A combination of escalating interest rates and a tight regulatory environment in the United States has driven $417 million out of the crypto industry over the past eight weeks, with trading halts in many altcoins draining liquidity and prolonging the ongoing crypto winter.

This environment is forcing crypto firms to rethink and adapt their business strategies.

For example, crypto exchange Binance is trying to diversify its revenue streams amid legal issues with regulators. The company is launching a new subscription-based cloud mining product dedicated to bitcoin (BTC), which allows users without equipment to purchase Bitcoin hashrates through Binance’s cloud mining service.

Venture capital firm Andreessen Horowitz (a16z) is also moving in a new direction, opening its first non-US office in London, UK. Chris Dixon, managing partner of a16z, cited a “predictable business environment” as one of the main factors behind the decision. British Prime Minister Rishi Sunak credited the expansion with “proper regulation and controls” to “encourage innovation” while protecting consumers.

According to the Sovereign Wealth Fund Institute, a16z is the largest venture capital firm in the world with $35.8 billion in assets under management. With this move, the company joins many other crypto businesses that are setting up operations in a friendlier regulatory environment outside of the United States.

This week’s Crypto Biz focuses on crypto market outflows, a16z’s first branch outside the US, the ongoing silent ban on altcoins and AI models to be deployed in the UK for the first time.

​​Crypto fund outflows reach $417 million in eight weeks as investor caution persists

CoinShares latest weekly report revealed that cryptocurrency investment products saw an outflow of $88 million last week. With a substantial draw, the series had an eight-week run totaling US$417 million. CoinShares analysts attribute this ongoing trend to monetary policy considerations, forcing investors to remain cautious about digital assets. In the past week, Ether products witnessed an outflow of $36 million, marking the asset’s largest weekly outflow since the Ethereum merger in September 2022. Meanwhile, Bitcoin investment products saw outflows totaling $52 million.

Digital asset investment products have seen a significant decline over the past 2 months. Source: CoinShares

A16z opens London crypto office citing ‘predictable’ environment

Venture capital firm a16z will to open its first office outside the US this year, adding to a backdrop of US firms looking for greener pastures outside the country. The decision was finalized after “productive dialogue” with the UK Prime Minister and “months of constructive discussions” with HM Treasury, Politics and the Financial Conduct Authority. In addition to the new office, a16z announced its plan to launch a new Crypto Startup School (CSS) program in London in spring 2024. The latest CSS program received over 8,000 applicants, with 26 companies receiving investment from a16z.

EToro halts ALGO, MANA, MATIC and DASH purchases for US customers

Trading platform eToro halted purchases of Algorand (SOMETHING), Decentraland (MOLL), polygon (MAT) and Dash (DASH) for customers from the USA in reactions to tokens marked as securities in recent lawsuits by the nation’s Securities and Exchange Commission. The move came just days after a competitor Robinhood also stopped support for MATIC together with Cardano (ADA) and Solana (SALT), two other cryptocurrencies that the regulator considers securities. Although the assets are officially removed, eToro users in the US can still hold and sell these tokens. The company said it remains a “supporter” of the crypto industry and suggested the move was purely to avoid any potential regulatory violations.

UK to get ‘early or priority access’ to AI models from Google and OpenAI

British Prime Minister Rishi Sunak recently announced that Google DeepMind, OpenAI and Anthropic – three technology companies widely regarded as world leaders in generative artificial intelligence (AI) technologies – have agreed to provide early access to their AI models. Sunak made the announcement during a speech at the launch of London Tech Week, unveiling a three-part plan for deploying AI systems. The Prime Minister did not specify whether the UK would get earlier access to the production models than the general public or suppliers, or whether the commitment would simply offer access to the government and other priority researchers.

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