PayPal’s cryptocurrency partner Paxos has raised $142 million in Series C funding. Led by Declaration Partners, an investment adviser to the family office of $230 billion private equity giant Carlyle Group’s co-founder David Rubenstein, the round closed on November 24 and also includes investments from PayPal Ventures and Paxos’ previous investors RRE Ventures and Liberty City Ventures.
In total, the firm has raised more than $240 million in venture funding, making it one of the highest funded firms in crypto, just below Bakkt, which has raised $482 million, and Circle, which has raised $271 million. The firm declined to disclose how much the investment valued the company.
Founded in 2012 under the name itBit, Paxos was among the first bitcoin startups to offer crypto products and services. In October, payment giant Paypal launched a cryptocurrency trading service in partnership with Paxos, letting customers buy and spend bitcoin.
“Our pipeline has expanded very significantly from having been in the millions of customers maybe a year ago to, now, billions of customers through partnerships. And that big change in our pipeline is partly why we need to raise this capital, to really take advantage of the growth opportunities that we’re seeing right now,” said Paxos’ co-founder and CEO Charles Cascarilla.
As part of the investment, the company plans to develop new products that help institutional clients track traditional assets like securities and commodities on a blockchain, a process called tokenization. “We always want to be able to think of other ways that we can grow our business, including, potentially, acquisitions and new hires,” added Cascarilla. Part of the capital raise will be invested in regulatory infrastructure, which Cascarilla cites as one of the key reasons for Paxos’ success with onboarding strong institutional clients, such as PayPal and Credit Suisse.
The investment news comes the day after bitcoin breached the $20,000 mark for the first time ever. Paxos likely played a role in the cryptocurrency’s meteoric rise over the second half of the year. On October 21, PayPal announced its entry into the cryptocurrency market by integrating Paxos’ API-based crypto brokerage service and giving its 350 million customers access to bitcoin and a handful of other cryptocurrencies.
PayPal’s embrace of crypto coincided with Bitcoin’s rally, and some analysts have even expressed the view that the online payment giant is actually fueling the spike. Earlier in July, the American division of the U.K.-based fintech firm Revolut integrated Paxos’ technology into its app, enabling Revolut customers in 49 U.S. states to buy, hold, and sell bitcoin and ether.
Paxos however shies away from positioning itself as a purely crypto-native venture, stating its commitment to provide infrastructure for multiple asset classes. In February, the firm facilitated what it describes as the first live application of blockchain technology for U.S. listed equities when Switzerland-based Credit Suisse and New-York based broker-dealer Nomura Instinet began using the blockchain-based Paxos Settlement Service to settle equity trades.
The service is a private, permissioned blockchain network allowing two parties to bilaterally settle securities trades directly with each other without a central counterparty. In September, French banking giant Societe Generale became the third broker-dealer utilizing the service. To date, 15,000 trades worth approximately $75 million have been settled on the platform.
Most recently, on December 8, Paxos filed an application for a national Trust Bank charter with the Office of the Comptroller of the Currency (OCC), a regulatory agency that supervises all national banks and federal branches and agencies of foreign banks. If granted, Paxos could become the first custodian of digital assets to be regulated at both the state and federal levels. In 2015, it obtained a trust charter from the New York State Department of Financial Services (NYDFS) becoming one of the first regulated companies in the state to offer crypto products and services.