Web3 Startups Witness 76% Plunge in Venture Funding in Q2 2023

Data from Crunchbase shows that venture funding for Web3 startups, which includes cryptocurrency and blockchain businesses, has significantly decreased in the second quarter of 2023. Just over $1.8 billion was raised overall over 322 agreements, a 76% decrease in fundraising from the same time previous year. This reflects a 51% decrease in transaction flow and a more than three-quarter dip from Q2 2022, when entrepreneurs in the industry raised over $7.5 billion.

The first half of 2023 has been particularly challenging for Web3 startups. In H1 2023, these startups raised only $3.6 billion, marking a massive 78% drop from nearly $16 billion raised during the same period in 2022. This is the slowest pace of deal flow since the final quarter of 2020, when only 291 deals were announced for a total of $1.1 billion.

Large funding rounds played a significant role in the dramatic year-to-year drop in Web3 funding. In Q2 2022, startups raised 15 rounds of more than $100 million each. In contrast, the second quarter of 2023 saw only three such rounds:

Islamic Coin, a Switzerland-based Shariah-compliant crypto asset, raised $200 million from ABO Digital.

LayerZero Labs, a Vancouver-based messaging protocol, closed a $120 million Series B funding round from 33 investors, including a16z crypto and Sequoia Capital, valuing the company at $3 billion.

Worldcoin developer Tools For Humanity, co-founded by OpenAI’s Sam Altman, raised a $115 million Series C led by Blockchain Capital, with participation from a16z crypto, Bain Capital Crypto, and Distributed Global.

Intriguingly, despite a downturn in venture capital investment, the cryptocurrency prices have surged.

Bitcoin, the most prominent cryptocurrency, has seen an increase of over 80% this year, while Ethereum has risen by more than 50%. Both experienced substantial growth last month when Fidelity Investments and BlackRock applied to the U.S. Securities and Exchange Commission to launch the first U.S. exchange-traded fund that make possible directly invests in Bitcoin.

Even in this downturn, investors continue to put small sums of money into firms like Auradine in Santa Clara, California, and Axoni in New York to advance Web3. However, the recent failures of major crypto exchanges and regulatory interventions in the U.S. have likely discouraged some investors from venturing into the digital asset sector.

The future trajectory of Web3 funding is still unclear, as current trends do not suggest a positive turnaround. Nevertheless, the consistent funding from quarter to quarter in 2023, with Q1 startups raising just under $1.8 billion, could imply that the investor interest in Web3 has reached its lowest point and may stabilize or rebound from here.

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CoinFund Secures $158M for Seed IV Fund, Surpassing Initial Goal

According to Blockchain.News, CoinFund has successfully raised $158 million for its Seed IV Fund, exceeding its initial target of $125 million. This achievement underscores the firm’s commitment to fostering innovation in the web3 ecosystem.

CoinFund, a leading cryptonative investment firm, has been making waves in the industry since its inception in 2015. The firm was founded by Jake Brukhman, a former Highbridge Capital Management and Amazon employee, and later joined by Alex Felix, an American Capital alum. Today, CoinFund boasts a global team of nearly 30 individuals and has made over 100 investments across six investment vehicles.

The Seed IV fund is designed to support early-stage investments in innovative teams developing web3 technologies. CoinFund’s CEO, Jake Brukhman, expressed his optimism about the firm’s future, stating, “Over the last two years, we’ve built a truly institutional-grade firm, the model of a large professional manager in web3.”

CoinFund’s recent investments include Cloudburst Technologies, a company specializing in cyberthreat intelligence for digital currency fraud, Gensyn, an ML compute protocol, Giza, an AI platform for smart contracts and web3 protocols, and Robert Leshner’s Superstate, which is developing blockchain-based financial products.

The firm also recently announced the composite ether staking rate (CESR) in collaboration with CoinDesk Indices. CESR is a global floating rate benchmark derived from the daily transaction fees and staking rewards from the Ethereum Proof of Stake (PoS) blockchain. This initiative showcases CoinFund’s continued support for the growth and maturity of web3 and its mainstream convergence.

As CoinFund continues to grow, it remains committed to its mission: “CoinFund champions the leaders of the new internet – powered by foresight as active investors to achieve extraordinary results.” This mission statement reflects the firm’s dedication to supporting the leaders of the new internet and achieving extraordinary results through active investment.

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South Korea Embraces Blockchain: New Digital Asset Act, K-Culture Tokenization, and More

According to the Polymesh report titled “Regulatory Developments in Digital Assets”, South Korea has made a significant move in the crypto industry by passing the “Digital Asset Basic Act” (DABA). This Act introduces 17 legislative proposals aimed at balancing blockchain development with investor protection.

