The US venture capital firm Sequoia Capital is investing between US$500mln and US$600mln in a new fund focused on cryptocurrency, in the latest sign that venture capitalists are moving deeper into digital assets.
Shaun Maguire, a partner at Sequoia, described crypto as a “megatrend over the next 20 years” and called it “the future of money”.
The new crypto fund will primarily invest in cryptocurrency tokens traded on third-party exchanges.
“The area in crypto where we have the most opportunity for improvement is really in the liquid stuff,” Maguire said. “Our founders have asked us for a lot of help there, and we just haven’t been able to deliver in the traditional venture capital model.”
The new fund will allow Sequoia to become a bigger participant in the cryptocurrency projects it backs, the FT reported. One-fifth of Sequoia’s investments in the US and Europe last year went to the cryptocurrency sector, including start-ups such as the US$8bn digital asset security company Fireblocks.
Many cryptocurrency projects do not have boards of directors but distribute tokens that allow users and investors to vote on major decisions.
Global regulators have recently increased their scrutiny of cryptocurrency groups.
Maguire said Sequoia would apply a “20-year lens” to its cryptocurrency holdings and avoid trading tokens except for “exceptional circumstances”.
“We expect regulation, but there’s a balance that we need to find between protecting consumers and maintaining innovation in a really important space,” he said. “It reminds me of early internet regulation.”
Venture capital firms allocated US$25.2bn towards blockchain and cryptocurrency projects in 2021, the highest on record, according to Cointelegraph.