Coinbase-backed cryptocurrency trading firm hits $ 1 billion valuation

Amber Group, a cryptocurrency financial services company, has raised $ 100 million as investors rush to back companies in the industry.

The new round of funding values ​​the Hong Kong-based startup at $ 1 billion.

Investment bank China Renaissance led the round with the participation of other high-profile investors, including New York-based Tiger Global Management. Existing investors, which includes Coinbase’s venture arm, participated.

The latest round of funding continues a flurry of funding activity in the cryptocurrency industry.

In the second quarter of 2021, venture capital investment in cryptocurrency and blockchain startup totaled $ 14 billion, according to PitchBook data provided to CNBC. That compares to just $ 600 million in the same period last year.

Interest in cryptocurrencies, particularly bitcoins, increased this year as institutional investors and large corporations came together. Payment processor Square and electric vehicle maker Tesla are among the companies that have bought bitcoin.

But after hitting a record high of $ 64,829.14 in April, bitcoin has plummeted by almost half.

Business model

Amber Group has typically sold products to institutional investors and high net worth individuals, including loan products and algorithmic trading.

Rather than being a cryptocurrency exchange that allows users to trade individual digital currencies, Amber Group CEO Michael Wu said the company is bringing 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 on track to post revenue of $ 500 million by the end of this year and has been profitable “from the start.”

According to Wu, between 70% and 80% of the company’s income comes from the so-called net interest margin, a measure of the profitability of loans. Amber Group assumes customer deposits and offers an interest rate. They then lend the money from a group of deposits to other entities at higher interest rates and earn money on that margin.

About 15% of the revenue comes from commercial fees.

While the majority of the company’s clients are institutional investors, Wu said Amber Group is making an effort to win individual investor clients.

“We do not advocate heavy speculation or high use of leverage, rather we want our clients to be longer term, focus on risk management, and deliver stable and attractive returns,” Wu said.

Strategic acquisitions

The CEO said the new capital raised will be used to “hire even more aggressively” and to make strategic acquisitions in areas such as cybersecurity.

But Wu said the company is also looking to acquire others that 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 because it is a very global industry,” Wu said. “It’s always about staying ahead of the curve, or at least being aware of the different regulations. We always take a very conservative approach to this. “

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