Last summer, London's first invite-only Bitcoin conference saw a room packed full of VCs, entrepreneurs and journalists on the 39th floor above Canary Wharf, at the heart of London's fintech district. By their own admission, many of those attendees were there to find out for themselves why the crypto-currency was grabbing the tech headlines.
Not least was Passion Capital's Stefan Glaenzer who openly described himself as "totally clueless" and "on a learning mission" regarding Bitcoin. Another attendee that day was Transferwise founder Taavet Hinrikus who, in a call with me a few weeks later, likened Bitcoin to the early days of music filesharing service Napster. It may not shake out to be the future of online money, but its foundations point the way.
However, four months is a long time in the world of Bitcoin, with news today that Passion Capital and Hinrikus, now obviously clued up a little, have joined forces to back new London-based Biticoin exchange Coinfloor. The amount invested remains undisclosed, so we can presume this is a modest Seed round, perhaps in comparison to competitors, while it's likely testament to Passion and Hinrikus testing the waters, following their fact-finding mission at Bitcoin London.
Also of interest is that, while the UK startup is founded by Mark Lamb and Amadeo Pellicce, one of its team members is James McCarthy (aka Nefario) who was previously involved in Global Bitcoin Stock Exchange, which controversially shut down last October.
To that end, along with the security of its assets, Coinfloor's big pitch is that it's intending to be “fully compliant” (though technically, like other exchanges, it's unregulated for now) and is employing full electronic KYC/AML procedures to ensure the integrity of its users and traders, “far above and beyond what is required… by regulators” . It's also in formal talks with UK and EU financial and tax authorities, presumably in a bid to stay ahead of any regulatory or legal curve. Money laundering is the monkey on Bitcoin's back, after all.
And because the exchange will require users to be verified - both electronic and manual KYC/AML checks, much like opening a new bank account, says Coinfloor - the startup is open today for registrations a week before it actually starts trading.
One further potential differentiator is that Coinfloor claims to be the first exchange to employ a “sophisticated algorithmic rounding engine for fee calculation”, which it says makes it favourable for high frequency and professional traders. At the same time, Coinfloor says the exchange has been designed to also be easy to use for casual Bitcoin enthusiasts and first-time traders.
On the risk that potential regulation of Bitcoin presents for investors and players in the space, in an email to TechChrunch, Stefan Glaenzer, Partner at Passion Capital, says “regulation of Bitcoin is definitely the biggest unknown for the entire sector at the moment”. He also notes that many exchanges that are no longer operating have shut down because of lax or completely absent KYC/AML and other procedures.
“One of the reasons we were keen to partner with Coinfloor is because from the very start they have been committed to rigorous KYC/AML electronic and manual checks, and would be prepared if the UK FCA and HMRC ever decided to regulate this space”, says Glaenzer.
“As a London-based VC firm “we're actually very optimistic about the opportunities related to Bitcoin and decentralized currencies available to non-US startups”.
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