Notabene Raises $10.2M for Crypto Exchange Compliance

Notabene Secures $10.2 Million in Series A Funding

Notabene, a SaaS startup specializing in crypto compliance, has successfully closed a $10.2 million Series A funding round. The investment was co-led by prominent venture capital firms, F-Prime Capital and Jump Capital, elevating the company’s valuation to $45 million.

New and Existing Investors

This funding round saw participation from several new investors, including leading cryptocurrency exchanges Luno and Bitso, both of whom were pre-existing Notabene customers. Additionally, the venture capital divisions of Blockfi and Gemini Frontier Fund contributed to the round.

Illuminate Financial, CMT Digital, Fenbushi Capital, and Charlie Delingpole, CEO of ComplyAdvantage, also joined as new backers. Existing investors, such as Castle Island Ventures and Green Visor Capital, continued their support of Notabene.

The company previously secured a $1.76 million seed round in October 2020, just six months after its inception.

Addressing FATF Travel Rule Compliance

Notabene’s core offering is software designed to assist its 50+ customers – primarily crypto exchanges – in adhering to the Financial Action Task Force (FATF) “travel rule.” This rule, implemented in 2019, mandates that exchanges in FATF member nations exchange customer identification details for transactions exceeding $1,000.

The purpose of this regulation is to ensure adherence to know-your-customer (KYC) and anti-money laundering (AML) protocols. Recent guidance issued by FATF in October further clarified the specific requirements for exchanges seeking compliance.

Facilitating Secure Information Transfer

Notabene provides a crucial solution for exchanges needing technology that facilitates the secure transfer of information between transacting parties. A key aspect of this is linking anonymous wallet addresses on the blockchain to verified real-world identities.

According to Notabene CEO Pelle Brændgaard, maintaining the privacy of this information is paramount. He emphasized that access should be restricted to only the parties directly involved in the transaction, as well as Notabene itself.

Building Trust in Crypto Transactions

Beyond regulatory compliance, Notabene’s identity-verification services contribute to increased trust among crypto users. Consumers benefit from assurance that they are interacting with the correct counterparties, mitigating the potential for fraudulent activities.

Future Growth Plans

The capital raised in this funding round will be strategically allocated to expand Notabene’s technological capabilities and accommodate a growing customer base.

Strong Market Demand

A survey conducted by Jump Capital among 25 crypto exchanges revealed that 90% intend to utilize Notabene for travel rule compliance. Peter Johnson, a partner at Jump Capital and incoming member of Notabene’s board of directors, cited “overwhelming market feedback” as a key driver behind their investment.

Johnson stated that Notabene’s product effectively addresses a critical challenge facing the cryptocurrency industry.

Competitive Landscape

Notabene’s primary competition consists of industry working groups that are developing centralized protocols for compliance. The US Travel Rule Working Group (USTRWG), which includes major financial institutions like Fidelity Investments and Standard Chartered, is a prominent example.

These centralized protocols enable member institutions and exchanges to seamlessly share data, facilitating compliant transactions between their users.

Addressing Inclusivity Concerns

Brændgaard voiced concerns that these centralized groups can sometimes create barriers to entry. He specifically pointed out that the USTRWG, being US-focused, primarily admits fully regulated exchanges, often excluding those operating in jurisdictions with less developed regulatory frameworks.

“Even if a company in a country like Nigeria has established a robust and respected compliance function, they may be automatically excluded if they aren’t fully regulated,” Brændgaard explained.

A Decentralized Approach

Notabene’s team, many of whom previously worked at decentralized identity startup UPort, aims to foster a more inclusive environment. Brændgaard believes that their decentralized framework, drawing on their experience at UPort, can build trust among exchanges without imposing restrictive membership requirements.