The Act, which is expected to be implemented into law in June 2024, includes measures such as capital reserve requirements for exchanges and the establishment of a separate market for digital securities.

Shinhan Bank, the nation’s oldest bank, has also become an equity investor in the Korea Digital Asset Custody Co. (KDAC), a consortium for startups providing digital asset custody solutions. Shinhan Securities Co., Ltd, part of the Shinhan Financial Group, has launched its “STO Alliance”, a consultative body for the development of security tokens. 

However, the path to digital asset regulation in South Korea hasn’t been without resistance. The Financial Services Commission (FSC) and the Bank of Korea (BoK) have been in a dispute over regulatory supremacy for digital assets. The BoK has demanded a right to access data from digital asset service providers, arguing that digital assets may pose a threat to financial stability.

South Korea’s only legislation to explicitly define and regulate digital assets is an amendment bringing digital assets within the scope of the Act on Reporting and Use of Specified Financial Information, known as the “Anti-Money Laundering Act.”

In a unique blend of culture and technology, South Korea is planning to use blockchain technology to spread its popular culture, known as “K-culture”. The city of Busan plans to roll out a city-backed decentralized digital commodities exchange that will focus on tokenized products that take advantage of the city’s cultural strengths.

In related news, Cube Entertainment, the fifth-largest K-pop company, has moved into the metaverse via a partnership with Animoca Brand’s gaming subsidiary The Sandbox. The partnership will see Cube creating a “K-culture complex” filled with Korean cultural content on virtual land in The Sandbox.

Finally, global digital asset custodian BDACS has announced its intention to establish a project for the tokenization of Korean culture built on the Polymesh blockchain. This move aims to unlock new engagement for fans, artists, producers, and investors.

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FSB Releases High-Level Recommendations for Global Stablecoin Regulation

The Financial Stability Board (FSB) has published a comprehensive report outlining key recommendations for the regulation, supervision, and oversight of global stablecoin (GSC) arrangements. The report aims to address potential financial stability risks posed by GSCs at both the domestic and international level.

The FSB emphasizes the need for authorities to possess and utilize the appropriate powers and tools to regulate, supervise, and oversee a GSC arrangement and its associated functions and activities effectively. This includes the issuance, redemption, and stabilization of the value of the coins; transfer of coins; and interaction with coin users for storing and exchanging coins.

The report also underscores the importance of comprehensive oversight of GSC activities and functions. It recommends that authorities apply regulatory, supervisory, and oversight requirements consistent with international standards to GSC arrangements based on their functions and risks.

In the context of increasing globalization and interconnectedness of financial markets, the FSB highlights the critical role of cross-border cooperation, coordination, and information sharing among authorities. This cooperation is seen as essential to ensure comprehensive regulation, supervision, and oversight of a GSC arrangement across borders and sectors.

The FSB also calls for GSC arrangements to have a comprehensive governance framework with clear and direct lines of responsibility and accountability for all functions and activities within the GSC arrangement.

Although the report focuses on financial stability risks, it acknowledges that it does not cover other important issues related to stablecoins, including anti-money laundering, data privacy, cybersecurity, consumer and investor protection, market integrity, competition policy, taxation, and monetary policy.

To tackle these issues, the FSB suggests a comprehensive supervisory and regulatory framework for GSC arrangements.

The FSB’s recommendations are intended to be flexible to accommodate the wide variety of regulatory frameworks potentially applicable to GSCs around the world.

The FSB also plans to conduct a review of the implementation of these recommendations by the end of 2025 to determine whether further review or action is necessary.

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Crypto Market Consolidation and Key Trends in Q2 2023

According to the CoinGecko report, the entire cryptocurrency market saw a slight increase of 0.14%, with the total market cap rising from $1.238 trillion on March 31, 2023, to $1.240 trillion on June 30, 2023. This period was characterized by a consolidation of gains, following the exuberance of Q1

Bitcoin (BTC) and Ethereum (ETH), the two leading cryptocurrencies, experienced growth during this quarter. Bitcoin prices rose by 6.9%, increasing from $28,517 to $30,481, outperforming the total crypto market cap. This growth was despite a 58.7% decline in average daily trading volume from $33.4 billion in Q1 to $13.8 billion in Q2. Ethereum also saw an increase of 6.0% in Q2, with prices hovering around $1,900.

The report also highlighted a 3.5% shrinkage in the stablecoin market, with USD Coin (USDC) and Binance USD (BUSD) being the biggest losers. In contrast, Tether (USDT) strengthened its foothold, adding 4.4% ($3.48 billion) to its market cap and ending Q2 with a 66% market share of the stablecoin market.

