Today in crypto, crypto projects saw their second-best quarter of venture capital funding since Q3 2022. Japan’s financial regulator is preparing to require exchanges to hold liability reserves for customer assets, and crypto investment products have seen nearly $5 billion in outflows over the past four weeks, though late-week inflows suggest sentiment may be stabilizing.
Crypto VC activity hits $4.6B in third quarter
Crypto-focused venture capital investment reached $4.65 billion in the third quarter, the second-highest amount of activity since crypto exchange FTX collapsed in late 2022 and decimated venture bets on crypto.
Galaxy Digital’s head of research, Alex Thorn, said in a report on Monday that Q3’s venture bets were a 290% quarter-on-quarter jump and the largest quarter since Q1, which saw $4.8 billion in investments.
“Despite remaining below 2021-2022 bull market levels, venture activity remains active and healthy overall,” Thorn said. “Sectors like stablecoins, AI, blockchain infrastructure, and trading continue to draw deals and dollars, and pre-seed activity remains consistent.”
Q3 saw 414 venture deals, with seven accounting for half of the capital raised over the quarter.
Those included financial technology company Revolut, which attracted $1 billion, crypto exchange Kraken with $500 million and crypto-focused US bank Erebor with $250 million.
Meanwhile, established companies, those founded in 2018, accounted for most of the capital raised, while companies founded in 2024 accounted for the highest number of deals.
Japanese watchdog to require exchanges to hold liability reserves: Report
The Financial Services Agency in Japan will reportedly require cryptocurrency exchanges to maintain liability reserves as part of measures to guard against hacks or unforeseen events.
According to a Monday Nikkei report, Japan’s FSA will revise its requirements for local companies to include methods for quickly compensating users affected by security breaches or other causes. The financial watchdog reportedly cited recent hacks of global exchanges as part of the reason behind the change.
The Financial System Council, an advisory body to the FSA, is set to release a report on the matter following a meeting on Wednesday. One of the expected recommendations would require crypto firms to create liability reserve funds.
The move follows reports that the FSA plans to review regulations that would allow banks to purchase and hold crypto assets. Japan remains a country with a high concentration of crypto users, with about 12 million accounts registered as of February, according to data from the FSA. The country has a population of about 123 million.
$1.9 billion exodus and flicker of hope hits crypto investment funds: CoinShares
Cryptocurrency investment products have hit almost $5 billion in outflows over the past four weeks, but inflows during the final days of last week offered a small sign of improving sentiment.
Crypto exchange-traded products (ETPs) saw $1.94 billion in outflows last week, a small decline from the $2 billion exodus the previous week, according to a Monday research report from CoinShares.
The four-week total now stands at $4.9 billion, marking the third-largest outflow run on record. Only the March tariff-driven sell-off and the February 2018 downturn were bigger.
Still, CoinShares noted “tentative signs of a turnaround,” citing $258 million in inflows during the last trading days of the week following seven straight days of redemptions.
XRP (XRP) investment products were a rare bright spot. XRP exchange-traded products (ETPs) recorded $89.3 million in inflows last week, defying the broader downturn even as the token fell 6.9%.
Solana (SOL) ETPs were in the red with $156 million in outflows and SOL falling 3.5%, according to Cointelegraph data.