Institutional-grade cryptocurrency prime dealer SFOX has raised nearly $23 million to fund the development of full-featured asset management platform for large-scale cryptocurrency investors.
Announced on Thursday, SFOX’s $22.7 million Series A funding round was led by Tribe Capital and Social Capital, and it also included investments from Y Combinator, Khosla Ventures, Blockchain Capital, and Airbnb co-founder Nathan Blecharczyk.
SFOX helps institutional investors execute large cryptocurrency trades, routing orders through a myriad of exchanges and over-the-counter (OTC) trading desk, enabling them to capture the best available prices while also minimizing the impact that large orders have on cryptocurrency prices in the spot markets.
“The distributed nature of cryptocurrency has given rise to a large breadth of exchanges around the globe, creating a fragmented market and limited liquidity,” said Akbar Thobhani, CEO of SFOX. “Over the last four years, we’ve been able to provide our clients a single point of access and the best price execution by building the necessary smart routing technology to navigate and connect these global markets and exchanges.”
SFOX works primarily with institutional and other high net worth investors.
The company says that it has processed a total of $9 billion in transaction volume since its launch in 2014 and has seen its client base grow 12-fold in 2018, even as the cryptocurrency market has suffered under the weight of a severe downturn. That’s not entirely surprising, as declining trading volumes have made it harder for investors to enter or exit large positions without causing violent price swings that ripple throughout the entire market.
Reflecting on how institutional investors have warmed to cryptocurrency since SFOX’s launch four years ago, Thobhani told CCN that he now spends far less time than he used to educating prospective clients on the basics of the industry — answering questions such as “What is Bitcoin?” — and more time explaining the nuances of the difference between various asset classes, as well as best practices for managing their cryptoassets.
Thobhani told CCN that SFOX plans to use its new capital to solve additional “pain points” for institutions throughout the trading process, from KYC/AML onboarding to post-trade reporting.
He said, “institutions are looking for more than just trading. Institutions for example, look for reporting so they can manage their accounting better. To support them, we provide unified reporting to our customers. SFOX provides a complete-suite solution for institutions, from KYC / AML APIs for onboarding, pre-trade analysis using our data analytics, to post-trade management using our reporting solutions. We will be using the capital we raised to build more tools to solve for these additional pain points for institutions and provide a complete crypto asset management platform.”
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