By
Chimamanda U. Martha
April 19th, 2024
A major implication of the growing popularity of digital currencies, according to the KPMG report, is that sovereign countries through their Central Banks are now beginning to harness ways to develop a digital currency to integrate into the economy.
Companies focused on blockchain and its underlying technologies were arguably the delight of Venture Capital firms in 2021 as a total of $30 billion in investments vestments rose significantly from $5.4 billion in 2020 to over $30 billion in 2021.
This massive funding can be attributed to the increased recognition of the potential of blockchain and its attendant technologies, and the need to be a major part of the innovation as an early investor.
“Investment in the crypto and blockchain space soared in 2021, rising from $5.4 billion in 2020 to over $30 billion. Globally, there was an incredible increase in the level of recognition for the potential role of crypto and its underlying technologies in modern financial systems,” the report reads.
According to KPMG, investors seemed amused by startups involved in the money movement in general. 2021 was actually a blockbuster year for Fintech firms as the overall funding secured by these outfits in the second half of last year reached $210 billion across 5,684 deals. Of particular interest are Global VC deals which hit a maximum of $115 billion and specifically, “corporate VC-related investment accounted for $50 billion of this total — more than double the $24 billion seen in 2020.”
Many cryptocurrency exchanges, decentralized finance (DeFi) protocols, Non-Fungible Token (NFT) initiators, and metaverse linked startups were amongst those who got funding from investors in the past year. Of prominence is the more than $1 billion raised by Bahamas-based brokerage, FTX Derivatives Exchange. NFT marketplace OpenSea also raised as much as $300 million this January to raise its valuation to $13 billion.
Growing Investments in Blockchain and Government’s Response
A major implication of the growing popularity of digital currencies, according to the KPMG report, is that sovereign countries through their Central Banks are now beginning to harness ways to develop a digital currency to integrate into the economy. Correspondingly, the growth in the crypto ecosystem has sparked a lot of regulatory actions from the Central Banks.
“Increasing activity in the space has also sparked further action from central banks, some of which are considering the development of digital currencies in the footsteps of the digital yuan in China. It has also sparked increasing scrutiny from regulators,” the report outlined, drawing reference from the crackdown on all things crypto by the Chinese government, as well the similar move that is now being made by India.
Beyond these two countries, a lot of nations have also introduced at least one form of stringent crypto regulation or another. With the prominent goal to gain oversight and enforce appropriate monitoring and taxation, a lot of stakeholders in the space are advocating for regulations to be meted out.
This year opened up with significant funding news that may even surpass that of last year. The best response on the path of regulators is to embrace the new technology and create an enabling environment for its growth in order to reap the benefits when the tech is fully matured.