Brief Musings on the State of Crypto in Western Europe
Initial reactions to two weeks in the European ecosystem
My exposure to the blockchain world has been heavily U.S. skewed — I live in San Francisco and work at CoinList, where we focus on helping companies run token sales compliantly to the standards set by U.S. securities laws. Unsurprisingly, most — although not all — of the projects that we’ve worked with have been U.S. based.
Last month I spent two weeks in Europe for a number of conferences (Internet of Agreements in London, Blockstack’s Berlin event, and Unplug) and left with a few strong impressions: while the overall ecosystem is smaller than in the U.S., there are some really interesting projects; London and Berlin are the big winners (so far); and the regulatory environment is evolving rapidly.
I should be clear that I am by no means an expert on the European crypto scene — these are simply based on my observations over a two week period. These observations also likely skew heavily towards London and Berlin as that’s where I spent the most time.
- The European crypto ecosystem is growing quickly.
Just look to government adoption, initial coin offerings, or bitcoin nodes. A few companies that I spent time with that I found highly impressive:
Mattereum (A legal/technical interface to connect digital assets on the blockchain with goods and services in the material world)— Vinay Gupta and the Mattereum team are doing really interesting things with regard to creating arbitration processes around smart contracts (arbitration remains an underdeveloped space for digital contracts).
If the attendance at their last conference was any indication, lawyers are highly interested in what they’re building.
oscoin (Decentralized network/incentive structure for open source software development)— I spent about 20 minutes chatting with Ele about his vision for improving open source software development but I could’ve easily spent two hours.
He has clearly thought tremendously hard about the incentives that exist in open source software and has a highly compelling vision for building a network that would better maintain and incentivize its development.
Colony (Platform for open organizations)— Jack du Rose and the team have a really ambitious vision for building a protocol to power decentralized organizations built on meritocracy. Jack’s also been a thought leader for founders wanting to run token sales compliantly.
2. London and Berlin have been the big winners (so far).
Many of the high-profile European companies in the space (Polkadot, Lisk) and almost all of the institutional capital (see below) are clustered in these markets. This isn’t terribly surprising given that these are already the largest tech hubs in Europe.
There’s a reasonable argument to be made that Berlin could overtake London. The opening of Full Node, a blockchain focused co-working space in Berlin, is generating a ton of buzz and some high-profile teams including Gnosis have already moved in. It also seems likely that Brexit will have some meaningfully negative impact on talent moving to London.
Two areas that have historically been large tech hubs but that I heard mentioned less were Nordic cities (especially Stockholm) and Paris.
This is not to say that there aren’t impressive teams working there — I just heard less buzz about those areas. For what it’s worth, EthCC was in Paris a few weeks ago and I heard nothing but good things about the conference.
3. Eastern Europe is a huge cultural hub for crypto.
It’s tough to find data on this but based on a number of conversations, it seems like crypto has captured the popular imagination in the region more so than most places on earth.
Slovenia is a particularly interesting example (a town in Slovenia has even installed a Bitcoin monument!) There are rumors that Bitsamp is being sold for $400M — this is the largest exit I could find for a Slovenian tech company in recent history. Imagine the products that will come out of a country where the startup success story is a crypto exchange and not a social network or search engine...
4. Switzerland will be Delaware, not Silicon Valley. Switzerland has been a finance hub for decades and remains ahead of the curve in crypto regulations, and so we may well see a lot of companies incorporate in Switzerland (plus it already has a catchy name). That said, I believe the impact of these regulations has been dramatically overstated:
A. Token sales almost always involve cross-border capital flows (ie a company incorporated in Switzerland is selling tokens outside of Switzerland). Hence, companies that sell tokens in other European countries (or globally) still have to abide by the securities laws of those countries.
So while Swiss regulations are a step in the right direction, it doesn’t really solve the problems of a company that wants to raise money in an ICO from investors across the continent.
B. Most builders in the space have no interest in moving to Switzerland. Asking the average tech worker in Berlin or London if they‘d move to Switzerland has about a 75 percent chance of eliciting a snicker.
The country has a notoriously high cost-of-living and is quite quiet compared to Berlin or London. (In the same vein, are Malta (pop 425k) or Gibraltar (pop 30k) likely to become thriving tech hubs?🤔)
The U.S. is an interesting corollary. New York has some of the most restrictive laws around token sales and yet NYC is arguably the most innovative hub for blockchain activity in the U.S. (see ConsenSys, CoinFund, Digital Currency Group, Blockstack Inc, Kadena).
It’s not obvious to me that regulations are causing token issuers to move their headquarters just yet (although it’s clearly having an impact on exchanges ie Binance, Kraken).
5. The European crypto funding environment is significantly less mature than that of the U.S.
While there are dozens (likely 100’s) of crypto funds in the U.S., there are less than half a dozen that are widely talked about in Western Europe. BlueYard Capital (Berlin), which has been investing in the space for over a year, is almost definitely the highest profile crypto-focused fund in the region (and has already built an enviable portfolio).
Libertus Capital (London) and Fabric Ventures (London) have come online in the past year and have very strong teams behind them.
6. Europe has not had a surge in token sale service providers (at least to the same degree that the U.S. has).
The U.S. now has a plethora of ICO advisory firms (ie Element Group, Satis Group), crypto-focused marketing and PR agencies (ie Foxtail), and even celebrity lawyers. Based on the conversations I had in Europe, it seems like this ecosystem of providers is much less developed.
Europe has a huge bench of technical talent and has almost as many engineers working on blockchain projects as the US does (Atomico). While the overall sector is still smaller than that of the U.S.
I am super bullish on crypto in Europe. As more crypto-focused funds come online (and as most European VC funds get their LPA’s amended so that they can invest in token sales), I’m confident that the ecosystem will grow even faster.
If you’re working on blockchain technology in Europe and want to chat, please drop me a line: regan [at] coinlist.co.
Huge thanks to Jill Carlson, Samit Kalra, Andy Bromberg, and Alicia Garabedian for their input on this article.
Disclosures: I am not a lawyer and nothing here should be construed as legal advice. These are my personal views and not those of CoinList. Libertus Capital and Digital Currency Group are investors in CoinList. CoinList has business relationships with Blockstack and Kadena. I may invest personally in any of the projects mentioned. CoinList may engage with any of the projects mentioned.
