by John Murray Research Director
View the the full panel discussion here.
Venture investor Tim Draper has been a prominent figure in the Silicon Valley financial community for more than thirty years. Many of his successful investments are household names like Twitter, Skype, Tesla, and Hotmail. In 2001, Draper became the first US venture capitalist to invest in Chinese tech firms, taking a 28% stake in the emerging search engine company Baidu. More recently, he has focused his attention on fintech ventures, and his funds hold significant stakes in companies like Coinbase, Robinhood, and eShares.
Speaking at a recent Linqto Global Investor Conference, Draper described his vision of raising a purely cryptocurrency venture fund in a few years’ time. Such a fund would raise investor capital in Bitcoin or XRP for example, with the goal of taking equity positions in companies that run their financial operations entirely in crypto. In the perfect crypto-centric firm, all accounts payable, receivables, payroll, taxes, etc. would be managed in cryptocurrency, regardless of the actual type of business operation or industry sector that it trades in.
But no business, however perfect, operates in a complete vacuum, and crypto-centric firms need to rely on frameworks and infrastructure that enable them to perform in tandem with existing commercial and retail operations. Over time, a variety of innovative ventures have emerged to address these needs. For example, Uphold’s multi-asset platform offers a seamless, easy-to-use way to make and receive payments in numerous fiat and crypto-currencies. The company provides fintech software developers the ability to build secure and compliant products that can store, convert and transfer almost any type of digital asset. Since its product launch in 2015, the UK-based company has handled over US$4B in transactions..
In contrast to Uphold’s core focus on seamless currency transactions, San Francisco-based SoFi arrived in this space via a different route. The company was originally founded in 2011 as a personal finance service that used peer-to-peer lending to address student loan refinancing needs. Having access to high-quality information about the customer base enabled SoFi to rapidly move into other debt services like mortgages, personal loans, and credit cards. In 2019, the company rolled out SoFi Invest, a commission-free online brokerage service, which was rapidly enhanced to support crypto-currency trading as well. SoFi’s last fund-raising round, which was in May 2019, set a valuation of the company at $4.8B
Several months ago, Atlanta-based payments processor BitPay also moved further into this consumer space by introducing a Mastercard-branded prepaid debit card, which enables customers to instantly convert their cryptocurrency into fiat currencies for making everyday purchases. Since its founding in 2011, BitPay has raised over $70M from leading investors including Index Ventures and Founders Fund.
For handling currency conversions in the opposite direction, retailers can use in-store terminals from POSaBIT, which instantly converts fiat currency credit and debit card payments into crypto. POSaBIT is publicly traded on the Canadian Securities Exchange (symbol PBIT), and has made strong inroads in the US cannabis business, where cryptocurrency transactions have garnered widespread popularity. Perhaps it will be in this industry sector that Draper’s perfect crypto-centric firms will first flourish.
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“BitPay Launches Prepaid Mastercard in the United States.” Business Wire, 11 June 2020, www.businesswire.com/news/home/20200611005269/en/BitPay-Launches-Prepaid-Mastercard-United-States.
Buntinx, JP. “Uphold Launches US Equities Trading With Crypto Support • CryptoMode.” CryptoMode, 25 June 2020, cryptomode.com/uphold-launches-us-equities-trading-with-crypto-support/.
Dyer, Jonathan. “SoFi Officially Rolls Out Crypto Trading with $25 Bitcoin Bonus Offer.” Dyer News, 2 Oct. 2019, dyernews.com/sofi-officially-rolls-out-crypto-trading-with-25-bitcoin-bonus-offer/.
Roberts, Jeff John. “SoFi Launches Crypto Trading With Bitcoin, Ethereum, and Litecoin.” Fortune, Fortune, 25 Sept. 2019, fortune.com/2019/09/25/sofi-bitcoin-crypto/.
Žemaitis, Eimantas. “Crypto May Help Multibillion Cannabis Business Where Banks Can’t.” Cryptonews, Cryptonews, 6 Mar. 2019, cryptonews.com/news/crypto-may-help-cannabis-business-where-banks-can-t-3480.htm.