Outlier Ventures, a blockchain-centric investment group, has published its State of Blockchain report for Q3 2018. The document shows that industry startups and applications have undergone growth in investment interest. On the other hand, however, ICO fundraising is down and regulators are starting to show an interest in making their regions competitive enough to attract startups in the blockchain niche.

Blockchain Investment Up, ICO Investment Down

According to Outlier Ventures’ State of Blockchain report, ICO funding posted a nearly 74% drop from Q1 2018, as speculators have sought to shy away from the volatile token market.

Moreover, it can be presumed that investors are wary due to an abundance of reports that regulators have cracked down on exchange founders that failed to deal with the SEC’s fine print, along with the supposed “unregistered securities” listed on exchanges.

Venture capitalists appear increasingly willing to fill in the gap left by fleeing speculators. This group of investors accounted for $2.85 billion in blockchain-related investment this year, a 316 percent increase from $900 million in 2017. Many of the 119 deals that were closed in Q3 2018 were Series A or Seed financing, indicating a willingness by venture capitalists to invest earlier and eliminate the need for the token pre-sales of last year.

Regulators Beginning to Recognize Benefits of Attracting Blockchain Startups

While regulators have become notorious for disliking cryptocurrencies and ICOs, they seem to be beginning to recognize that blockchain has potential. This is something of a shift from the prevailing attitude among regulators in 2014, which was when they believed that tokens and cryptocurrencies must be tightly regulated, if not banned altogether.

Much of this may be classic FOMO – the belief that their respective countries will miss out on an innovative new technology and its economic benefits if regulators allow archaic attitudes and popular misconceptions about blockchain to prevail.

Estonia, for instance, was one of the first countries to get on board with its decentralized ledger-based notary services and E-Residency program. More recently, Switzerland stood up to its banking industry for refusing to work with blockchain startups. Several nations, like France and the UK, have also formed working groups to study this innovation or create a regulatory “sandbox” to explore a legal environment that may be favorable. Outlier Ventures’ report summed it up this way:

“The blockchain ecosystem has evolved from struggling to find banking partners to governments becoming increasingly sensitive of the possibility of startups moving abroad in search of more friendly startup and funding environments. Forward-looking countries have begun engaging with regional banking entities to foster a regulatory environment to capture the vast economic gains.”

Not that all government officials are friendly toward blockchain and cryptocurrency: US Congressman Brad Sherman (D-California) was famously shot down on Twitter when he called for a complete ban on cryptocurrency-related activities, such as trading and mining. However, his attitude may be increasingly part of the minority in an environment in which venture capitalists and regulators are beginning to loosen up when it comes to this budding technology.

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