A significant trend in the Ethereum ecosystem was the growth of ETH staking by 30.3% in Q2 2023, reaching 23.6 million ETH staked. This represented a gain of 5.6 million and was facilitated by the enabling of withdrawals.

Despite the growing popularity of Bitcoin Ordinals, the non-fungible token (NFT) trading volume saw a 35.0% drop, from $4.84 billion in Q1 to $3.15 billion in Q2. Ethereum remained the dominant platform for NFT trading in Q2, capturing 83.0% of the volume.

Trading volumes on both centralized and decentralized exchanges fell by 43.2% and 28.1% respectively. Binance, the leading centralized exchange, saw its market share drop to 52%. In the decentralized exchange market, Uniswap maintained its dominance.

The report provides valuable insights into the crypto market landscape, including deep dives into the decentralized finance (DeFi) and NFT ecosystems, and reviews of exchange performance. These insights are crucial for understanding the trends and dynamics shaping the cryptocurrency market as it continues to evolve

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CITD and XBE Pioneer Innovation with Launch of World’s First DOT Standard 3+2 STO and NSTO

China Information Technology Development Limited (CITD) and Xtreme Business Enterprises (XBE) have announced the successful launch of the world’s first Digital Ownership Token (DOT) Standard 3+2 Security Token Offering (STO) and Non-Security Token Offering (NSTO). This marks a significant milestone in the evolution of blockchain assets and the development of Web 5.

CITD, a leading technology company specializing in AI and cloud technologies, and XBE, a pioneer in Web 3 and blockchain assets, have aligned their efforts with China’s 14th Five-Year Plan and Hong Kong’s vision of becoming an international innovation and technology hub. The government has introduced measures to foster the growth of Web 3, blockchain assets, and smart city initiatives, responding to the rising demand for digital ownership verification.

XBE’s DOT Standard 3+2 STO and NSTO leverage XBE’s proprietary DOT technology. Unlike conventional digital tokens, XBE’s DOT employs blockchain technology specifically designed to authenticate legal documents and smart contracts, providing legally enforceable ownership of tangible and intangible assets via tokenization. The versatility of DOTs allows their application across various sectors, including intellectual property, real estate, memberships, and more.

The DOT Standard 3+2 STO uses the DOT standard to record bond documents and corresponding smart contracts into the Bond Security Token. This allows token holders to directly hold and control their own assets, enhancing the certainty, security, efficiency, and transparency of security tokens. It also eliminates the need for a third-party custodian and complex trust structures, mitigating risks often found in the traditional securities market.

In collaboration with Petaverse, CITD and XBE have also launched the Non-Security Token Offering (NSTO). Petaverse is a virtual pet metaverse where individuals can own unique virtual pets and engage in interactive play. The NSTO aims to build a global community of pet enthusiasts, connecting pet lovers from around the world and fostering a supportive community.

Dr. Herbert Lee, Founder and Chairman of XBE, commented, “We are excited to utilize the DOT standard for STOs, demonstrating the versatility of our DOT technology across various assets and industries.” Mr. Daniel Wong, Chairman and CEO of CITD, added, “The utilization of blockchain technology in place of traditional documentation for bond issuance showcases our ability to fully adopt blockchain and smart contract technologies through the DOT standard STO and NSTO.”

In the past, CITD has shown its commitment to leveraging blockchain technology for innovative solutions. In a notable event, CITD announced its plan to issue HK$100 million worth of Bonds using distributed ledger technology (DLT). The Bonds, with a maturity date set for June 27, 2053, were documented using the Digital Ownership Token (DOT) standard and implemented through a binding Ricardian Contract. This approach allowed investors to directly hold and control their own securities, eliminating the need for a third-party custodian.

The use of the DOT standard in the Bond Security Token set a new precedent in the bond market, offering enhanced security and transparency compared to traditional paper-based bond offerings. The tokenization of debt instruments using DOTs enabled a clear record of ownership and simplified the transferability of securities. Additionally, the elimination of third-party custodians reduced risks associated with securities custody.

CITD’s decision to embrace DLT and the DOT standard aligned with its strategic vision for the development of Web3.0 and blockchain business. As the Hong Kong government actively supports the growth of Web3.0 and decentralized finance (DeFi) industries, CITD aimed to leverage its expertise in digital transformation to pioneer innovative solutions in various sectors, including finance, healthcare, and logistics.

