AlphaPoint, a digital currency exchange platform solution provider, last month landed $1.35 million in venture funding to fuel international growth and product development.
The round was contributed by Scott Becker of Invite Media, Gabriel Weinberg of DuckDuckGo, Robin Hood Ventures, Ben Franklin Technology Partners, Crypto Currency Partners and other angel investors.
The company’s offerings fall into two categories: exchange platforms and exchange remarketing. Its platform was been used to power exchanges in Canada, Norway, Mexico and the Carribean. Seeing that liquidity can be thin for an exchange just starting out, particularly in countries with low bitcoin and/or trading penetration rates, its remarketing service matches orders with other liquidity providers.
More recently, they partnered with Bitfinex to take care of the exchange’s technology needs, letting Bitfinex focus more on its business strategy. AlphaPoint’s software, which the company says can handle one million transactions per second, was sought by Bitfinex to enhance performance and scale for future growth.
Speaking with DC Magnates, Vadim Telyatnikov, CEO at AlphaPoint, explained that the platform is flexible to multiple crytpo/fiat currencies and that it helps fill the liquidity gap even between exchanges supporting different fiat currencies.
Client exchanges have the choice of storing and securing entrusted bitcoins in their own wallets, or using AlphaPoint’s multisignature wallet. Funds are also kept in cold storage and as a rule of thumb, funds that they can’t afford to cover are not kept in a hot wallet.
Is regulation a good thing?
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Located in New York, the company may soon be operating in regulated playing field- depending on the outcome of Benjamin Lawsky’s BitLicense proposal. Recent reports indicate that Lawsky is leaving his post, which may have implications on if/when regulations will materialize.
As we’ve heard from multiple firms in the bitcoin community, Telyatnikov believes a balanced approach to regulation is important- enough to protect the public, but not the point when innovation is stifled or startups can’t afford it. Lawsky recently sought to further allay such concerns with a prospective “transitional BitLicense” that eases the burden on startups.
Telyatnikov warned that excessive regulation in the US may drive innovation elsewhere. He compared the situation to the automobile’s earlier days in the UK, where a law was passed requiring drivers to wave a flag warning pedestrians that a car is coming. Eventually, the US became the main hub for automakers.
In any event, Telyatnikov explains that the company was capable of becoming a bitcoin exchange. However, it prefers to focus on its core asset- technology- without having to divert resources toward regulatory needs. Indeed, Lawsky did recently clarify that the proposed BitLicense isn’t intended to regulate software developers.
The volatility effect
Often, we pose the following paradox: Suppose Bitcoin, with the help of regulation, makes it far enough into the mainstream that its price becomes far less volatile. How would this affect the fortunes of bitcoin exchanges, whose proliferation, often backed by funding, comes part and parcel with a maturing industry? With traditional fiat forex brokerages, it is well known that low volatility severely impacts earnings.
Telyatnikov believes that to the contrary, volume will grow substantially. Mainstream forex is traded at a rate of $5.3 trillion daily, so attaining any sizeable piece of this pie entails a huge volume increase. This can more than make up for the reduced volatility, offering “exponentially more opportunity” for brokers in the future than today.
For a detailed list of recent investment and M&A activity in the crypto industry, please visit the DC Magnates Crypto Deal Table.