Location-specific Analysis

2023-03-02 02:38:54 UTC

Crypto activity is more prominent in North America, Asia, and Europe than the other continents. Throughout the report, we label these continents collectively as 'Active Continents' as 91% of the total deals recorded and 95% of the total amount raised are attributed to these continents. Oceania, Africa, and South America are labeled 'Developing Continents.'
North America has been dominant in the sector ever since its inception. This mirrors North America's lion's share in global venture investments. The United States consistently contributes to more than 50% of global venture investments.
Looking at YoY developments among Active Continents, we noticed a peculiar trend; Europe saw a rise in the number of deals in 2019 as opposed to other Active Continents. This rise could have been mainly due to the mildly favorable regulatory framework for digital assets in some European countries, as opposed to their previous stance.
The number of deals increased in 2018 and 2021 compared to the preceding years in all continents. The preceding years included two decorated bull runs in the crypto industry, which reestablishes the hypothesis that venture funding is a lagging indicator of the state of the market.

North American projects have raised 41% more money than all the other continents combined. Projects in CFS and Infrastructure category correspond to more than 50% of the total amount raised by North America. Most early developments in the industry during 2017-2018 occurred in North America, and the two categories mentioned above were more prevalent during that time.
In Asia, NFTs/Gaming leads the way by contributing 22% of the total amount raised. The increasing requirement for alternate income sources for citizens, the borderless nature of blockchain games, the rise of Axie Infinity, and the development of Polygon as a scaling solution, along with Polygon's native NFT infrastructure projects, may have played some part in this growth.
As rationale might dictate, a jurisdiction will primarily attract investments into the Fundamental Categories' projects. To re-iterate, CFS, Infrastructure, and Trading/Brokerage fall under Fundamental Categories. However, Developing Continents exhibit a different trend.
The Developing Continents are taking noticeable strides in Trading/Brokerage to increase user adoption. South America and Africa have raised $573 million and $546 million, respectively, since 2017.Trading/Brokerage corresponds to more than 60% of this amount for both continents. Mercado Bitcoin, a Brazil-based exchange, has raised $288 million to date. Kucoin, a Seychelles-based digital asset exchange focusing on retail traders, raised $150 million in Q2 2022 from Jump Capital. Yellow Card, an exchange incorporated in the United States but predominantly focused on African demography, has raised $56.5 million to date, including a recent $40 million raise in September 2022 in a series B round led by Polychian Capital.
However, we observed that the distribution of investments in the CFS and Infrastructure category is more disproportionate and heavily skewed towards Active Continents.
What does this imply? Let's understand this with a hypothetical example. Offchain Labs, the company behind Arbitrum, which develops scaling solutions for Ethereum, belongs to the Infrastructure category. Although this R&D company is based out of the United States (USA), a group of developers from Sudan, Africa, can create a DeFi application on top of Offchain Labs' Arbitrum. Let us call it 'MakerSwap.' If the existing infrastructure of Arbitrum is adequate for MakerSwap's functionality that is being developed in Sudan, it becomes unnecessary to reinvent the wheel for Sudanese catering to their region.
Infrastructure, as a category, offers building blocks to develop a framework of decentralized financial applications. Projects belonging to CFS create digital asset-specific financial applications. CeDeFi platforms like Ledn also belong to the CFS category. Both the categories mentioned above can be accessed by users in most jurisdictions with no restrictions on the access of products/services. CFS and Infrastructure are location-agnostic categories as opposed to Trading/Brokerage.

The United States is the torchbearer for the crypto industry. According to The Block Research's funding database, projects from the United States have raised 2423 deals. Furthermore, nearly $38 billion have been infused into USA-based projects in the last six years. Singapore, a crypto pioneer because of its favorable regulatory and tax infrastructure, which  recently began observing stricter regulation, is the second most preferred country for crypto investments.

As of this writing, 90% of the total projects in the digital asset sector reside in Active Continents.

36% of the projects that have sought investments in the last six years are headquartered in the United States. Of the 139 Indian projects that attracted investments, 91 were founded during the previous 30 months. The renouncement of the cryptocurrency ban may have played a crucial role in the rise of digital assets in India.

Comparison of the United States, United Kingdom, and Singapore with Other Countries

Usually, projects that exhibit potential and are a little more than a mere idea attract funding mainly in crowdfunding, Pre-Seed, and Seed rounds. Until this stage, capital injection is necessary primarily to kick-start the process of converting a prototype into an actual concept capable of generating revenues for the startup.
If a project survives long enough to raise another round of investments, its survival and generating revenue are testaments to the viability of the business concept. Any investment following this is made at Series A level and above. Capital from these rounds is typically utilized to optimize, expand, and scale the existing products/ services. The Block recognizes the capital injection rounds of Growth Equity, Series A, Series B, and beyond as Maturation Phase funding rounds.
Nearly 50% of the United Kingdom and Singapore deals are at the Seed level. 489 out of 2,423 deals in the United States correspond to the maturation phase funding rounds.

63% of the total observed investment in the crypto space originates in the United States, United Kingdom, and Singapore combined.