Andreessen Horowitz believes that crypto's future may be in the U.K.
America's largest investor in crypto startups believes that the industry's future may be across the pond, and is opening its first international office in London to take advantage of the opportunity.
Driving the news: Silicon Valley-based Andreessen Horowitz on Sunday announced its new outpost, to be led by relocating partner Sriram Krishnan, and said that London will be the location of its next crypto accelerator program.
- The firm also disclosed that it's leading a $43 million investment in Gensyn, a London-based decentralized compute network for training AI models.
The big picture: The moves come just days after the U.S. Securities & Exchange Commission sued crypto exchanges Binance and Coinbase, in moves that Axios' Felix Salmon wrote are a government effort "to kill the crypto ecosystem."
- Andreessen Horowitz's expansion is not a direct response to those suits, despite the firm holding nearly a 1% stake in Coinbase and firm co-founder Marc Andreessen sitting on its board. Instead, the plans have been in the works for more than six months.
- However, persistent U.S. regulatory uncertainty around crypto did play a role. As did crypto-positive statements from U.K. Prime Minister Rishi Sunak, and a British system of government that can more swiftly implement new rules.
What they're saying: "If they can get regulatory clarity soon in the U.K., I think you'll see U.S. companies move there and new companies start there," says Chris Dixon, who founded and leads Andreessen Horowitz's crypto practice (known as a16z crypto).
- "Despite the lawsuits, there was some positive news in the U.S. last week in terms of the discussion draft in the House, and hopefully that can move forward sooner than later. It's a similar approach to what they're doing in the U.K., but but the U.K. has fewer hurdles," Dixon says.
- Brian Quintenz, a former CFTC commissioner and current policy head for a16z crytpo, adds: "We've met with all the U.K. stakeholders because we've wanted to discuss this in a nonpartisan way ... There are some people whose concerns skew more toward custody or consumer protection or innovation, but no one seems to react to it in the same polarizing way that they do here."
What to know: One big reason crypto has been under siege in the U.S. is the collapse of FTX under the weight of alleged fraud, and the proliferation of so-called "shitcoins."
- Andreessen Horowitz was not an investor in FTX, but certainly has backed some startups whose tokens have become virtually worthless.
- Dixon acknowledges there is "some risk" in his firm's portfolio, including within its record $4.5 billion crypto fund, but argues that more than half of its companies haven't even launched products yet.
- Moreover, he believes that there is still a very strong flow of crypto entrepreneurs, despite the lure of AI riches, as evidenced by the number of applicants to the firm's most recent crypto accelerator program in Los Angeles.
Reality check: Headquartering a company outside of the U.S. doesn't necessarily guarantee it will avoid U.S. regulation, particularly in a crypto industry that often operates globally.
The bottom line: Dixon and Quintenz for now are staying stateside, reflecting at least something of a hedge, but forming an international office is notable for a firm that once blanched at having any of its partners live or work outside of Silicon Valley.