Dive Brief:

• Venture capitalists invested a record $25.2 billion in blockchain companies in 2021, an eight-fold increase from the previous year, according to a new CB Insights report published Tuesday. Of that worldwide funding total, startups based in the U.S. received a little over half of the capital ($14.1 billion), the report said.
• Among the 59 companies that raised more than $100 million, cryptocurrency exchange, brokerage, non-fungible token, gaming and payment companies landed the most money. Among firms ranking in the top 10 equity deals globally in Q4 2021, U.S.-based fintech firms topped the list, with NYDIG, Forte Labs and MoonPay landing the biggest piles of cash, respectively, per the report. The U.S. fintechs Celsius Network, Fireblocks, Gemini and Anchorage Digital also ranked in the top ten.
• About half of top 13 most active blockchain venture capital investors, based on company count, were U.S.-based firms, including Jump Capital, Andreessen Horowitz and X21 in the top three slots, CB Insights said. Of the top corporate investors, also based on company count, the venture arm of U.S. crypto exchange Coinbase, Coinbase Ventures, was the most active, though that ranking overall was dominated by Asian companies. 

Dive Insight:

The CB Insights report highlights that investors are pouring more capital into blockchain businesses than ever before, with funding for the emerging sector soaring globally to peak last year at $25.2 billion, up from $3.1 billion in 2020 and $600 million in 2015. In the U.S., funding for the companies also surged, rising to $14.1 billion last year, up from $1.7 billion in 2020, the report said.

2021 proved to be a pivotal year for both cryptocurrency startups and payments companies looking to get in on the up-and-coming blockchain trend.

In one deal where payments companies played an outsized role, the venture arms of digital payments giant PayPal and card company American Express joined big venture firm Tiger Global Management to invest in a Series B round of funding for TRM Labs in the 10th largest such round during Q4 2021, according to the report. In that deal, TRM, a crypto fraud-fighting firm, raised $60 million.

In addition to investing in one of the top blockchain company funding rounds last year, PayPal acquired digital asset firm Curv to speed up its cryptocurrency efforts. Meanwhile, Visa also ventured into cryptocurrencies to boost its revenue last year. Payments platforms have increasingly adopted cryptocurrencies as a form of payment, though it remains to be seen whether such digital currencies will become popular in the mainstream.

As payment companies waded into the emerging crypto market, cryptocurrency startups took advantage of the investor appetite to raise funds and make their own acquisitions.

Last April, Coinbase completed an initial stock offering in a move that gave the company a current market valuation of about $40 billion.

Also last year, the crypto exchange Gemini bought the London-based cryptocurrency custodian provider Shard X for an undisclosed sum. For Gemini, acquiring and integrating Shard X’s technology would allow it to quickly transfer its customers’ assets and "provide support for new asset listings and usage," Gemini COO Noah Perlman told Payments Dive at the time via an emailed statement.

While crypto startups rake in venture capital from payment companies and other investors, more regulations for the emerging sector could be on the way. In remarks to the agency’s Investor Advisory Committee in December, Securities and Exchange Commission Chair Gary Gensler referred to crypto assets as "rife with fraud, scams and abuse in certain applications" and stressed the need for regulation to rein in unsavory behavior in the sector.

Gensler wants Congress to weigh in, too, by giving his agency more authority to oversee the fast-expanding realm. Congress members have taken a keen interest in understanding the industry and reining it in.