Blockchain and Crypto Investment in H1 2021 Double All of 2020 – KPMG

Investment in blockchain and cryptocurrencies in the first half (H1) 2021 more than double all investments in blockchain and crypto space in 2020, according to the latest report from KPMG.

In the report titled ‘Pulse of Fintech H1 2021, investment rose over 200 percent of 2020 investment in the first half of 2021 alone to blast through the record set in the entire 2018 financial year.

Explaining evolving nature of investors in the blockchain and crypto space, the report said “As the blockchain and crypto sector has matured, so has the nature of its investors. In H1’21, a significant amount of institutional money flowed into the crypto space, highlighting the broadening of the investor base. Investor awareness and knowledge of the sector is growing, with investors now having a much better understanding not only about crypto assets, but also the operational and procedural side of crypto — from custody and storage to storekeeping and the competitiveness and maturity of service providers.”

Rising VC Investment

VC investment was very strong in the blockchain and crypto space in the first half of 2021. Several firms raised $100 million+ funding rounds, including BlockFi ($350 million), Paxos ($300 million), Blockchain.com ($300 million) and Bitso ($250 million).

Central Bank Digital Currency (CBDC)

China has continued to move forward with testing of its central bank digital currency (the ‘digital renminbi’, digital yuan, or e-CNY). In H1’21, it expanded its pilot project to include salary payments for some workers in China’s Xiong’an New Area,16 the payment of subway fares and the exchange of digital and physical currencies at two banks in Beijing. The evolution of the digital currency combined with China’s Belt and Road Initiative could truly open up a whole new level of correspondent banking and money transfers.

Growing Focus on NFTs

Interest in non-fungible tokens (NFTs) has started gaining more traction, with interest in a whole range of new types of assets, ranging from professional real estate to more fragile assets which can be tokenized or fractionalized.

Increasing Regulatory Attention

Cryptocurrencies continued to be a critical focus for some regulators, with widespread differences between jurisdictions as to acceptance and use. During H1’21, China banned financial institutions and payments companies from providing cryptocurrency-related services,19 while El Salvador announced that Bitcoin would become legal tender in the country as of September 7, 2021.

What to watch for in H2’21

— continued maturation of the cryptocurrency space
— stronger separation between cryptocurrencies and the use of blockchain technologies
— further focus on regulatory frameworks, particularly in India, which could regulate cryptocurrencies as an asset class in H2’21
— the evolution of exchanges focused on areas such as NFTs.