MiCA Triggers VC Funding Increase Targeting EU Crypto Startups 

A review of VC funding in Europe by Binance and Circle executives reveals increased activity portraying investor attraction by the progress on crypto regulation. The surge in VC funding witnessed by EU-headquartered startups shows a preference for investment in zones with a stable regulatory context. 

Crypto Regulation in Europe Attracts VC Funding

Binance executive admits that the landmark crypto regulation is fueling the flow of funds to Europe which has increased immensely in the few months. In particular, venture capitalists are willing to allocate additional funds to entities operating in the European crypto market. 

The Markets in Crypto Assets (MiCA) involves a comprehensive regulatory framework formulated and approved by member states earlier in 2023. The proposed law awaits approval by the European Council and is likely to get approval into law later in 2023.

Harmonized Legislation Yields a Basis to Regulate Digital Assets

The legislation is set to harmonize crypto assets regulation and operators involved in transacting them. The regulation demands compliance from individuals and entities transacting in crypto assets. The harmonization constitutes the initial major step in regulating the digital assets industry. 

MiCA is attracting increased support from executives within the crypto executives. Executives of leading crypto companies have revealed from Twitter posts urging replication of the EU’s footsteps in applying similar laws. 

The executive heading EU Policy in Circle the issuer of USD Coin (USDC) stablecoin, Patrick Hansen, observed that VC investment in Europe crypto projects is 10x in the past 12 months. The uptrend is linked to new MiCA laws.  

Europe Accounts for Nearly Half of VC Funding Globally

Hansen’s screenshot derived from PictBook indicates that Europe dominated the VC funding for Q1 2023 startups by accounting for 48%. 

Hansen tweeted that regulatory clarity is attractive to capital providers and entrepreneurs globally. While England exited the EU, it leads in Europe as the preferred destination for investing in startups. London-based crypto start-ups are the leading recipients of VC funding. 

Zurich and Berlin Emerge Leading Destination of VC Funding in EU

A study by investment company Rockaway revealed that besides London, VC funding investors channelled financial resources to Zurich and Berlin. Rockaway projects that VC funding targeting Europe crypto startups is set to eclipse the $5.7 billion realized in 2022.

While London retains the attraction of crypto investment, Zug and Zurich are emerging the hotbed of Swiss crypto. Rockaway shows that Berlin and Paris constitute the chasing pack though themselves battling for third place.

Hansen considers legislation as a means to draw investment and increase future participation within the crypto space. 

Hansen’s perspective receives backing from Richard Teng who serves as the regional head of Binance operations in Asia and Europe. He portrayed the MiCA framework as delivering the regulatory clarity desired by crypto businesses in Europe. He added that it provides a reference model that other models should emulate. 

Majority of executives for firms operating in the crypto space express concern regarding the absence of regulators’ clarity. The approval of MiCA will transform Europe into a bright spot for startups in crypto startups. 

Although Europe tops as the leading destination for VC funding, startups in the crypto sector plummeted 82% in quarter 1 of 2023.

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