Crypto start-ups drive fintech funding boom in first quarter
Fintech companies raised $29.3bn in the first quarter of the year driven by a series of high value crypto deals fresh data has revealed.
A record $122bn was raised by fintech firms in 2021 and the momentum has continued into 2022 with funding up by 13 per cent in the first quarter, Pitchbook data has shown. A number of crypto firms have snagged bumper deals this year with digital asset exchange FTX closing a $400m round in January at a $32bn valuation, digital asset custodian Fireblocks raising $550m and Consensys securing $450m of funding in March.
“The increase in crypto and blockchain investment reflects the growing realisation that blockchain, including tokenisation and programmable digital functionality, has the potential to transform all aspects of financial systems,” commented Adam Jackson, the director of policy at Innovate Finance.
“Regulators and government have woken up to the possibilities and recent announcements by the US and UK provide a more positive policy environment that will encourage investment.”
Both the UK and US have taken steps to clarify regulation amid an explosion of interest in digital assets. Last month Britain’s chancellor Rishi Sunak announced plans to transform the UK into a “global hub” for digital assets by integrating stablecoins into the domestic payments system and introducing tax incentives for digital asset firms.
The policy announcement is a signal that crypto has become too big for lawmakers to ignore. In 2021 $31.6bn of venture funding was poured into crypto projects globally, more than the 10 previous years combined according to Pitchbook. Crypto firms have already secured $13bn of venture capital so far this year putting the industry on track to beat last year’s record funding levels.
“The role of traditional corporate finance is quickly changing with the adoption of new financial paradigms around crypto, DeFi, and web3,” said Pitchbook researcher Robert Le.
“Traditional finance (TradFi) software has been slow to adopt crypto features and services, which has created a gap for startups to develop innovative solutions for companies with crypto strategies,” he added.
Contending with the wild swings of the crypto market does not always prove smooth sailing for crypto focussed funds, however.
Asset management firm Tiger Global, which has backed crypto funds including FTX, Blockdaemon and Moonpay, saw its flagship hedge fund slump by 40 per cent in the first four months of the year as tech stocks flagged.