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PayPal Gets on Board for the $4.2 Million Round for Crypto Banking Compliance Startup

Financial institutions know how to calculate the risk of serving traditional businesses, although for the firms touching cryptocurrency, the math is still a bit fuzzy. The assumption of added regulatory hurdles and money-laundering fears, have led to a widespread problem, and most likely your bank would rather just not deal with it.

Addressing such concerns with clear-eyed data is how the compliance startup TRM Labs wants to accelerate the institutional embrace of crypto. And that’s why a group of investors are backing the blockchain analytics firm to the tune of $4.2 million in new funding.

“Many might consider this the unsexy plumbing of the financial system but it’s what allows (crypto adoption) to thrive”, TRM Labs co-founder and CEO Esteban Castaño said in an interview. “We’re helping financial institutions to think through crypto’s potential as well as to mitigate any of the associated risks”.

The slate of investors includes the founder of Reddit Alexis Ohanian’s Initialized Capital, SF Stalwart Blockchain Capital and also a new strategic partner, PayPal ventures. The capital influx brings the total funding for TRM to $5.9 million after the startup emerged out of Y Combinator from the Facebook-led Libra Association.

Chainalysis for Banks

Although firms like Chainalysis and Elliptic are known for aiding law enforcement, TRM is solely focused on finance.

“Financial institutions use TRM to risk-score their cryptocurrency-related transactions, customers, or partnerships, helping them to simplify customer due diligence and meet regulatory requirements”, the company said in a statement.

That actually means that the startup scours over a dozen blockchains, as well as analyzing billions of transactions for any fraud signs and money-laundering.

The rise in interest from the major players in traditional finance comes from a dawning realization that exposure to crypto is now “inevitable”, Castaño said.

“This new world is coming”, he said. “We’re going to help the existing financial system adapt to this new world so they can effectively engage with it”.

That doesn’t mean TRM is alone. Chainalysis, for one, already serves the finance sector, apparently to mixed reviews.

“The existing providers are trying to tailor products to financial institutions, and we’re just finding they’re not doing a good job of that”,

Blockchain Capital’s Spencer Bogart told CoinDesk.

Regardless, he said, getting those institutions comfortable with crypto requires conforming to existing rules and regulations around tracking the provenance of customer funds.

“Every time we’re talking to a financial institution, number one or two on their list of concerns is compliance and risk management”, Bogart said.

According to Castaño TRM Labs is a team of 20. The San Francisco-based company says it will use the new funding for product development, hiring and expanding to new geographies.


Also published on Medium.

Published inStartups

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