Exactly a year ago, Rishi Sunak, then the chancellor of the Exchequer, pledged to transform the UK into a crypto hub. He’d be happy to hear that crypto projects in Britain secured more funding rounds in the first quarter of 2023 than anywhere else in the world outside of the US.
By analysing new data from DefiLlama, DL News revealed that crypto projects operating out of the UK received $232.7 million across 20 deals between January and March, making Blighty the second largest destination for crypto investments in the world.
US-based projects led the investment league by closing 99 deals in the first quarter to the tune of over $1 billion. Singapore, which closed 14 deals worth almost $118 million in the period, came third.
Canada, Switzerland, Germany, France, and Dubai were also popular investment destinations. Projects in those locations closed eight, eight, seven, six and five deals in the first quarter of 2023 respectively.
The industry globally secured $2.2 billion in that period across 221 venture capital raises, initial fair offerings, private and public token sales, and initial public offerings.
That is down from the $3 billion raised in the previous quarter and a far cry from the $8.9 billion raised in the first quarter of 2022.
After accessing the data, DL News tried to locate the 221 deals to establish what countries the projects operated out of.
Many DeFi projects value privacy, so pinning projects to specific locations proved challenging. DL News was unable to ascertain where 14 projects operated from.
Since Sunak became prime minister in October, the government has launched several initiatives apparently designed to make the UK more attractive to crypto entrepreneurs. These include government consultations about how to best regulate the industry and to investigate the need for a British central bank digital currency.
UK crypto cheerleaders are celebrating the results as a sign that the prime minister’s vision of moulding London into a Singapore-on-Thames may be underway.
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“There is real progress starting to be made in offering an attractive and fit-for-purpose regime here in the UK,” Su Carpenter, director of operations at lobby group CryptoUK, told DL News.
Market observers said Britain may benefit from the regulatory crackdown in the US.
“It’s clear that the UK and Singapore — along with other Asian countries — are rapidly catching up,” Alan Vey, CEO of blockchain protocol Aventus Network, told DL News. “Regulatory developments in the US are making it increasingly challenging to be involved in the crypto industry, while friendly policies in the UK and Asia are further exacerbating the gap.”
The sentiment follows a string of recent enforcement actions from US authorities against crypto companies like Binance, Paxos, Kraken, and Coinbase.
At the same time, lawmakers on Capitol Hill, such as Massachusetts Senator Elizabeth Warren, are taking a hard line on crypto.
“The regulatory situation in the US can benefit Sunak’s desire to make the UK a crypto hotbed,” Nicklas Nilsson, thematic research consultant at GlobalData, told DL News.
For the last decade, successive Conservative Party leaders have supported a slew of taxpayer-funded programmes, such as the now-defunct Tech Nation, to stoke fintech and cryptocurrency startups.
The result was a sprawling web of accelerators and startups spread out across London, and in regional hubs such as Cambridge and Bristol.
But Sunak’s friendly stance won’t go unchallenged, Nilsson said. The prime minister will still have to wrangle with the Financial Conduct Authority and the Bank of England as he chases crypto supremacy.
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Moreover, Brexit appears to have dented confidence in the UK’s startup scene. While the UK still leads Europe in volume — the country attracted £2.7 billion in overall VC cash in the fourth quarter — those numbers are declining.
VC investment in Britain has fallen 15% since early 2019, according to CB Insights. Compare that to a 20% jump in France and a 41% surge in Germany.
Sunak drew the ire of the crypto community in March when his new Brexit deal with the EU failed to include UK businesses being able to rejoin Horizon Europe, a €95 billion development programme that supports scientific and technological research and startups, including blockchain ventures.
Days later, the industry was also snubbed when the British government said it was launching its own £370 million programme to make the nation a “technology superpower,” but seemingly didn’t include blockchain or crypto in the technologies in the programme.
“So it remains to be seen if the UK will prove to be more attractive than other crypto hubs like Singapore and Dubai,” Nilsson said.
