Investments in Canadian fintechs may have slowed down in 2023, but crypto and blockchain-related ventures continued to dominate the scene, according to KPMG’s global Pulse of Fintech report published on Tuesday.
The report revealed that VC-backed investments constituted over three-quarters of all deals, with 83 transactions valued at $711 million. Of these, more than two-thirds were early-stage or seed investments.
For the second consecutive year, crypto and blockchain led the way with a total of 31 deals, followed closely by software-as-a-service fintechs with 24 investments. Artificial intelligence and machine learning secured 15 investments.
KPMG advisory services partner Edith Hitt attributed investor interest in cryptoasset fintechs to expectations of the US SEC approving a spot bitcoin ETF. The approval of 11 such ETFs in January signaled broader industry acceptance and could potentially boost investment in Canadian fintechs, she said.
Hitt highlighted one notable Canadian investment in a blockchain infrastructure company, citing Blockstream, a digital asset firm in Victoria, Canada, which secured $125 million in funding for bitcoin mining operations.
She suggested that this investment reflects increasing interest in blockchain technology and speculated on its potential role in future developments such as a central bank digital currency in Canada.
However, reports indicate that Canadians are less enthusiastic about a CBDC, preferring cash transactions and advocating for legislation requiring merchants to accept cash.
KPMG noted that a combination of factors, including market cycles, slower growth, market fluctuations, higher costs, and global tensions, contributed to the subdued investment scene. This decline in Canada’s fintech investment reflects a global trend in VC funding for the crypto sector, with Galaxy Digital reporting a 70% decrease in VC funding in 2023 compared to 2022.