The blockchain and cryptocurrency sector continued its reign as the top recipient of investments within Canada's financial technology landscape, according to a recent report by accounting firm KPMG.
Released on February 6, KPMG's Canadian fintech report highlighted that despite significant drops in deal volumes and values in 2023, the crypto industry maintained its leading position in investment activity. Last year, the blockchain and crypto sector secured 31 deals, outpacing other fintech verticals in the country. Software-as-a-service (SaaS) followed closely with 24 deals, while artificial intelligence (AI) and machine learning saw 15 deals.
Edith Hitt, a partner at KPMG, noted that investor interest in crypto-related fintech ventures was partly fueled by anticipation surrounding the approval of a spot Bitcoin exchange-traded fund (ETF) by the United States Securities and Exchange Commission (SEC). Hitt emphasized the potential impact of a Bitcoin ETF approval on investment in Canadian fintechs, predicting that it could drive innovation and investment in digital assets within the country.
Highlighting one of the largest fintech investments in Canada in 2023, Hitt pointed to a blockchain infrastructure company, indicating a growing interest in blockchain technology in the region. She suggested that investors may be anticipating the future potential of blockchain technology, particularly in the event of a central bank digital currency (CBDC) being introduced in Canada.
According to Hitt, if Canada were to deploy a CBDC, blockchain technology could serve as the necessary infrastructure to power the digital currency system, potentially catalyzing further growth in the Canadian fintech ecosystem.
However, the adoption of a CBDC in Canada faces skepticism. A discussion paper by the Bank of Canada in August 2023 highlighted potential challenges in CBDC adoption, citing weak consumer incentives due to existing access to financial services. Additionally, a survey conducted on November 30 revealed reluctance among individuals aware of CBDCs to use them, further indicating hurdles to widespread adoption.
Despite these challenges, the continued dominance of the crypto industry in Canadian fintech investments underscores its resilience and potential for growth in the country's evolving financial landscape.