By Jay Derenthal
Recently released reports from two of the world’s largest auditing companies have concluded that investment in blockchain technology is accelerating. The two reports, one from KPMG and the other from PricewaterhouseCoopers (PwC), found that blockchain technology had drawn enormous attention from investors in the first half of 2018. The reports also concluded that U.S. blockchain investment is far ahead of other countries and contributing to an ongoing initial coin offering (ICO) bull market.
KPMG Report: “The Pulse of Fintech 2018”
KPMG, one of the “Big Four” auditing firms that also includes PwC, Deloitte and Ernst & Young, released its biannual report on July 31, concluding that U.S. blockchain investments in the first half of 2018 have already exceeded 2017’s total.
KPMG’s report estimated that U.S.-based firms invested $858 million in blockchain technology initiatives in the first half of 2018, exceeding the $631 million total for all of 2017 despite a 70 percent correction in the cryptocurrency market in 2018. The report found that investments are being made by more experienced firms in 2018 and that the investments tend not to be in startups, but rather in more mature blockchain technology companies seeking additional rounds of funding.
The report highlighted these investments:
- $363 million raised by brokerage app provider Robinhood, raised to expand its crypto trading platform to all 50 U.S. states
- $250 million raised by blockchain banking tech developer Revolut
- $110 million raised by peer-to-peer payments company Circle
- $77 million raised by cryptocurrency wallet manufacturer Ledger
- $65 million raised by Paxos to scale its blockchain platform
- $38 million raised by Harbor for its tokenized compliance platform for private securities trading
Other notable investments reported by KPMG included banking consortium R3’s expanded blockchain initiatives in the insurance space, insurance consortium B3i’s reorganized blockchain initiative focused on commercial applications and other blockchain consortia investments focused on supply chain management solutions.
“There’s more VC [venture capital] flow available than opportunities to invest — a sign of tremendous growth in the space,” said Safwan Zaheer, the financial services digital and U.S. fintech lead for KPMG, per a report. “Investments in blockchain-related firms already doubled in the first half of 2018 compared to 2017. Blockchain [technology] has the potential to transform banking services. If banking systems were to be rewritten today they would be based on blockchain[s].”
PwC Report: “Initial Coin Offerings: a Strategic Perspective”
In June, PwC, another “Big Four” auditor, released its most recent blockchain technology related report. PwC’s research found the ICO industry flourishing, noting that “In the first [five] months of 2018, a total of 537 [ICOs] with a volume of $13.7 [billion] have been closed successfully –±which is more than all pre-2018 ICOs combined.”
PwC’s report said that, subsequent to 2017’s blockchain hype cycle, the ICO sector has evolved and matured, especially with regard to legal and investor relations. There were ten raises of over $100 million in the first half of 2018, each one focused on blockchain technology initiatives partnered with a tech or retail leader.
The year-to-date sell-off in cryptocurrencies has done little to dent investor appetite for ICOs, with enthusiasm centered on EOS’ record-breaking $4 billion ICO for its open-source tokenomic platform and Telegram’s $1.7 billion ICO for its messaging service tokenization project. PwC noted that the vast majority of funds received by the token sales likely came from those investors already holding large sums of cryptocurrency and betting that the failure rate of ICOs will decline.