Los Angeles-based cryptocurrency investment firm SFOX has raked in roughly $22.7 million in its Series A funding. The round was headed by venture platforms Social Capital and Tribe Capital and earned the participation of other firms like DCG, SV Angel, Blockchain Capital and Y Combinator.
SFOX caters specifically to professional traders, high net-worth individuals and institutions. As a prime dealer for cryptocurrency markets, the company provides access to global sources of trading and liquidity, real-time trading APIs, OTC desks and U2F hardware for private key management. The company’s transaction volume exceeds $9 billion, and its client base has grown 12-fold since January.
In an interview with Bitcoin Magazine, CEO and co-founder Akbar Thobhani said that the addition of institutional investors to the crypto space could bring legitimacy and boost mass adoption. He also suggested that more institutional investors wish to get involved in the cryptocurrency space but are reluctant to do so because of regulatory uncertainty and volatility in the market.
“Traditional institutions, including funds, banks, pensions and endowments require an infrastructure they’re accustomed to for properly managing operational and monetary risk,” he said.
“As infrastructure is built, institutions require trading products to properly hedge themselves during volatile markets. In the financial markets, there is a suite of products that help participants navigate: options, futures, repos, etc. We’re still in the early stages, but the progress in trading products is a positive sign. Options and futures have been available since 2017, and there’s a strong push for bitcoin and Ethereum ETFs.”
Thobhani says the company plans to use its newly acquired funds to expand its services. The company is building a full crypto asset-management platform, and it plans to hire more engineers and operations managers, expand to new geographical markets and add more trading pairs.
“SFOX’s goal is to provide a premier crypto asset management platform,” he said. “This will involve the delivery of a family of products that bring additional durability to crypto asset management, including advanced security and risk management products, additional infrastructure and support, and licenses to access new markets. SFOX believes these offerings will create new untapped opportunities for institutional investors.”
Thobhani added that SFOX’s goal is to provide a single point of entry for institutional investors to access liquidity through a network of global cryptocurrency trading venues, bypassing the time they would spend opening accounts on top exchanges.
He also stated that the company aims to provide many of the same tools institutions are accustomed to seeing when they work with Wall Street while not compromising the unique, security-intensive needs of the industry.
“We’ve been entrenched in this space for years,” Thobani said. “We officially started SFOX in 2014, and our platform launched in 2015. We understand the needs of institutional investors — the standards they expect, the features that are the most useful to them, and their pain points. That’s why we provide access to global liquidity: to make the high-volume transactions they need possible without negatively impacting markets.”
Lacking traditional investment instruments like the ever-elusive bitcoin ETF, accredited individuals and institutions have few avenues through which to enter the market. The recent opening of a bitcoin ETN to U.S. investors is the closest the industry’s American investors have gotten to an institutional grade crypto offering. Brokerage and prime dealer services like SFOX and others like Coinbase Custody provide institutional investors with a next-best option for entering the market, though such services are still intrinsic to the crypto industry and aren’t linked to traditional markets.
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