Cryptocurrency exchange FTX reached a valuation of $25bn in a new funding round that includes heavyweights from traditional finance, such as the Ontario Teachers’ Pension Plan and funds managed by BlackRock.
FTX Trading, the exchange’s parent company, said on 21 October that it had raised just over $420m in the new round. The news came three months after FTX closed a previous round at a valuation of $18bn.
Since then, cryptocurrencies have rebounded from a summer slump. Bitcoin powered to a record of above $66,000 on 20 October, after this week’s debut of the first US bitcoin-focused exchange-traded fund.
Singapore’s sovereign-wealth fund Temasek Holdings joined the new funding round, along with Silicon Valley venture-capital firms Sequoia Capital — an existing investor in FTX — and IVP. Other investors included New York-based Tiger Global Management and Iconiq Growth, an affiliate of Iconiq Capital, which has managed money for Mark Zuckerberg and other tech billionaires.
The backing of high-profile investors is a vote of confidence in FTX, which has grown rapidly since starting operations in 2019. FTX has handled nearly $13bn worth of trades on an average day this month, making it the world’s third-largest crypto exchange by volume, according to data provider CryptoCompare. Binance and OKEx are the world’s first and second-largest exchanges, respectively.
Binance also has sought new funding in recent months, targeting a valuation of as much as $300bn, people briefed on the discussions said. But some investors have balked at that price tag, in part because of the regulatory risk surrounding Binance, one of the people said.
A Binance spokeswoman said: “As we continue to grow responsibly in cooperation with global regulators, the potential of this industry is virtually impossible to project today.” She didn’t comment directly on the funding effort.
Much of the volume at both FTX and Binance is in cryptocurrency derivatives—risky and volatile instruments that can be used to bet on whether various digital coins will rise or fall in price. Regulators have been wary of crypto derivatives. This summer, Binance stopped offering derivatives in Germany, the Netherlands, Italy, Hong Kong and other jurisdictions after coming under official pressure. Another rival, BitMEX, agreed to pay $100m in August to settle accusations from the Commodity Futures Trading Commission that it let Americans trade derivatives without following US rules.
FTX has avoided public clashes with authorities. It keeps its main exchange off-limits to Americans to comply with US financial regulations, while running a US sister exchange that focuses on less exotic products. In August, FTX’s US affiliate said it was acquiring LedgerX, a small, CFTC-licensed trading platform for crypto futures and options, to help build out a regulated US derivatives business.
FTX recently moved its headquarters from Hong Kong to the Bahamas, in part because of the archipelago nation’s crypto-friendly regulatory regime. FTX has raised more than $1.4bn in its two recent funding rounds.
In an interview, FTX founder and Chief Executive Sam Bankman-Fried said the firm could spend the money on acquisitions. Such deals could be used to obtain assets with regulatory licenses, like LedgerX, or to buy crypto ventures with local expertise in various countries, he said.
Bankman-Fried, a California native, voiced hope that FTX would eventually offer Americans crypto-linked investment products. The firm is in the process of acquiring a US broker-dealer, he said, without providing details. Such an acquisition could allow FTX to legally offer securities trading to Americans.
“We’re starting to see the tip of the iceberg in terms of institutional cryptocurrency-related products in the United States right now, with the bitcoin futures ETF that just launched,” Bankman-Fried said. “We’d be super-excited to help contribute to those over time.”
FTX has sought to boost its visibility in the US with sports sponsorships, minting deals with the Miami Heat professional basketball team and National Football League star Tom Brady, among others. Major League Baseball umpires have been wearing an FTX patch on their uniforms as a result of one such deal.
Write to Alexander Osipovich at [email protected]
This article was published by Dow Jones Newswires