely based on CBDCs (Central Bank Digital Currencies) whilst putting in place reasonable and sensible consumer protections.
To become a Web3 hub, we outline the following recommendations for Downing Street to consider:
- To encourage startups back we need clear and hard incentives for founders to domicile in the UK with committed financial support, subsidies and favourable tax treatment for crypto assets and related income.
- Integrate Artificial Intelligence (AI) and Web3 as fully integrated policy and industry tracks, recognising that a true Web3 must have AI and a New Data Economy at its core. This includes ensuring consumer data protections and IP provenance, as well as protection for training models.
- Establish continued clarity of definitions and frameworks around a range of digital assets, such as; utility tokens, real world assets and NFTs as well as DAOs.
- In the absence of a UK tech sovereign wealth fund like Singapore, allow pensions to invest a higher threshold in digital assets through experienced investment funds and vehicles as advocated recently by The City of London.
- Introduce a new tech visa and issuer specifically for Web3 talent in the absence of Tech Nation’s Tech Visa.
- Ensure digital sovereignty and property rights for citizens are enshrined in UK law. This includes the right to exit platforms; granting individuals permissionless, unrestricted freedom to switch between platforms and transfer their digital property without any limitations.
- Mandate UK banks to offer banking services to retail and corporate customers who pass sufficient KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements.
- Propose the establishment of a permanent physical startup hub for Web3, similar to Station F, with committed financial support for the next decade. This hub should have the capability to rapidly issue skilled visas, fostering a conducive environment for Web3 startups to thrive.
This is why we believe that Outlier Ventures is a critical part of any successful UK Web3 strategy. We operate and compete both globally, engaging with founders at the earliest stage, while also having a physical presence here in the UK as they grow. And we are already a known and trusted part of the global Web3 ecosystem.
We welcome an open and trusted conversation with the UK Government, and all political parties, to help develop and sustain a globally competitive proposition. Our aim is to attract and retain the best in global talent, making the UK a critical hub for the next phase of the Web, which will bring significant job opportunities and economic growth for the next decade.
Founder and CEO, Outlier Ventures