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Chinese Authorities Crack Down on 54.8 Million USDT Money Laundering Scheme

On July 18, 2023, Chinese authorities in Qingshui County, Jincheng City, Shanxi Province successfully cracked a money laundering case involving the use of the cryptocurrency Tether (USDT). The operation led to the arrest of 21 suspects, the seizure of over 40 mobile phones, and the confiscation of cash and USDT worth over 1 million yuan.

The investigation began on April 1, 2023, when local police noticed abnormal fund flows in a bank account belonging to a resident of Longgang Town, Qingshui County. The account holder, identified as Zhao, was suspected of being involved in a “running points” money laundering scheme. Further investigation revealed that this was a case of fraud involving the use of USDT for money laundering.

The case spanned across four provinces and six cities, including Guangxi, Jiangxi, Henan, and Anhui, and involved a complex network of individuals. In response, Qingshui police assembled a team of over 50 officers, forming three arrest groups to carry out operations in various locations. The continuous efforts of the police led to the successful arrest of all 21 suspects involved in the case, and the seizure of cash and USDT worth over 1 million yuan.

Upon interrogation, the 21 suspects confessed to using USDT to launder money for cybercriminals. The investigation revealed that since October 2021, a person named Zhou had been organizing off-market USDT trading groups, buying USDT at low prices and selling it at higher prices through WeChat groups and running points platforms. This scheme helped cybercriminals carry out payment settlements between USDT and yuan, generating illegal profits. The criminal group helped cybercriminals settle payments of over 54.8 million USDT, equivalent to about 380 million yuan.

The so-called “running points” is a money laundering method that involves using one’s bank card, POS machine, WeChat or Alipay payment QR code, and cryptocurrency accounts to collect money on behalf of others and transfer it to a designated account, earning commissions in the process. USDT, a blockchain-based cryptocurrency issued by a foreign company, has become the preferred choice for running points platforms due to its convenience and anonymity.

As of now, all 21 suspects in the case have been subjected to criminal coercive measures according to the law, and the case is still under further investigation.

Money laundering using cryptos and stablecoins like USDT is not uncommon. In December 2022, the Public Security Bureau of Tongliao City in Inner Mongolia successfully dismantled a major criminal group that used blockchain technology to exchange cryptocurrencies and launder money with USDT. The operation resulted in the arrest of 63 suspects, the destruction of over 10 money laundering and “running points” dens, and the confiscation of illegal proceeds amounting to approximately 130 million yuan. The total amount laundered by this group reached a staggering 12 billion yuan.

These cases highlight the growing concern over the misuse of cryptocurrencies for illicit activities. Despite the potential benefits of blockchain technology and cryptocurrencies, their anonymity and lack of regulation make them attractive tools for money laundering and other criminal activities. 

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Binance Trims Employee Benefits and Faces Regulatory Challenges Globally

According to a recent report by The Wall Street Journal, the global cryptocurrency exchange Binance has reduced several benefits for its employees, including reimbursements for mobile phone usage, fitness, and work-from-home expenses. 

The company cited the “current market environment and regulatory climate” as the reasons for this change, which has led to a decline in profit. This suggests that additional cost-cutting measures may be necessary in the future.

A representative for Binance indicated that the company might consider scaling back on certain products, business units, staff benefits, and policies in response to business and regulatory concerns.

In addition, Binance is reportedly planning to lay off between 1,500 and 3,000 employees by the end of the year, according to an anonymous source cited by CNBC. This information came to light around the company’s six-year anniversary on July 14, 2023.

Binance is currently facing legal challenges globally. In the United States, both the Securities and Exchange Commission and the Commodity Futures Trading Commission have initiated legal proceedings against the company.

The lawsuits allege that Binance and its CEO, Changpeng Zhao, offered unregistered securities. Binance has characterized these legal actions as an example of regulation by enforcement.

On July 5, 2023, the Australian Securities and Investments Commission (ASIC) conducted a search operation at the Binance Australia headquarters. This investigation into the now-closed local derivatives division of the crypto-giant is part of the operation, highlighting the increasing regulatory scrutiny Binance is facing.

This follows the decision to cease facilitating PayID AUD deposits by a third-party payment service provider on May 8, 2023.


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Shinhan Bank and SCB TechX Achieve Milestone with Successful Stablecoin Remittance Pilot on Hedera Network

Shinhan Bank, SCB TechX, and Taiwan’s largest financial institution have successfully completed a stablecoin remittance proof-of-concept (PoC) pilot on the Hedera network, as announced on July 18th, 2023.

