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Hard Drop in Australian Blockchain Firms’ Revealed by KPMG Report
- A report on the Aussie fintech industry by consultancy firm KPMG has found that the number of local blockchain companies fell by 14% in 2024, double the rate of the broader fintech industry.
- KPMG has attributed the decline in blockchain firms to the lingering effects of the 2022 crypto crash, the boom in AI drawing capital away from blockchain and high inflation rates creating a difficult capital-raising environment.
- The report suggests 2025 might be a better year for blockchain, with a crypto-friendly administration coming into power in the US and interest rates likely to be cut, freeing up more capital.
A report from consultancy firm KPMG has found 2024 wasn’t a great year for Australia’s fintech industry, with 7% of all Aussie companies in the sector closing in the past 12 months.
Blockchain companies were the hardest hit vertical, with 14% shuttering in 2024. KPMG attributes this drop-off to the lingering impact of the 2022 crypto crash and the growth of AI pulling some of the capital out of blockchain.
Despite this drop, KPMG says the industry still has a diverse range of solid, large players in the space including a number of well-regarded Aussie crypto exchanges:
The Australian blockchain and crypto sector features some high-profile players, with a diversified portfolio of products and services such as Independent Reserve, Swyftx and CoinSpot.
KPMG Australian fintech landscape 2024 report The report also suggests better times could be on the horizon for the blockchain industry with positive signs such as a friendlier regulatory environment in the US, the recent launch of spot ETFs and looming interest rate cuts all likely to boost the industry in the next year.
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According to KPMG’s report the Aussie blockchain sector lost 12 firms this year, finding there’s now 73 in total down from 85 in 2023.
It marks two consecutive years the consulting firm has reported a contraction of the Aussie fintech industry. The total number of companies in the industry now stands at 767, down from 800 in 2022.
The movement of capital out of blockchain and into AI following the disastrous year that was 2022 has been hard on the industry, but the report suggests those tough times might be set to end in 2025, saying:
After a few significant and adverse events for the sector in previous years, this year the SEC approval of the Bitcoin ETF could act as the positive catalyst the blockchain space needs.
KPMG Australian fintech landscape 2024 report The looming rate cuts are also cited as a possible trigger for a resurgence, potentially unleashing a new wave of capital into blockchain:
Furthermore, with a series of rate cuts that have already commenced in a number of geographies, and likely to commence in Australia as well, this could free up capital that has been sitting on the sideline and which could potentially be deployed back in the sector, as the risk-free rate falls making alternative investments more attractive.
KPMG Australian fintech landscape 2024 report Aussie Fintech Market Now at More Sustainable Size, Says KPMG
In its report KPMG said that both mergers and acquisitions and company closures contributed to the decline in Aussie fintechs in 2024. The consultancy firm found that about 3% of Aussie fintechs were acquired in 2024, in most cases these were smaller, capital-hungry companies being acquired by large foreign “strategic investors” — venture capital and private equity investment has been more subdued.
While there were some acquisitions, KPMG says the larger contributor to the decline was company closures, which impacted about 4.5% of Aussie fintechs in the past year. KPMG suggests that the lack of rate cuts and the stubbornly high inflation rate exacerbated an already “complex capital raising environment” contributing to these closures.
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Overall, KPMG says the loss of some Aussie fintechs has probably got the industry to a “more sustainable level for the size of the local market and current economic headwinds affecting the sector”.
The report says that given the global geopolitical uncertainty, large investors are likely to remain cautious in the near term. However, it also suggests we could be close to the end of the current market cycle and may soon see an increase in investment across the entire Aussie fintech industry, with interest rates expected to be cut in the coming months, reducing the cost of capital and potentially leading to more investment in Aussie fintechs in 2025.
Author
Jody McDonald
Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.
