Despite a decrease in investments in Canadian fintechs in 2023, the financial technology landscape was still dominated by the rise of crypto and blockchain ventures.
According to KPMG’s global Pulse of Fintech report, published on Tuesday, these cutting-edge technologies captured the attention of investors, with over three-quarters of all deals involving VC-backed companies. In fact, a total of 83 transactions, worth a whopping $711 million, were made.
In a noteworthy trend, crypto and blockchain once again stole the show with a staggering 31 deals, surpassing the 24 investments made in software-as-a-service fintechs. Coming in third were companies focused on artificial intelligence and machine learning, which secured 15 investments.
KPMG’s advisory services partner, Edith Hitt, suggests that the recent approval of 11 spot bitcoin ETFs by the US SEC may have fueled investor interest in cryptoasset fintechs. This milestone marks a significant step forward and reflects the growing acceptance of these technologies within the industry.
Edith Hitt believes that green-lighting a Bitcoin ETF in the United States has the potential to fuel Canadian fintechs and propel the development of cutting-edge technologies in the realm of digital assets.
As Canada’s crypto enthusiasm continues to surge, the funding for Blockstream showcases the nation’s escalating interest in the digital currency realm. According to Hitt, a significant investment was made in a blockchain infrastructure enterprise last year, highlighting the country’s growing fascination with this innovative technology. The $125 million secured by Victoria-based digital asset company, Blockstream, is a testament to the nation’s unwavering commitment to expanding its bitcoin mining operations.
Edith Hitt ponders over the notable investment pouring into blockchain infrastructure and sees it as a sign that investors are looking towards the future. In her opinion, they could be anticipating the possibility of a central bank digital currency or a ‘digital dollar’ becoming a reality in Canada.
Expert thinks, if that day comes, blockchain could be the backbone of such a system, propelling Canada’s fintech ecosystem to new heights.
However, recent reports indicate that Canadians are not as excited about a CBDC as one might expect. Instead, a considerable number still prefer traditional cash transactions and are pushing for laws that mandate merchants to accept cash.
Unfortunately, this subdued sentiment towards CBDCs is not unique to Canada. KPMG attributes the declining investment scene to a combination of factors, including market fluctuations, slower growth, rising costs, and global tensions.
This downward trend in Canada’s fintech investment follows a larger global trend in venture capital funding for the crypto sector. According to Galaxy Digital, 2023 saw a staggering 70% decrease in VC funding, with deal values plummeting from $32 billion in 2022 to a mere $10 billion.
