Deal focus: Crypto promises frictionless wire transfers

Cryptocurrencies were invented to reduce the number of intermediaries in financial transactions. So it is no small irony that as more people want to buy and sell them, the more they must contend with a web of custodians, foreign exchange brokerages, and trading and withdrawal fees.

This is the pain point that inspired Hong Kong’s XanPool to set up what it calls the world’s first automated P2P local currency-to-crypto payment processor. The service, also known as a “fiat gateway,” settles currency conversions in seconds by tapping idle capital in a network of crypto holders. Gateway users get speed and lower costs; liquidity providers earn monthly fees of up to 2%.

“We work extensively with local market makers to automate their cryptocurrency market-making using local payment methods,” CEO Jeffery Liu (pictured) explains. “In this way, customers are able to access cryptocurrencies in a familiar, instant manner, and with the added benefit of not having to bear any custody risk.”

The company raised a $27 million Series A round this week led by Valar Ventures, a firm set up by PayPal co-founder Peter Thiel. CMT Digital, Gumi Cryptos, and Antler provided support alongside angel investor Taavet Hinrikus, founder and chairman of Wise, formerly known as Transferwise. Pan-Asian expansion is the plan.

“Their networks at this point are important to a young crypto company like ours. One introduction from them to a C-level person in a company could be worth months of business development efforts,” Liu says.

Operations currently encompass a network of more than 500,000 users and 400 businesses in 13 Asian jurisdictions, giving XanPool a decentralized liquidity pool of $200 million, the region’s largest. The idea is to build the platform into a diversified value transfer ecosystem.

By the end of 2022, XanPool aims to have grown the user base by 20x to 10 million across the XanPool.com and XanPay brands, while increasing the business network to 10,000. There will also be an expansion of the service offering.

The upside is mostly underpinned by the general popularization of crypto assets and their ability to disrupt legacy financial infrastructure, in this case SWIFT, which is not compatible with crypto or e-wallets. As James Fitzgerald, a founding partner of Valar, puts it: “The incumbents aren’t going to know what hit them.”

Liu, meanwhile, is undistracted by potential technical or legal headwinds. “As our transaction volumes grow, we only have to scale our software and cloud capabilities,” he says. “As for compliance, our team constantly monitors the regional laws, regulations, as well as best practices.”

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• Topics
• Greater China
• Financials
• Technology
• Early-stage
• Hong Kong (China)
• Valar Ventures
• Fintech
• Cryptocurrency