Earlier this year, an article was published in the Financial Times titled ‘The Asian century is set to begin’. The piece heralds the coming of the ‘Asian Age’; a supposed shift in order, in which the continent will become the new center of the world. It’s undeniable that Asia is growing in significance both economically and financially, and in the blockchain world, things are no different.
A recent report from consultancy giant PwC highlights the fact that the majority of fundraising deals in the cryptocurrency industry are now happening in Asia and Europe, surpassing the previously dominant role of the Americas. While institutional involvement continues to flood into blockchain, we are witnessing a major momentum shift from US dominance to Asian and European competitiveness, particularly in the fundraising and M&A space. The ‘Asian Age’ may well be arriving in the form of crypto fundraising — and it’s turning the heads of many large institutions around the globe.
The Challenge from the East
When it comes to crypto fundraising, the US has always been a leader. In Q2 2018, the US alone accounted for more than half (51%) of crypto fundraising deals. With strong VC investment in Silicon Valley, and a developed capital market infrastructure, the US led the charge in investing in blockchain technology. Recently, the tide has started to equalize, with Q2 2019 figures highlighting that US fundraising has dropped to just 28%. Meanwhile, Europe and Asia saw a tide of capital flow to both regions, which accounted for 67% of the activity in Q2 of this year.
Asia has quickly grown to become the focal point for cryptocurrency exchanges and mining activities, while bans on trading on exchanges in the US continue to take hold. Several regions within Asia have adopted positive frameworks and legal positions over the past 18 months, and a host of big players are starting to set up shop. Binance — one of the world’s leading cryptocurrency exchanges, who left China in 2017 — recently participated in a funding round estimated to be worth $200 million in the country. Similar activity is sweeping the region, with cryptocurrency fundraises in the Asian market jumping massively, accounting for a whopping 26% of global deals in Q2 2019.
Europe Making Moves
In Europe, a regulatory-friendly environment combined with a focus on developing the industry through initiatives such as the EU Blockchain Observatory, have positioned the region as a global leader in the technology. With a tradition for creating thorough, principles-based regulation, the trading of security tokens and other security products may become commonplace, and this cannot be underestimated. As the space matures, we are witnessing a shift in the size, type, and geography of fundraising deals.
First Mover Advantage
PwC’s report highlights the growth in equity fundraising, where investors offer cash to crypto companies in return for equity. As this equity fundraising is moving from the US to Europe and Asia, it will be fascinating to see how these regions adopt regulation to support digital assets.
The funding mechanism of an STO — a tokenized version of an equity investment — is increasingly making headlines as the crypto space holds its breath for how countries plan to roll out regulation. The movement of fundraising deals from the US to Asia and Europe could give the latter regions a competitive advantage over the US, particularly as the market for STOs grows rapidly — companies raised $442m with STOs globally last year, up from just $22m the year before.
It seems Europe and Asia are attempting to take steps to advance their position, with more and more security token alliances continuing to crop up — one of the most prominent being the Asia Security Token Alliance (ASTA). Earlier this month, six major Japanese brokerages, including Nomura Securities and Daiwa Securities, formed the Japan STO Association, a self-regulatory organization (SRO) for STOs.
The movement of funding from the US to Asia could be a sign that the ‘Asian Age’ is one where big institutions will look to the east as the next chapter for the industry. Several market movements point to this trend, and with institutions entering the space at unprecedented rates, Europe and Asia may make the right moves at the right time to gain a further competitive advantage over the US.