Saudi Aramco, SBI explore digital asset investment collaboration – Ledger Insights

2 views 6:53 am 0 Comments December 19, 2023

Last week Japan’s SBI and state-controlled energy firm Saudi Aramco announced they will explore a potential collaboration for digital assets and semiconductors. Additionally, SBI said it plans to set up “SBI Middle East” in Riyadh as a base for operations in the Middle East. SBI recently announced a $100 million joint fund with Standard Chartered based out of Dubai.

SBI and Aramco will look at co-investing each other ‘s digital assets portfolio. In this regard, SBI has a very substantial portfolio, although Aramco’s should not be underestimated.

Additionally, SBI will look at identifying Japanese digital asset startups that want to expand their business in Saudi Arabia. Together they would provide support.

Saudi Aramco is the world’s second largest company in terms of revenue with a figure of $604 billion. It was pipped by Walmart which had $605 billion in net sales for 2022.

Tokenization, crypto or both?

Stepping back, when considering cryptocurrency in the Middle East, Saudi Arabia isn’t the first destination one would think of. Turkey is the biggest in terms of activity, and the UAE has at least three crypto regulatory authorities – Dubai’s VARA and Abu Dhabi’s ADGM are the highest profile. That said, Saudi crypto activity is only a little behind the UAE, according to Chainalysis. And it was the country experiencing the most year-on-year growth to June 2023 (12%).

In contrast, Saudi doesn’t have a crypto regulatory regime. But perhaps it is working on one. Reports indicate regulators are warming to the concept. In 2018 multiple Saudi regulators issued a decree warning against virtual currencies. It said there are no crypto-regulated entities and they discouraged promotion and trading. It described trading as ‘unauthorized securities activities’. However, it was not quite an outright ban on holding crypto.

In July, the Saudi Central Bank (SAMA) appointed a crypto chief Mohsen AlZahrani. However, one thoughtful analysis questioned whether he would be focusing on cryptocurrencies. Although the report expects some positive movement from other regulators.

SBI and Aramco referred only to digital assets, not cryptocurrency. Hence, it’s conceivable the emphasis could be on tokenization, an area where SBI is extremely active as well. It founded the Osaka Digital Exchange (ODX) which will start trading tokenized securities on Christmas Day. One could imagine the trading of tokenized oil contracts. However, that is our reading, rather than a hint by the companies.

Saudi Aramco blockchain investments

While we’ve regularly reported on SBI’s digital asset investments, Saudi Aramco has a few in blockchain. VAKT is post trade solution for the oil sector, and Data Gumbo uses blockchain for operational efficiencies. TradeGo is one of nine approved electronic bill of lading (eBL) providers.

We previously reported it was an investor in Red Date Technologies, the company behind the Blockchain-based Service Network (BSN), the Chinese and international public blockchain networks that avoid using cryptocurrencies.

It invested in Saudi-based IR4LAB which provides document and supply solutions using blockchain. The most web3 collaboration was one announced by droppLabs in March. That discussed tokenization and web3 rewards.

Meanwhile, Sanabil, the $3 billion fund owned by the government’s Public Investment Fund, is an indirect crypto investor. It mainly invests in other funds, with half its assets in venture capital (VC). They include commitments to crypto-focused Haun and Blockchain Capital as well as several other VCs with major crypto portfolios such as Andreessen Horowitz, Coatue and Tiger Global.