Kast: Stablecoin-Powered Neobank - Hongshan Peak XV

KAST Secures $10 Million Seed Funding to Bridge Traditional Finance and Stablecoins

Investment firms Peak XV and HongShan, formerly part of Sequoia, have jointly led a $10 million seed investment in KAST. This innovative platform functions similarly to a neobank, enabling users to both hold and utilize stablecoins through established payment methods.

Facilitating Stablecoin Spending

KAST distinguishes itself by issuing credit cards compatible with conventional merchant networks. This allows users to spend their stablecoin assets at businesses that do not currently accept cryptocurrency directly.

The startup is strategically focused on emerging markets. These regions often experience limited access to USD and face substantial costs associated with sending money internationally.

Addressing Cross-Border Payment Challenges

KAST currently does not operate within India or China due to existing regulatory frameworks. However, it effectively serves the substantial workforce originating from these countries who are employed abroad.

Raagulan Pathy, a co-founder with prior experience leading Circle’s Asia Pacific operations, highlighted the deficiencies in cross-border banking infrastructure prevalent in many nations. The platform’s core objective is to streamline international payments by circumventing traditional banking systems.

Growing Stablecoin Adoption

The launch of KAST coincides with a period of rapid growth in stablecoin usage. Globally, over 20 million individuals utilize stablecoins on a monthly basis, with a significant concentration of users in emerging markets.

Stripe’s acquisition of Bridge, a stablecoin infrastructure provider, for $1.1 billion in October, underscores the increasing interest in this technology from mainstream corporations.

Competitive Landscape

KAST faces competition from both companies specializing in cryptocurrency and traditional fintech firms expanding into the stablecoin space. PayPal has introduced its own USD-pegged token, and both Revolut and Ripple have announced plans to launch their own stablecoins.

The stablecoin market is currently dominated by a few key players, with Tether controlling approximately three-quarters of the total supply.

Built for the Future of Finance

Daniel Bertoli, KAST’s other co-founder and formerly a partner at Quona Capital, contends that existing neobanks encounter difficulties integrating blockchain technology due to the limitations of their foundational systems.

“The next generation of digital banks will be inherently global and constructed on stablecoins from the outset,” he stated.

Investment Details and Future Plans

The investment round also included participation from partners at DST Global and Goodwater Capital. KAST has not disclosed its user numbers or valuation, but reports that its growth has surpassed initial projections within its first four months of operation.

The startup intends to introduce savings products and broaden its remittance services, while maintaining a central focus on stablecoin-based infrastructure.

A Safe Haven for Income

Because KAST exclusively utilizes stablecoins, it provides its customers with “a secure repository for earned income during periods of local currency devaluation,” according to Alex Svanevik, co-founder and CEO of analytics platform Nansen.ai and an early investor in KAST.

“As an increasing number of digital nomads receive compensation in stablecoins, they can now avoid the complexities of traditional financial rails. International transfers that previously took weeks can now be completed almost instantaneously and with minimal fees,” he explained.

Peak XV and HongShan’s First Joint Venture

This investment in KAST represents the first collaborative deal between Peak XV and HongShan since their separation from Sequoia in June 2023.

Both firms are actively expanding their operational reach beyond their traditional geographic areas. HongShan is venturing into Europe and North Asia as it manages its $9 billion capital pool, while Peak XV is establishing a presence in the United States.

Sequoia, their former parent company, is reportedly nearing a decision to invest in fintech company Vance. Should this occur, it would mark Sequoia’s first investment in India following the separation.