Why Europe is Leading in ICO Investment, Fresh Insight
Initial Coin Offerings (ICOs) have taken off as the prefered way for raising project funds for cryptocurrency related startups compared to the red-taped, costly Initial Public Offerings (IPOs). Token sales in the first nine months of the year have hit the $12.3 billion mark, doubling the amount raised during the whole of 2017.
With the increased funding, the race is on as countries aim to develop their own digital asset economies. An emerging region that has been leading in this industry is Europe. According to a report dubbed ‘State of the Token Market’ released last week by Fabric Ventures, approximately $4.1 billion has been raised through ICOs in the region.
This amount is quite high compared to the $2.3 billion and $ 2.6 billion raised in Asia and the United States, respectively. So, what factors could be could be boosting ICO investments in Europe:
1. Positive Regulatory Environment
One factor that has been attributed to the significant funding raised through ICOs in Europe is the positive regulatory environment created by numerous governments across the region. European Union countries have been on the forefront of enacting the general data protection regulation, as well as the payment services directive for the benefit of users.
For Joseph Oreste, founder & CEO of Qupon, Europe's regulatory burden is far less compared to other regions.
He said, "Investors in both Europe and the United States see the value and the future that cryptocurrency and decentralized technology are ushering in. However, the growth of ICOs in Europe is mainly the result of less regulatory burden for European investors compared to those in the United States. "
Individually, European countries are creating clear and forward thinking regulatory frameworks for digital assets to ensure they are not left behind. Due to this, relatively smaller European countries are able to compete against big countries such as the United Kingdom (UK).
The report shows that Malta and Gibraltar cumulatively raised $300 million, nearly 60% of the token amounts raised in the UK. Some regions outside Europe lack clarity in regulation or have relatively restrictive frameworks.
2. Increased Development Activity
The other reason that could be driving European domination in the cryptocurrency space is increased development activity in the region. Europe houses strong project formations in cities such as Zug, Berlin, Tallinn, and London. These have attracted fintech startups and some noteworthy cryptocurrency projects.
Also, as Europe is composed of 50 diverse but unified countries, it has propagated increased ICO activity in the region. This is because developers are able to take advantage of diverse and multinational teams across hubs in their cities to develop crypto projects. The ‘State of the Token Market’ report shows successful ICO projects have a large contributor community, thus, Europe has an advantage. Additionally, these teams are more likely to have a global outlook as opposed to narrowing to a small economy.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.