December 12, 2013
BitCoin Wallet Coinbase Raises $25 Million in Funding
The cloud-based BitCoin wallet service Coinbase just added $25 million to its bankroll - and this is real currency. A dealer of Bitcoin currency, the company has now received a total of $31 million in venture capital funding, according to a post on their blog detailing the transaction.
The investment was led by Andreessen Horowitz, but existing investors Union Square Ventures and Ribbit Capital also participated in the series B round of funding. The investment represents the largest round of funding in Bitcoin to date. Previous investors include Y Combinator, IDG Ventures, Start Fund, FundersClub and SV Angel as well as individuals Greg Kidd, Adam Draper and Garry Tan.Coinbase was founded in June 2012 as a Bitcoin wallet and platform where merchants and consumers can transact with Bitcoin currency. Since it started its operations, Coinbase has made its way to 617,000 consumer wallets and 16,000 merchants, according to the company.
One challenge that Coinbase faces is that it has to serve both merchants and consumers, TechCrunch reports. Most other Bitcoin service providers, such as Bitpay, focus on payment processing rather than creating the mechanisms for both sides of a transaction.
The money from the Series B funding will go toward expanding the company, which currently has eight employees including co-founders Brian Armstrong and Fred Ehrsam. The company plans to expand to 50 or 60 employees over the next year. Coinbase also plans to continue building its product offerings, such as SMS payments and recurring payments for subscriptions by providing more services for developers.
Coinbase operates under US bank integration, the company says. It is one of just a few Bitcoin dealers that are compliant with US law. According to a report from the Verge, only 35 Bitcoin dealers are actually compliant with US law, though the law was passed nine months ago.
The revelation came after Firstbank sent a letter to a customer in Pennsylvania asking him to stop sending money to Coinbase.
"We respectfully request that you no longer perform transactions with this company or other companies of this kind," the letter as quoted by the Verge says. "If there should be a reoccurrence of this type of activity, we will regretfully be forced to close your account."
Banks are worried about a crackdown, even though Bitcoin itself is legal, when vendors comply with US banking laws.
"In the US, the virtual currency is subject to money transmitter laws at the federal level and in 47 states. The rules are not always clear, however, because they are written for money transmission services, not virtual currencies. The regulations are also in flux. New York is considering a special 'BitLicense' for virtual currency firms, for example," the Verge's Adrianne Jeffries writes.
The Verge reports only 35 companies that handle Bitcoin transactions have registered with the Financial Crimes Enforcement Network (FinCEN), the bureau of the US Treasury Department that oversees such areas including virtual currencies. FinCEN has stepped forward to handle Bitcoin regulation.
While Coinbase says it is integrated with US banks, it is not clear whether it has, in fact, registered with FinCEN.