Swiss Crypto Firm Closes $14.5M Series B to Help Secure Brokerage License

Swiss holding company Crypto Finance AG has closed a $14.5 million Series B funding round co-led by Swiss investor Rainer-Marc Frey, Beijing-based private equity firm Lingfeng Capital and joined by Hong Kong’s QBN Capital.

The round began in September 2019 and was initially slated to close two weeks prior to Thursday, but was delayed by the financial uncertainty of the COVID-19 pandemic, Crypto Finance AG CEO and founder Jan Brzezek told CoinDesk in a phone interview.

Crypto Finance AG operates three subsidiaries including Crypto Fund AG, Crypto Broker AG and Crypto Storage AG. Brzezek said the Series B funds will be used to fulfill capital requirements for obtaining a broker-dealer license from the Swiss financial regulator FINMA for Crypto Broker AG. Sister-firm Crypto Fund AG received its FINMA license in October 2018.

Brzezek said the subsidiary is in the “final mile” of receiving the license, which will allow the firm to expand its cryptocurrency trading business to additional banks in Switzerland and abroad. Specifically, the license will let Crypto Broker AG increase its trading values and expand into derivative products. Brzezek said the process has taken 18 months so far.

More-traditional financial institutions, Brzezek said, “don't want the hassle of connecting [with] different exchanges and brokers. … But they connect their API or order management systems to our infrastructure and then they can trade around the world.”

He said the firm is not a prime broker like Genesis Capital or Cumberland but offers “best execution,” a valued feature for traditional players looking for small price spreads on market orders.

Asian capital

Crypto Finance AG is also looking East following the raise, which brings the total since its founding in 2017 to $37.29 million. The Swiss company has attracted attention from Asian investors who remain bullish on crypto but would rather invest in regulatory-friendly markets, Brzezek said.

“The U.S. is still struggling to find the common solution,” Brzezek said of regulatory hurdles in the states. “We have a very good legal basis to operate in Europe and in Asia.”

In a statement, Lingfeng Capital partner Ming Shu said his firm looks forward to “building a bridge between Europe and Asia with Crypto Finance.” Consulting firm PwC was enlisted for investor introductions, according to a press release. As part of the funding round, Brzezek has proposed that Shu join the Crypto Finance AG board of directors.

The Swiss firm is also planning to enter the crypto derivatives market, with Brzezek citing the allure of high trading volumes on incumbent platforms such as BitMEX. Brzezek said Crypto Broker AG plans to offer derivative products to clients and is seeking licensing.

Although a timetable was not given for launching a regulated derivatives platform, Brzezek said he saw “a lot of interest in the room.”