JPMorgan (JPM) said in a research report on Wednesday that Crypto Venture Capital (VC) funding is expected to recover this year as regulatory clarity and more crypto-friendly policies occur during President Donald Trump’s term.
The Wall Street bank noted that venture financing for the industry has been subdued in recent years. This may be due to enforcement actions by the US Securities and Exchange Commission (SEC) and a climate of regulatory uncertainty during the previous administration, analysts led by Nikolaos Panigirtozoglou wrote.
the It starts Among the EU Markets in Crypto Assets (MICA) regulations, which came into effect at the end of December, are expected to “boost further VC participation,” the report said.
However, the level of funding is unlikely to match previous peaks seen in 2021/22, JPMorgan said, as Crypto Venture Capital firms face a number of challenges.
Traditional finance (Tradfi) giants like BlackRock (BLK) and Franklin Templeton are increasing their participation in the crypto market, and this leaves a lower market share for VC firms in StableCoinsand Token and Decentralized finance (Davy), the bank said.
The report noted that emerging crypto projects are avoiding large token sales to VCs and are increasingly turning to community-based platforms to raise funds.
High interest rates also pose a challenge for VC funding, JPMorgan said.
The report added that the growth of cryptocurrency exchange-traded fund (ETF) products is “catalyzing the trend toward passive investing,” and this may be diverting capital away from VC firms.
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