The crypto bear market – which was exacerbated by a number of headline-grabbing scandals – slowed the flow of venture-capital investments in the industry to a trickle over the past year. However, a new report from blockchain-focused venture-capital firm RockawayX and startup data provider DealRoom shows that one region still managed to achieve record-setting investment levels in 2022.

European crypto startups raised a record $5.7 billion in VC funding last year, up from $5 billion in 2021, according to the latest State of European Crypto VC Funding report. The investment cycle followed the global trend of peaking in the second quarter and declining sharply in the first quarter of this year. Web3 remained a key sector of interest, while the fastest growth category was infrastructure, including developer tooling, blockchain scalability products and layer 1 blockchains.

“With an increasingly hostile U.S. regulatory environment, crypto industry onlookers speculate that the space’s center of gravity may shift, taking funding and innovation to other regions. This data suggests that the foundation exists for Europe to be a key beneficiary,” RockawayX CEO Viktor Fischer said in a press release. "Europe already has a plurality of crypto startups, and a top early-stage ecosystem; if U.S. growth capital concentrates there, European crypto companies could attract the late-stage funding that catapulted U.S. leaders in the last cycle.”

Crypto investments worldwide had a rocky start to 2023 with venture capital and other investments down 91% year-over-year in January. Investors moved away from centralized-finance projects such as collapsed crypto exchange FTX to instead back earlier-stage infrastructure, Web3 and decentralized-finance projects.

Read more: What Are VCs Funding After FTX? More Decentralized Infrastructure