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PayPal Bets On Crypto Again: TRM Labs

PayPal has already found its second path to the world of blockchain just over one month following its departure from the Libra Association, a Facebook-led consortium working towards a stablecoin-like token project.

Joined by the likes of Initialized Capital, Blockchain Capital, and Y Combinator (Monzo): PayPal Ventures, the investment arm of the global payments processor, has invested in the latest phase of seed-funding for crypto compliance specialist TRM Labs.

Other recent investments from PayPal ventures include the acquisition of Honey for $4 billion, and the leadership of an $11 million funding round for a retail start-up called ‘Happy Returns’.

“TRM integrates with more than a dozen blockchains, and analyzes billions of virtual asset transactions to detect signs of fraud and financial crimes like money laundering in real-time.

TRM launched out of the startup accelerator Y Combinator this summer. Since then, it has delivered its cryptocurrency compliance and risk management solutions to global financial institutions including major banks, brokerages, and exchanges across US, Latin America, Asia, and Europe.”

TRM, press release

Combined, the four companies raised a total of $4.2 million in funding which brings the total seed capital raised so far to $5.9 million. These latest contributions comprise the vast majority of TRM’s investments. 

When combined with the added media, industry and investor exposure afforded through its newfound association with names as large and reputable as PayPal and Y Combinator, this could be the beginning of a highly successful enterprise.

TRM claims that the money raised will go towards increasing headcount across its engineering and data science teams, in addition to “accelerat[ing] product development”.

“PayPal has been trusted by consumers for over 20 years because of its emphasis on fraud prevention and risk management…

Their strategic investment in TRM signals their continued commitment to ensuring safety and compliance as the digital payments landscape evolves and innovates.”

Rahul Raina (TRM Labs, co-founder and CTO)

When operating a financial organisation of any kind, risk management, compliance and corporate liability are of the utmost importance, particularly for those which offer cross-border remittance / services. 

Compared to the traditional (fiat) finance industry, cryptocurrency companies face arguably greater challenges. If you live in the USA, these challenges appear to be growing more difficult each year – with a marked increase in pressure coming from local regulatory authorities.

This is a result of the lack of consistent and clear regulatory frameworks, according to 2020 US Presidential Candidate Andrew Yang, which has left the USA in a position of trailing behind its global peers.

A deficit of understanding and intent on behalf of the government, suggested Yang in a November 14th statement, means the country is currently playing ‘catch up’ and may even resort to adapting the standards set by its global peers.

“other countries, which are ahead of us on regulation, are leading in this new marketplace and dictating the rules that we’ll need to follow once we catch up.”

Andrew Yang, via Yang2020

This year, we have witnessed several high profile cases against cryptocurrencies, such as the Securities and Exchange Commission (SEC) recently suing Telegram’s blockchain (TON) and cryptocurrency token (Gram) project that had been long in development.

Telegram was retroactively charged over an ICO that took place between 2017 and 2018, which is about five in ‘cryptocurrency years’. The team behind the popular messaging app has opted to fight these allegations,

Conversely: many defendants, such as Block.one (the company behind EOS cryptocurrency), capitulate to the commissions demands via cash settlements. In early October, Block.one agreed to pay the SEC $24 million for operating an unregistered securities IPO for a digital asset.

By no means are all cryptocurrency crimes are a result of government misunderstanding. Significant frauds and scams in the headlines this have included the so-called ‘Cryptoqueen’ and the Onecoin scam, and the massive controversy surrounding the widow of the founder of QuadrigaCX exchange.

“Illicit activity is an existential problem for crypto since it impacts the willingness of financial institutions, regulators, and consumers to embrace crypto…

We can’t imagine more mission-oriented founders who can bridge the worlds of traditional finance, compliance, and crypto to tackle this critical problem.”

Garry Tan (Initialized, co-founder and managing partner)