If you want to raise institutional capital, get a license first.
By: Xiao Bing
Dubai crypto lawyer Irina Heaver and her team at NeosLegal did something simple yet powerful: they went through every publicly disclosed crypto industry funding round in the first half of 2026, totaling 377 deals, with a total amount of approximately $11.2 billion.
The conclusion is just one sentence: Every funding round with a disclosed amount flowed into businesses that require regulatory licenses to operate.
The top three sectors are: Payments & Stablecoins at $3.7 billion, Prediction Markets at $2 billion, and Exchanges & Trading Platforms at $1.7 billion. These three fields share a common characteristic: legal operation requires a license in any major jurisdiction.
The valuation logic of institutional capital for the crypto industry has shifted from “what the code can do” to “do you have a license.”
Who Is Writing the Checks
Let’s first look at who is paying the bill.
Kalshi completed a $1 billion funding round in May, with investors including Sequoia, Morgan Stanley, Ark Invest, and a16z. Polymarket secured $600 million, led by Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange. In the prediction market sector alone, 34 funding rounds were completed within half a year.
Within the $3.7 billion in the Payments & Stablecoins sector, the names of BlackRock, Goldman Sachs, and Persian Gulf Sovereign Funds appear repeatedly.
Vineet Budki, Managing Partner at Sigma Capital, put it bluntly: Regulatory licenses have shifted from compliance footnotes to core valuation metrics.
Behind this judgment lies cold, hard arithmetic: a MiCA license or a Dubai VARA permit typically requires an application cycle of 18 to 24 months and costs millions of dollars. Code can be forked over a weekend; licenses cannot. When VCs evaluate two projects with similar functionality, the one with a license naturally possesses a moat that competitors cannot quickly replicate.
Licenses Are the New Moat
Let’s look at this phenomenon on a longer timeline.
In 2020-2021, the main theme of crypto funding was protocols and infrastructure. Public chains, DeFi protocols, and NFT platforms took most of the VC money. The investment logic was technical barriers and network effects; whoever had the highest TVL and the most active developer ecosystem was the most valuable.
In 2022-2023, the bear market washed out a batch of pure narrative projects, and funding began to tilt towards businesses with actual revenue. The proportion of funding for exchanges, wallets, and infrastructure companies increased.
Data from the first half of 2026 shows that this trend has reached its logical conclusion: Capital is no longer paying for technological innovation itself, but for the “ability to operate technological innovation within a compliance framework.” Simply put, code is a necessary condition, but a license is the sufficient condition.
This is highly consistent with the evolution path of the traditional financial industry. Fintech companies relied on technological disruption for funding in the early 2010s, and on licenses and compliance capabilities for funding by the late 2010s. Stripe is worth $100 billion; its core barrier is its ability to operate compliantly in over 40 countries, far exceeding the technical gap of the payment API itself.
The crypto industry is walking the same path, just at a faster speed.
Funding Flows and User Activity Are Diverging
But this set of data has an important blind spot: it only counts funding, not users.
On-chain data shows that in the first half of 2026, TVL, DEX trading volume, and active addresses for DeFi protocols were all growing. The daily active users and trading volumes of permissionless protocols like Uniswap, Aave, and Jupiter did not shrink just because VC money stopped flowing to them. Retail users are still trading, lending, and providing liquidity on-chain.
This means what is happening is a more subtle divergence, rather than the “death of permissionless protocols”: Institutional capital is flowing into compliant, licensed centralized businesses, while retail user activity remains distributed in permissionless on-chain markets. Money and people are moving in two directions.
This divergence is most evident in prediction markets. Both Kalshi and Polymarket operate in prediction markets, but Kalshi is a CFTC-registered exchange, while Polymarket does not have a license in the US. Kalshi secured $1 billion in funding and endorsement from Morgan Stanley, while Polymarket secured $600 million in funding and endorsement from ICE. Both are moving towards compliance, but their user bases and product experiences still differ significantly.
A Redefinition of “Valuable”
Heaver used a precise expression in an interview: Capital is no longer chasing the permissionless, but rather regulated businesses.
The deeper meaning of this shift is that “what constitutes a valuable asset” in the crypto industry is being redefined. In 2021, the most valuable asset was a widely forked smart contract protocol. In 2026, the most valuable asset might be a MiCA e-money license covering 27 EU countries, or an entity that has obtained a financial services license in Abu Dhabi ADGM.
Code is still important. But code solves the problem of “can it be done,” while licenses solve the problem of “are you allowed to do it.” When $11.2 billion in institutional capital votes with its feet to tell you that the latter is scarcer and more valuable, the center of gravity of power in this industry has already shifted.
For developers, this is not necessarily bad news. Permissionless protocols can run without VC money; they have token incentives, communities, and on-chain revenue. But for entrepreneurs, the funding reality of 2026 is already clear: If you want institutional money, get a license first.