A recent report published by Galaxy Digital, a crypto investment firm, reveals that United States-based crypto startups dominated venture capital funding in the crypto industry during the second quarter of this year. Despite regulatory scrutiny, these U.S. firms showcased their innovative prowess, attracting nearly half of all capital investments.
US Crypto Startups Lead the Way, UK and Singapore Follow Suit
The United States emerges as the frontrunner, as it attracted 45% of the total venture capital funding in the crypto industry. This significant share demonstrates the continued interest of venture capital firms in supporting crypto businesses operating within the United States.
Following the US, the United Kingdom secured 7.7% of the capital investment, showcasing its growing prominence in the crypto space. Singapore, another prominent player, acquired 5.7% of the venture capital funding. These figures illustrate the global appeal and diverse investment landscape within the crypto industry.
Declining Capital Investments and Shifts in Investment Categories
While the US remains dominant in funding, it is worth noting that the total capital invested in crypto and blockchain startups has experienced a decline on a quarterly basis. In Q2 2023, only $720 million was raised by ten new crypto venture capital funds.
This marks the lowest fundraising amount since the onset of the COVID-19 pandemic in the third quarter of 2020. It becomes evident that the industry faces challenges in maintaining previous levels of funding.
Notably, the report highlights a shift in the distribution of funding among different categories. Companies falling under the “broad Web3 category” experienced a higher number of deals. Conversely, those categorized under “trading” managed to raise more capital. This shift suggests evolving investment trends within the crypto industry.
Regulatory Scrutiny and Recent Actions
The report’s findings come against the backdrop of increased regulatory scrutiny faced by U.S. crypto firms. Notably, the Securities and Exchange Commission (SEC) has taken action against several prominent players in the industry.
On July 13, a judge partially ruled in favor of Ripple Labs, declaring that XRP is not a security when sold on digital asset exchanges.
In June, the SEC took action against two major crypto exchanges, Binance and Coinbase, within a span of just two days. These actions allege violations of securities laws and the offering of unregistered securities. Such regulatory actions contribute to the overall uncertainty surrounding the crypto industry in the United States.