Cryptocurrency compliance startup TRM Labs has partnered with financial firms

This year’s


in the crypto markets, billions have been washed out of the ecosystem of digital assets. But one startup, TRM Labs, is seeing increased interest in its back-end tools used by a range of digital asset players despite — or because of — the market’s turnaround.

TRM Labs co-founder and CEO Esteban Castaño told Insider that TRM Labs grew at its fastest pace ever in the second quarter — a record growth earlier this year. The startup has raised $80 million since launching in 2017, including a $60 million Series B round last December that saw participation from branches of financial giants such as Citi, PayPal and American Express. And this June, TRM Labs announced its acquisition of UK-based investigative blockchain training company CSITech.

Based in San Francisco, TRM Labs provides compliance, risk management and anti-fraud tools to financial firms, blockchain players and regulators. The startup has partnered with at least one major financial firm, JPMorgan — which announced a strategic investment in TRM Labs in February — and counts Shopify and crypto-native giants like Circle and FTX as clients.

“We see crypto companies continue to mature their compliance programs and make significant investments to improve their ability to monitor money laundering, financial crime and sanctions exposure,” Castaño said.

The financial sector, he added, represents TRM Lab’s second fastest growing client base, after the public sector, but ahead of cryptocurrencies. As one example, payment companies such as Shopify have adopted TRM Labs’ anti-money laundering transaction tracking tools. Chainalysis, another cryptocurrency compliance service in the growing crowd, estimates that more than $8 billion in cryptocurrencies was laundered in 2021.

Aircraft carriers versus speedboats

JPMorgan, which announced the opening of a virtual branch in the metaverse in February, isn’t the only Wall Street bank expecting new digital asset offerings this year.

Goldman Sachs tops the list of suitors interested in buying the assets of troubled crypto lender Celsius, CoinDesk reported this June. And in May, State Street partnered with Credit Suisse and another crypto startup, Paxos, to pilot a same-day stock settlement.

For banks that are increasingly partnering with crypto startups or serving clients that are loaded with crypto assets, TRM Labs offers one particularly sought-after product called “Know-Your-VASP” — or virtual asset service provider.

“A large bank could pull a report from TRM to get an overall risk profile of, say, a large cryptocurrency exchange, and then make a decision about whether they want to serve that exchange,” Castaño said.

TRM Lab’s technology is built on 26 different blockchains, including the recent addition of the Ethereum-based Polygon platform. According to Castaño, the startup is building its compliance tools in three key areas: “One cup of raw blockchain data, half a cup of threat intelligence and another half cup of advanced analytics.” He views TRM Labs’ services as Google Maps—layers of intelligence and screening tools live on top of a flat layer of data.

In Castaño’s opinion, for the past five years, most traditional financial firms have been in an “exploration phase” when it comes to digital assets. Now those same names are moving into the “implementation phase,” actively introducing new crypto products and embracing new compliance tools.

“While a two-person crypto startup might function more like a speedboat, large financial institutions can sometimes function more like aircraft carriers,” Castaño said.

“They’ve just spent the last three years reorienting the ship and focusing it on digital assets and cryptocurrencies, and we see that momentum continuing even through any

bear market

“, he added.

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