binanKey Highlights:
- Liquid Capital founder Yi Lihua urged Changpeng Zhao (CZ) to create better exit mechanisms for venture capital investors in crypto projects.
- Yi said long token lockups on Binance listings leave VCs exposed to higher risk while other market participants exit earlier.
- Data from Messari shows crypto fundraising rising year over year even as deal activity declines and investors focus on larger late-stage rounds.
Liquid Capital founder, Yi Lihua (aka Jack Yi), argued that the current investment environment places venture capital firms at a disadvantage and could obstruct the pace of new crypto and blockchain development. Yi’s view comes in at a time when concerns about declining innovation in the crypto industry have triggered calls for structural changes to how crypto VCl operates in the industry.
Yi Lihua to CZ: Improve Exit Options for Crypto VC
In a post on X, Yi pointed to two major factors that he believes are limiting innovation across the crypto sector. One factor relates to past regulatory pressure in the US. The other concerns investment lockup rules laid down by major crypto exchanges.
As per Yi, the regulatory dilemma during the previous US rule created a difficult environment for many blockchain startups. Strict policies forced several firms to slow development plans or relocate operations outside of the country.
Yi thinks a proposed crypto structure law could help relieve some of those problems. He drew on the Crypto Structure Act, an effort to set forth clearer rules for how crypto and blockchain companies operate within the American financial system in particular. Even as regulatory clarity may set the stage for the crypto industry, Yi said another structural flaw still plagues early investors. He pointed to listing requirements used by Binance, in which venture capital allocations tied to newly listed tokens are often locked for extended periods.
Under such circumstances, venture investors in some projects must keep their tokens locked for one to three years after a listing. Initially, the rule was meant to incentivize long-term investment and tackle sudden selloffs immediately after a project launches on an exchange.
Yi said the outcome has been different from what many investors expected. In many cases, project teams, market makers, and trading platforms have been able to adjust their positions earlier in the lifecycle of a crypto, while venture investors remain subject to longer lockups.
As a result, he argued, venture capital firms carry a larger share of risk and only receive fewer opportunities to manage liquidity.
Yi believes the structure differs from practices seen in traditional venture markets, where early investors often get clearer exit paths once a company moves to public markets. Without similar mechanisms in the crypto sector, he warned that venture capital participation could decline over time.
Yi directed his comments to Binance Co-founder, Changpeng Zhao (CZ). He suggested that exchanges consider building better exit mechanisms for venture capital participants. Such changes, he said, could restore balance to the investment ecosystem.
Yi’s view implies that if capital providers face persistent liquidity constraints, new startups may find it harder to secure funding.
Recent data from Messari showed that total crypto fundraising increased by nearly 50 percent between March 2025 and March 2026.
However, the number of deals completed during the same period declined drastically. Deal activity crashed about 46% as venture firms focused their capital on fewer but larger investments.
Messari CEO Eric Turner said the trend shows a change in investor behavior. Venture firms appear to be focusing resources on late stage companies instead of spreading funds across a larger pool of early stage startups.
The average deal size has gone up to nearly $34 million over the last 12 months. That figure represents a 272% increase compared with the previous year. At the same time, the number of active investors has gone down by about 34.5% to roughly 3,225 participants.
Also Read: 85% VC Backed Token Launches of 2025 Trade Lower Than Initial Evaluation
