The founder of Auckland-based metaverse and AI unicorn, Futureverse, has cautioned the incoming government against major changes in tech regulation.
Taking to the stage at SXSW Sydney, an offshoot of the annual festival and conference held in Austin, Texas, Futureverse founder and CEO Aaron McDonald told attendees that New Zealand’s business-friendly environment had been good for Web 3.0 companies like his, which he has said has raised a total of $200 million in funding.
McDonald was responding to the Australian federal government’s move last week to progress its plan to regulate the digital assets sector, with the Australian Treasury releasing plans to require custodial cryptocurrency exchanges to hold a financial services licence issued by the local financial regulator. It’s the first move across the Tasman to tackle regulation tailored to the digital assets market, where cryptocurrency is often the means of exchange.
“Because New Zealand is relatively technology-agnostic, it's pretty easy to see where you sit in terms of the services that you offer, and they've taken a pretty pragmatic approach to how they guide companies through their process,” McDonald told the SXSW Sydney audience.
He was sitting alongside Robbie Ferguson, co-founder of Sydney-based Web3 gaming company Immutable, which has also achieved unicorn status after raising more than US$200 million in venture funding.
Asked by Caffeine for his tech sector wishlist for the incoming National-led Government, McDonald instead advised Christopher Luxon and tech spokesperson Judith Collins to show restraint.
“If I’d say anything, it's like, don’t go out and make any big changes, it’s actually working pretty well,” he says.
He points to the fact that three New Zealand startups in the Web3 space alone have achieved the coveted unicorn status – where they have raised money at a valuation of $1 billion or more.
In addition to Futureverse, one of several to spin out of web infrastructure company Centrality, McDonald points to fellow unicorns VeVe, a marketplace for NFT digital collectibles founded in 2018 by David Yu, and decentralised finance consortium Acala.
“Those other two have moved offshore, but New Zealand is doing something right,” says McDonald, who has a New Zealand workforce of around 150, with over 100 more scattered around the world.
Futureverse has been a recipient of Callaghan Innovation grants and is set to take advantage of the 20 percent tax rebate for video game developers introduced in this year’s budget to counter the lucrative incentives available at federal and state levels in Australia.
While he welcomed National’s proposed visa changes to aid recruitment efforts, the reality of Futureverse’s business, says McDonald, is that it's not “super-critical” for staff to be based in New Zealand.
He says Futureverse likely employs the largest local team of artificial intelligence specialists, numbering around 20 people, who he sees as key to realising his vision for the metaverse.
If there is one area McDonald would like to see change in, it's the treatment of Web3 companies by New Zealand’s banks.
A report released earlier this month by Web3NZ, an online community established by Callaghan Innovation, found that the majority of companies surveyed had experienced problems accessing or maintaining banking services in New Zealand.
A wave of negative sentiment towards crypto companies worldwide, particularly in the wake of the collapse of cryptocurrency exchange FTX, has seen banks classify the sector as too risky to deal with.
“That’s the biggest issue, but it's not a regulatory issue. That’s a result of commercial decisions that the banks make,” says McDonald.
“It’s not like the banks haven’t messed up in that domain and been fined billions of dollars.”
If regulation is required, he adds, it should involve mandating the banks to treat digital assets companies the same way it treats any other type of business.
“It’s not just banking access, but also making banking APIs [application programming interfaces] and data available to fintechs. That’s a big issue."
It was a smoother run for Centrality in 2018 when it raised US$100 million in a token offering.
“When we did the token generation event for Centrality, we created software tools that allowed us to screen participants like anyone would in a crowdfunding situation,” he says.
“They did KYC [know your company], proof of wealth, proof of funds. We did all of that stuff on the blockchain, so there’s an immutable record of it.”
The funds raised seeded several ventures under the Centrality umbrella. But those were the heady days when initial coin offerings were happening every week and Web3 technologies were attracting serious investment.
With the crypto sector still depressed, NFT values languishing, and Web3 ventures struggling to raise money, McDonald remains committed to the company’s strategy of building the technologies that underpin metaverse environments.
“Down our way in the Western world, we haven't been exposed to what's actually happening as a metaverse trend, which is immersive convergence,” he says.
“There will soon be a new connection that integrates digital and physical forms, transcending time and space,” says Ma.
McDonald agrees: “We used to have silos in how we consumed offline and online. We had e-commerce, commerce, media, communications, banking, gaming – they were all very separate,” he says.
“But things have become much less discrete. TikTok is one of the fastest-growing commerce platforms in the world, they are doing social commerce.”
But artificial intelligence is crucial to handling the complexity of building immersive connected worlds, which is why Futureverse has invested heavily in it.
“If this technology had evolved 24 months ago, all of those ideas about the metaverse would have the technology to back them up,” says McDonald.
Other emerging technologies, such as Apple’s Vision Pro mixed-reality headset will spur much-needed innovation in how people access the metaverse, he adds.
“Apple is very good at doing two things: making things that are kind of geeky cool, and making these ever-so-slight improvements to user experience that make a world of difference."
“They will provide the blueprint to the Samsungs, Huaweis and all the others out there to take that and scale it to the masses.”
Futureverse has developed a US$50 million venture fund and studio to do its own bit to spur innovation. McDonald says he hopes to have the first cohort of companies in the Futureverse Base Camp accelerator programme by the end of the year.
As he was preparing to leave Sydney after his SXSW appearance, McDonald tells Caffeine: “If the metaverse is dead, the internet is dead.”
Peter Griffin is a Wellington-based technology and science writer, media trainer, and content specialist working with a wide range of media outlets and tech companies. He co-hosts The Business of Tech podcast for BusinessDesk and is the New Zealand Listener's tech columnist. He has a particular interest in cybersecurity, Web3, biotech, climate tech, and innovation. He founded the Science Media Centre and the Sciblogs platform in 2008.
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