Six years after the launch of the Mexico-based cryptocurrency exchange and financial services platform Bitso, the company revealed it has closed on $62 million in financing to capitalize on the cryptocurrency boom investors expect to hit Latin America.
The three major cryptocurrencies are all trading up in the waning months of 2020, with Bitcoin prices nearing (or exceeding) record highs. The global growth of these digital currencies and their applications in emerging markets have savvy financial services investors like the firm QED Investors (founded by the masterminds behind Capital One) intrigued. Which is why the firm joined the Latin American heavyweight investor Kaszek Ventures in financing Bitso’s $62 million round.
Bitso may already be the dominant cryptocurrency platform in Latin America boasting 1 million users (primarily in Mexico and Argentina) and is one of the only platforms to be licensed under the Distributed Ledger Technology (DLT) license from the Gibraltar Financial Services Commission (GFSC).
Founded by Ben Peters, Daniel Vogel and Pablo Gonzalez, the company has been dominant in the Latin America crypto market, but it has also not been able to avoid some of the controversies that surround the crypto industry.
The founders of Bitso and their investors focus on the ability for cryptocurrencies to reduce friction and cost in markets where financial services often ignore the middle class and low-income consumers that often need them the most.
“Crypto as an asset class was not going away and was clearly coming of age,” said Nigel Morris, the QED co-founder who previously led Capital One. “It’s not going away. And with that there are various financial services that are enabled by this asset class. You can lend against it. You can use it to move money cross-border. This thing is now palpable and real and has come of age.”
For all of those reasons, Latin America represented a big opportunity for QED Investors to make its first bet in the cryptocurrency space, and for Bitso to be that initial investment.
“This is a terrific business model and a great team and a geography that we know,” said Morris. The firm has invested in startups like Coru and Confio already and is a big believer in the opportunity for financial services startups in Mexico broadly.
For Bitso, the big opportunities are presenting Latin American investors with an opportunity to invest in foreign currencies like the U.S. dollar through stablecoin offerings alongside a slew of lending and cross-border remittance services — in addition to the peer to peer transaction services the company already offers.
Bitso already employs 200 people and intends to use the capital to expand aggressively across Latin America. The company’s first port of call will be Brazil. The largest market in the region, Brazil represents a huge untapped opportunity for Bitso’s growth, according to co-founder Daniel Vogel.
“We have really good traction building products where the central product is not exposure to bitcoin or crypto but fulfilling this vision of making crypto useful,” Vogel said. “These two investors have a lot of knowledge in the fintech space in the traditional financial services space and we’re excited to continue developing projects. We have been building some of these things out … utilizing technology for things that are useful to the end customer and developing products along those lines.”
For instance, Bitso is already processing $1 billion in remittances for customers, enabling transactions for financial services partners like cryptocurrency-enabled money transmitters.
Vogel first met QED and Kaszek when he was just getting Bitso off the ground, living and working in a hacker house that was shared with five other companies. “I had to kick my team out of the meeting from my only room,” Vogel recalled.
Now the company boasts a customer base of 1 million and with the new cash, hopes to add another 1 million Brazilian customers to the platform.
He thinks that access to stablecoins will lead the way. “There was so much uncertainty that people flocked to the dollar as a store of value,” Vogel said. “Access to dollars is something that has grown quite a bit in the last year.”