Payward Raises $5M From Hummingbird To Fund Kraken Bitcoin Exchange

Next Story

Portal Will Come To Android Via Nvidia And Shield

The implosion of Mt. Gox is just every other Bitcoin exchange’s gain.

Payward, which runs the alt-coin exchange Kraken, said it just raised a $5 million Series A round. Hummingbird Ventures, which is based out of Europe, led the round. Other angels included Trace Meyer and SecondMarket founder Barry Silbert.

Kraken is a platform that serves bitcoin along with a number of other currencies like Litecoin, Namecoin, Ven and Ripple. It’s one of the top 10 Bitcoin exchanges by volume, but there are other larger ones that serve multiple currencies like BTC-e, which appears to be based out of Eastern Europe.

Kraken’s platform supports margin trading, advanced ordering, fast deposits and withdrawals through a partnership with German online bank Fidor Bank. The company’s new funding round will go toward legal compliance and ensuring the security of the site.

“It’ll be mostly legal bills,” joked CEO Jesse Powell, who said most of the funding will actually go toward acquiring money transmitter licenses. The company now has 25 employees and there are plans to hire many more.

The company said that while the U.S. is the largest Bitcoin market, most Bitcoin liquidity is held elsewhere in part because of the lack of regulatory clarity and because major bank partners are hesitant to partner with or support Bitcoin-related companies. Other U.S.-based venture-backed Bitcoin companies like Coinbase and Bitpay have U.S. bank partners.

Kraken and other platforms like the Slovenian exchange Bitstamp and the U.S.-based Bitcoin wallet and payment processor Coinbase have stepped up to take some of the transaction activity that Mt.Gox once shouldered when it was the biggest exchange by volume in the world. Kraken was one of several bitcoin startups that banded together in a joint statement condemning Mt.Gox’s management before it filed for bankruptcy amid several hundred millions of dollars of losses.

For awhile through and after Gox’s troubles, Kraken was seeing double their normal user sign-up volume. But Gox was very problematic in other ways.

“Everyone in the space ultimately lost, and for the discussing that we were having with banks, it was hard,” Powell said.