US Leads in Crypto Startup Funding in Q2
Despite the increasing regulatory scrutiny in the United States, crypto firms continue to pioneer and attract significant funding. A recent report reveals that nearly half of all capital investments within the crypto industry are flowing towards US-based crypto startups.
Key Findings from the Galaxy Digital Report
Published by Galaxy Digital on July 14, the report underlines the considerable interest from venture capital (VC) firms towards US-based crypto startups. “US-based crypto startups accounted for more than 43% of all deals completed and raised more than 45% of the capital invested by VC firms.”
In terms of capital investment, the United Kingdom followed with a 7.7% share, while Singapore and South Korea attracted 5.7% and 5.4%, respectively.
Crypto and Blockchain Startup Investments Experience a Decline
However, a concerning trend emerged in the report. It was highlighted that the total amount of capital invested in crypto and blockchain startups continued to decline quarter-to-quarter.
“Only $720m was raised by 10 new crypto VC funds in Q2 2023,” the report noted. This figure is the lowest since the beginning of the COVID-19 pandemic in Q3 2020. “Crypto and blockchain startups raised less money across the last three quarters combined than they did in just Q2 last year.”
Breakdown of the Deals and Capital Raised
Interestingly, while companies in the broad Web3 category saw more deals, firms in the trading category managed to raise more capital.
The SEC’s Stance on Crypto
This revelation comes at a time when the United States Securities and Exchange Commission (SEC) is increasingly taking action against several US crypto firms.
On July 13, in the Ripple Labs vs SEC case, a judge ruled partially in favor of the payments and technology company, declaring that XRP is not a security when sold on digital asset exchanges. Ripple CEO Brad Garlinghouse accuses the SEC of attempting to stifle innovation within the US cryptocurrency industry.
Garlinghouse’s comments come on the heels of the SEC taking action against major crypto exchanges Binance and Coinbase, alleging violation of securities laws and offering unregistered securities. These regulatory hurdles continue to challenge the crypto industry, even as US-based startups lead in attracting venture capital.