Shinhan Bank, a leading commercial bank in South Korea, boasts KRW 664.4 trillion in assets and serves 27 million customers. SCB TechX Co., Ltd., a digitally native, industry-leading platform-as-a-service business, provides innovative banking and non-banking services to commercial institutions and consumers throughout Southeast Asia.

The Hedera network, on which the pilot was conducted, is the most sustainable public ledger for the decentralized economy, built by a global community, and governed by a diverse council of industry-leading organizations.

The pilot, a major stride in the use of blockchain technology for cross-border payments, achieved real-time settlement and real-time foreign exchange (FX) rate integration across the Thai Baht (THB), New Taiwan dollar (NTD), and South Korean won (KRW). This was accomplished in a test environment that aligns with current production capabilities.

Notably, the PoC is EVM-compatible, opening the door for any EVM-based stablecoin issuers to participate using the framework in the future. This pilot is a continuation of Shinhan Bank’s previous work that began in 2021, when they partnered with Standard Bank on stablecoin international remittances.

Both Shinhan Bank and SCB TechX highlighted the potential of stablecoins in facilitating cross-border remittances. They emphasized that stablecoins offer a low-cost, fast, and reliable way to transfer value across borders. This could significantly increase financial inclusion and improve access to financial services for individuals and businesses in underserved communities.

Stablecoins, like the ones used in this pilot, are increasingly becoming a critical part of the crypto-asset ecosystem due to their frequent use in the trading of crypto-assets and as liquidity providers in Decentralized Finance (DeFi).

However, despite their name, stablecoins may not always be stable. Their stability is dependent on the management of their reserve assets, which if mismanaged, could lead to a loss of confidence and large-scale redemption requests, potentially leading to financial instability.

Despite these challenges, the use of stablecoins in cross-border remittances, as demonstrated by Shinhan Bank and SCB TechX, is a testament to their growing use cases.

However, the potential risks and cross-border nature of stablecoins call for the urgent implementation of effective regulatory, supervisory, and oversight frameworks before significant further interconnectedness with the traditional financial system occurs.


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Ark Investment: Autonomous Vehicles to Boost GDP by $26 Trillion, Save Over 1M Lives by 2030

According to ARK Investment Management LLC, driverless cars are expected to revolutionise the global economy over the next 10 years and might impact GDP by as much as 20%. This huge shift is anticipated as a result of autonomous vehicles’ transformational potential to lower accident rates and lower transportation expenses.

The net GDP benefits from the introduction of autonomous taxis might be astounding, amounting to $26 trillion by 2030, or around 26% of the size of the US economy today. This economic shift is not just about numbers; it’s about lives saved.Between 30,000 and 35,000 lives might be saved by autonomous cars in the US, and 1.2 to 1.5 million lives worldwide.

While fewer accidents might lead to a GDP reduction of around $1 trillion per year due to decreased repairs, hospital stays, and insurance rates, the overall economic impact remains positive. The preservation of lives and reduction of injuries, coupled with the continued economic activity from employees who would otherwise be incapacitated, could contribute an additional $3 trillion to the global GDP annually.

The passenger experience in autonomous vehicles is set to change dramatically, with enhanced safety and newfound free time. This shift could lead to a global productivity uplift of approximately $17 trillion.

Due to their reduced running expenses and pricing, electric vehicles are predicted to take over the autonomous transportation market, which may result in a $1.2 trillion yearly drop in fuel and maintenance income for gas-powered vehicles.

The emergence of driverless taxis may cause a decline in the sale of personal vehicles in metropolitan areas, which would reduce GDP by almost $1.8 trillion annually. However, the estimated $1 trillion in sales of driverless vehicles to fleet operators may somewhat counterbalance this.

The transformation of unpaid driver activity into measured economic activity by autonomous cars could potentially generate around $9 trillion in service revenues annually. By 2030, personal autonomous travel could add a net $26 trillion to global GDP per year. This includes a potential increase of $30 trillion due to autonomous ride-hail service revenues and increased productivity, and a decrease of $4 trillion due to fewer accidents, lower gas-powered vehicle sales, and lower fuel and maintenance costs.

ARK projects that autonomous ride-hail could add around 2-3 percentage points to global GDP per year by 2030. This economic impact is anticipated to be greater than the combined boosts delivered by the steam engine, robots, and IT.

With global growth potentially nearly doubling from 3.3% per year to around 6% thanks to autonomous taxis, consumers are likely to be the biggest beneficiaries. Consumer purchasing power could increase as transportation costs drop, and time freed from unpaid driving could increase by around 10 weeks.

The autonomous vehicle revolution is not just about technology; it’s about reshaping the global economy and improving lives. As we move towards 2030, the impact of this transformative technology will become increasingly apparent.

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