Consensys Raises $65M from JPMorgan, Mastercard, UBS for DeFi Infrastructure

ConsenSys Secures $65 Million in Funding from Financial Giants

ConsenSys, a prominent entity within the cryptocurrency landscape and a strong advocate for the Ethereum blockchain, has successfully completed a $65 million funding round. The investment was led by J.P. Morgan, Mastercard, and UBS AG, alongside significant blockchain firms including Protocol Labs, the Maker Foundation, Fenbushi, The LAO, and Alameda Research.

CMT Digital and the Greater Bay Area Homeland Development Fund also participated in this funding initiative. Notably, a portion of the investment was made using Ethereum-based stablecoins, specifically DAI and USDC, in addition to traditional fiat currencies.

Valuation Considerations and Round Structure

According to sources at TechCrunch, the round was structured without a pre-defined valuation due to inherent valuation risks. The funding instrument is described as “full,” indicating the round is now finalized and closed to further investment.

Strategic Alignment with Decentralized Finance

This fundraise appears strategically focused on enabling traditional financial institutions to gain insight into the rapidly evolving world of decentralized finance (DeFi) and the Web3 applications being built on the Ethereum blockchain.

ConsenSys’ Evolution and Core Business Units

ConsenSys has undergone a significant “period of strategic evolution and growth,” as stated by the company. This transformation involved restructuring into two primary divisions: ConsenSys, the core software development business, and ConsenSys Mesh, which encompasses investment, incubation, and portfolio management.

The acquisition of the Quorum product from J.P. Morgan has further strengthened ConsenSys’ position within the enterprise blockchain ecosystem. This acquisition has resulted in a comprehensive product suite for the Ethereum platform.

Key Products and Capabilities

ConsenSys now offers a key product suite, including Codefi, Diligence, Infura, MetaMask, Truffle, and Quorum. These tools support both public and private, permissioned blockchain networks.

Furthermore, the company provides support for Layer 2 Ethereum networks and facilitates access to related protocols such as IPFS and Filecoin. ConsenSys is also a major contributor to the development of Ethereum 2.0.

Industry Perspectives on the Investment

Joseph Lubin, founder of ConsenSys, emphasized the importance of a diverse investor base, reflecting the belief that the entire economy will eventually embrace decentralized protocols like Ethereum, similar to the evolution of the web.

He stated: “ConsenSys’ software stack represents access to a new automated objective trust foundation enabled by decentralized protocols like Ethereum.”

Institutional Interest in DeFi

The public nature of DeFi activity on Ethereum allows financial institutions to observe the increasing convergence of the traditional financial system with the blockchain world, clarifying the appeal of this emerging technology.

Mike Dargan, head of Group Technology at UBS, commented: “Our investment in ConsenSys adds proven expertise in distributed ledger technology to our UBS Next portfolio.”

Mastercard views this as more than just a financial investment, as they have been collaborating with ConsenSys on a private, permissioned network.

Raj Dhamodharan, executive vice president at Mastercard, explained: “Enterprise Ethereum is a key infrastructure on which we and our partners are building payment and non-payment applications to power the future of commerce.”

Colleen Sullivan, co-founder and CEO of CMT Digital, added: “ConsenSys is the pioneer in bridging the gaps across traditional finance, centralized crypto, and DeFi, and more broadly, between Web 2.0 and Web 3.0.”

Timing and Significance of the Fundraise

The fundraise commenced around the time of the Quorum acquisition last June. The $65 million round is primarily denominated in fiat currency and complements a previous round completed with J.P. Morgan last summer.

The participation of prominent crypto players like Maker Protocol Labs underscores the significance of this funding beyond a simple financial transaction. The announcement also coincides with the Coinbase IPO, adding to the timing’s relevance.

Growth and User Adoption

ConsenSys’ products have become essential for developers, enterprises, and consumers engaging with blockchain and crypto technologies. The company reports that MetaMask now boasts over 3 million monthly active users across mobile and desktop platforms, representing a threefold increase in the last five to six months.

This user base is comparable in size to that of Coinbase.

Comparison with Coinbase

While Coinbase functions primarily as an exchange for converting fiat currency to cryptocurrency, it has also begun to explore DeFi. Both Coinbase, with its 3 million users, and MetaMask, also with 3 million users, can function as digital wallets.

Jeremy Millar, chief development officer, highlighted the positive relationship between ConsenSys and Coinbase, emphasizing their shared goal of fostering ecosystem growth and technology adoption.

The Broader Investment Landscape

While early-stage blockchain and crypto companies have attracted substantial funding recently, much of this capital has originated from crypto-focused investment firms. Relatively few Silicon Valley venture capital firms have actively backed blockchain ventures, such as Andreessen Horowitz.

This announcement is notable because established financial institutions are not only investing but also collaborating with ConsenSys to develop products on Ethereum.

Future Outlook and DeFi’s Potential

ConsenSys believes that every payment service provider will require this financial infrastructure in the future, particularly for DeFi applications.

With approximately $43 billion currently collateralized in DeFi, major investors are increasingly drawn to the higher returns compared to traditional yield and bond investments.

The exploration of digital currencies by central banks is also prompting companies and governments to recognize the enduring nature of digital currency and the “blockchain rails” that underpin it, as evidenced by the Greater Bay Area Homeland Development Fund’s involvement.

ConsenSys’ Product Portfolio and Market Reach

ConsenSys possesses a suite of powerful products catering to diverse user groups. Developers building on Ethereum utilize Truffle for smart contract development, while users participating in the NFT market rely on MetaMask.

MetaMask’s token swapping functionality has proven lucrative for ConsenSys, generating $1.8 billion in decentralized exchange volume, with the company earning a 0.875% commission on each swap.

Institutions are also leveraging ConsenSys’ products, with over 150,000 developers utilizing Infura’s APIs and 4.5 million developers creating and deploying smart contracts using Truffle. The Protocols group, responsible for Hyperledger Besu and ConsenSys Quorum, is developing Central Bank Digital Currencies (CBDCs) for six central banks.

ConsenSys is also benefiting from the surge in NFT adoption, providing the nodes and infrastructure on Ethereum that store NFT files.

The company is capitalizing on two key trends: the growth of the developer ecosystem and the evolution of the financial system.

As a spokesperson stated, “Where the interest in money and invention started happening was on public networks like Ethereum. So we really believe that these are converging and they will continue to, and every one of our products offers public main net compatibility because we think this is the future.”

Millar concluded: “If we want to help the world adopt the technology we need to meet it at its adoption point, which for many large enterprises means inside the firewall first. But similarly, we think, just like the public internet, the real value — the disruptive value — changes the ability to do this on a broader permissionless basis, especially when you have sufficient privacy and authentication available.”