Amber Group, a cryptocurrency financial services company, has raised $ 100 million as investors rush to support companies in the industry.
The new round of financing values the Hong Kong-based start-up at $ 1 billion.
The investment bank China Renaissance led the round, which was also attended by other high-profile investors, including Tiger Global Management, based in New York. Existing investors, including Coinbase’s venture arm, were involved.
The latest round of funding continues a flurry of funding activity in the cryptocurrency industry.
In the second quarter of 2021, venture capital investments in cryptocurrency and blockchain startups amounted to $ 14 billion, according to data from PitchBook provided to CNBC. That was just $ 600 million over the same period last year.
Interest in cryptocurrencies, especially Bitcoin, has increased this year as institutional investors and large corporations stepped on it. Payment processor Square and electric vehicle maker Tesla are among the companies that have bought bitcoin.
But after reaching a record high of $ 64,829.14 in April, Bitcoin fell by almost half.
Amber Group has typically sold products to institutional investors and high net worth individuals, including algorithmic trading and credit products.
Rather than being a cryptocurrency exchange that allows users to trade individual digital coins, Amber Group CEO Michael Wu said the company is delivering a “private banking experience” to everyday customers.
Wu says the company offers investors a number of different cryptocurrency products to invest in.
Amber Group said it is well on its way to $ 500 million in sales by the end of this year and has been profitable “since inception”.
According to Wu, between 70% and 80% of the company’s revenue comes from what is known as the net interest margin – a measure of the profitability of lending. Amber Group takes customers’ deposits and offers them an interest rate. Then they lend the money from a pool of deposits to other companies at higher rates and make money from that spread.
About 15% of the revenue comes from trading fees.
While the majority of the company’s clients are institutional investors, the Amber Group is making efforts to attract individual investor clients, according to Wu.
“We are not advocating heavy speculation or high leverage, we want our clients to be more long-term, focus on risk management and achieve stable and attractive returns,” said Wu.
The CEO said the fresh capital will be used to “hire even more aggressively” and make strategic acquisitions in areas such as cybersecurity.
However, Wu said the company is also looking to acquire others who have regulatory licenses in certain jurisdictions, which could allow Amber Group to enter a new market.
Regulation around investing in cryptocurrencies differs around the world and is quite fragmented.
“I think regulation is always a challenge for this industry as it is a very global industry,” said Wu. “It’s always about staying ahead or at least being aware of the other rules. We always proceed very conservatively.”