Crypto venture capital (VC) funding is expected to rebound this year as regulatory clarity and more crypto-friendly policies emerge under President Donald Trump’s tenure, JPMorgan ( JPM ) said in a research report on Wednesday.
The Wall Street Bank noted that venture funding for the industry has been muted in recent years. This may have been due to enforcement actions by the US Securities and Exchange Commission (SEC) and the climate of regulatory uncertainty under the previous administration, wrote analysts led by Nikolaos Panigirtzoglou.
The start of the EU’s Markets in Crypto Assets (MICA) regulations, which came into effect at the end of December, is expected to “further strengthen VC engagement,” the report says.
Still, funding levels are unlikely to match previous peaks seen in 2021/22, JPMorgan said, as crypto venture capital firms face a number of challenges.
Giants of Traditional Finance (Tradfi) such as BlackRock (BLK) and Franklin Templeton are increasing their participation in the crypto market, leaving less market share for VC firms in stablecoins, tokenization and decentralized finance (DEFI), the bank said.
Nascent Crypto Projects are avoiding large token sales to VCs and are increasingly turning to community-driven platforms to raise money, the report noted.
High interest rates also pose a challenge for VC funding, JPMorgan said.
The growth of Cryptocurrency Exchange-Traded Fund (ETF) products is “inducing a trend towards passive investment” and this may be diverting capital away from VC firms, the report added.
Read more: Crypto Venture Capital Market Remained Difficult in 2024, Says Galaxy Digital
