The rising interest from institutional investors in the blockchain-run regulatory technology (RegTech) start-ups is also supported by analyzing the trends. The venture capital investments in RegTech reached $5.7 billion last year, according to Venture Scanner. RegTech is still a relatively new industry. Therefore more than half (72%) of all investments were seed or early-stage rounds. On the other hand, Investments in blockchain start-ups more than doubled in Q1 2021, compared to the previous period.
In the past few years, digital currency stopped being exclusive to crypto enthusiasts and anarchists. Large institutional investors now participate in the trading, offer their clients to invest in the “crypto” funds, JP Morgan has issued its own coin, and Central Banks around the globe are getting ready for the issuance of GovCoins. While Bitcoin and altcoins are now widely accepted, Decentralized Finance (DeFi) is yet to gain momentum with the general public.
Clean Means Wider Adoption
Making the DeFi “clean” means it paves the way to large institutional investors. However, it is not only in the interest of cryptocurrency market professionals to attract institutional investors. The benefit is mutual- as institutional investors more and more turn to blockchain to solve their regulatory obligations. Additionally, the institutional investors with no AML risks can benefit from yield farming and lending that is possible in the DeFi ecosystem bringing more financial benefits to its investors.
Start-ups start to work with Institutional Investors
The blockchain RegTech start-ups are also helping non-blockchain companies to benefit from the earning opportunities offered by DeFi.. For example, Compound Treasury enables Neobanks and other non-crypto fintechs to earn in the USDC market of the Compound Protocol.
Moreover, AAVE DeFi protocol founder has confirmed that they are testing the liquidity pool specifically designed for institutional investors.
Master Ventures partner with PureFi
The obvious benefits that are brought by blockchain start-ups to the regulatory framework, make these start-ups an attractive target for Venture Capital firms.
Master Ventures, founded in 2018, has invested in PureFi protocol. Master Ventures is committed to facilitating a financial revolution powered by blockchain technologies. PureFi protocol allows checking the “purity” of the funds in the DeFi ecosystem. Powered by zero-knowledge oracles PureFi assigns the Money Laundering (ML) score to each transaction in the Decentralized Exchanges (DEXs) without compromising on the anonymity of the participants.
Making Decentralized Finance a safe place, free of money laundering risks is the key to widespread adoption by large institutional investors. However, just like in the “chicken and the egg” dilemma, the institutional investors will benefit greatly when such adoption will speed up and will get an incredible return on their investment. So, we advise considering promising blockchain-powered RegTech start-ups as an investment destination. Many prominent funds have already done so.