Bitcoin Surveillance Startup Elliptic Raises $23M for New Assets and Customers

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September 4, 2019

Blockchain analytics startup Elliptic has raised $23 million in a new round of funding, the company announced Wednesday.

The new funds will help Elliptic develop its offerings as it prepares to add more digital assets and address more types of risk for new and different types of customers, mainly in banking and financial services, CEO James Smith told Cheddar.

"Back in 2014 there weren't any banks touching crypto. It's changed over the last 18 months or so," he said. "We see people like Fidelity and Square coming into the space, and now banks are waking up and realizing they already are in this industry whether they knew it or not."

The 6-year-old company has made its name monitoring the bitcoin network and providing data, including suspicious patterns, and analytics services to financial institutions and law enforcement agencies. Now it's looking to include more digital assets into its services as they wade further into the existing global financial system. That could include existing cryptocurrencies as well as those waiting in the wings like Facebook's Libra. Or any other asset its clients may want to integrate into their business one day.

"This is the basis of a new, open, connected global financial system," James said. "Whether it's bitcoin, ether, XRP, or something backed by Facebook or a central bank is less important to us than the idea of a global open inclusive network that brings the world together and enables the world to transact in a more efficient, cheaper, faster, and inclusive manner."

The raise, a Series B round for the London-based startup, was led by Japan's SBI Holdings, a financial services conglomerate spun off from SoftBank. AlbionVC and existing investors Signalfire and Santander Innoventures also participated.

It's also going to open new offices in Japan and Singapore. That expansion follows months of international regulators speaking up (after years of silence) on how crypto companies and their customers should operate, driving up demand for compliance solutions.

In April the Parliament of the European Union issued an anti-money laundering (AML) directive with crypto specific regulations, providing clarity for crypto exchanges and custodians on how to operate in the world's second largest economy. In June the U.S. Financial Crimes Enforcement Network (FinCEN) put out renewed guidance to provide clarity and regulatory certainty for businesses and individuals involved in cryptocurrency activity, doubling down on its landmark guidance from 2013. That same month, the Financial Action Task Force (FATF), inter-governmental policymaking body, issued new international customer verification standards for the crypto industry, regulating it the same way as it does traditional financial institutions.

"After many years of not much movement on the regulatory side, in the last 12 months there've been a number of dominoes starting to fall and it's exciting to see the legitimacy that brings and the maturation of the space. You'll see more banks and other financial services getting comfortable coming into crypto as a result of maturing regulation," Smith said.

At the same time, Elliptic's clients, particularly in Asia, are looking at how they could support cryptocurrencies from Facebook and the Libra Association; the Chinese central bank, whose digital currency is "close" to launch; as well as LINK, the digital token of Line Corp., Japan's largest messenger app, according to Smith. While the vast majority of cryptocurrency volume is in bitcoin, Libra, LINK, and central bank issued digital currencies are exciting prospects for the adoption of cryptocurrency technology, he added.

"Where there's already a big user base you could see adoption grow far more quickly than we have with bitcoin or ether. It's our view we should provide support for any and all of these currencies people want to use and help make them safe and trusted so the world can take advantage of the technology regardless of whether it's a bitcoin or a Libra. It's not unrealistic that if one of these large platforms launches their own currency, gets it approved, that we could see it being a major payment mechanism within one to two years."

But Elliptic's Series B isn't just about Asia. Smith said Asia — where 60 percent of the world lives and has a huge population of young people who are early adopters of a lot of technology and a lot of crypto activity — is a big short-term opportunity, where the company will probably see its biggest growth. But his long-term focus is on global adoption of cryptocurrency, and he plans to use the funds to double down on its teams in London and New York too.

Elliptic began the year with 28 employees and currently has more than 60. It plans to add another 20 or 30 by the end of the year, with five to 10 of those people in the Japan and Singapore offices.