In a recent report published by Galaxy Digital, a crypto investment firm, it was revealed that US-based crypto startups received the largest share of venture capital (VC) funding in the industry during the second quarter (Q2). Despite facing regulatory scrutiny, these startups attracted significant interest from VC firms, accounting for over 43% of all completed deals and raising more than 45% of the total capital invested.
However, the report also highlighted a decline in the total amount of capital invested in crypto and blockchain startups compared to previous quarters. Only $720 million was raised by ten new crypto VC funds in Q2 2023, marking the lowest figure since Q3 2020, which coincided with the onset of the COVID-19 pandemic.
The United Kingdom followed the US as the second-largest recipient of capital investment, claiming 7.7% of the total. Singapore and South Korea secured 5.7% and 5.4% respectively. The report emphasized the notable decrease in funds raised by crypto and blockchain startups over the past three quarters combined, compared to the amount raised solely in Q2 of the previous year.
Meanwhile, the report distinguished between different categories within the crypto industry. While companies falling under the broad category of “Web3” had a higher number of deals, those categorized as “trading” attracted more capital investment.
The dominance of US crypto startups in attracting funding comes at a time when regulatory actions by the United States Securities and Exchange Commission (SEC) have been impacting the industry. The SEC’s recent case against Ripple, which alleged its native token XRP to be a security, resulted in a partial ruling in favor of Ripple on July 13. Ripple CEO Brad Garlinghouse criticized the SEC for what he perceived as an attempt to stifle innovation and the crypto industry in the US. The SEC has also taken action against major exchanges Coinbase and Binance, further adding to the regulatory landscape.
Despite these challenges, the report indicates that crypto firms are still receiving substantial investment, with the US leading the way. This suggests investor confidence in the long-term potential of the crypto industry, despite ongoing regulatory developments.