The United Kingdom’s crypto and fintech industries experienced a significant drop in investment in the latter half of 2022 due to a combination of turbulent macroeconomic conditions and record-high inflation. According to a report published by KPMG, the total amount of Fintech investment in the UK dropped from $22 billion in 2021 to just $17 billion in 2022 – a 60% decline. This drop in investment mirrored the roughly equivalent drop in the total cryptocurrency market cap within that time, from over $3 trillion in November 2021 to under $800 billion in December 2022. Payment firms were the largest draw among the UK’s fintech subsectors, absorbing $3.6 billion of investments last year. Worldwide, fintech firms reaped $164.1 billion across over 6000 investment deals last year, versus $238.9 billion in 2021.
Investment in crypto and blockchain-specific firms also fell, from $30 billion in 2021 to $23.1 billion in 2022. Value locked within Defi protocols has plummeted to $50 billion, down from $180 billion at its high. A report from Pantera Capital published last month shows that VC investment in crypto firms fell by over 75% between Q4 2021 and Q4 2022. This decline in investment was due to a number of factors, including a lack of IPO exits, downward pressure on valuations, and market turbulence. The decline in investment has also been accompanied by a number of high-profile blowups in the crypto space, such as those of Celsius, Voyager, and Terra.
Overall, the decline in investment in the crypto and fintech industries in the UK is indicative of a wider trend of decreased investment in the sector globally. This is likely due to the combination of macroeconomic conditions, market turbulence, and downward pressure on valuations. Despite this, the UK’s fintech industry still managed to attract a significant amount of investment in 2022, and the sector is likely to continue to grow in the coming years.