By Laura Shin for Forbes.com
The world of financial services — from companies to institutional and individual investors — continues to embrace digital currency and distributed ledger technology, and at a rapid pace.
Bitcoin- and blockchain-focused firm Digital Currency Group announces Thursday an undisclosed amount of investment from Western Union, Beijing-based HCM International Company (the investing arm of Foxconn), as well as family offices, investment managers and funds including Gibraltar Ventures (the investing arm of Prudential), OMERS Ventures, Horizon Kinetics, Kingsbridge Wealth Management, and Wood Investment Partners.
DCG also added new board members and senior advisers, including former treasury secretary and Harvard University president Lawrence Summers and cofounder of private equity firm Silver Lake Glenn Hutchins.
“Our mission is to accelerate the development of a better financial system,” said Barry Silbert, founder and chief executive, who made his name on Wall Street as the founder of SecondMarket, a platform for trading shares of private companies, which was purchased by NASDAQ last fall. “When I set out to raise money last year, the focus was to bring on board strategic investors that would bring engagement and interest, intellectual curiosity, and some strategic value to the table. So for us, this was really more about the investors than the capital.”
Silbert, noting that DCG is profitable, added these partners would help the firm make both new investments and additional ones in its 70+ companies, which focus on areas ranging from remittance to payment processing to a decentralized Internet of Things. In turn, DCG can help Western Union, Foxconn, Prudential and the others navigate the digital currency and blockchain space.
Sanjay Saraf, Western Union’s chief technology officer of digital operations, says the company’s interest lies in finding the best technology for international funds transfer: “One thing we are always focused on is how to improve the experience of our customers from the last mile standpoint, and how to actually ensure that those cross-border funds are delivered as quickly as possible in any form that works best for them.” Noting that delivery used to be mostly in cash, but that Western Union has increased its capability to send funds to bank accounts and mobile wallets, he added, “Blockchain definitely offers a very good potential for us in terms of how to make the entire cross-border movement of funds in a much more efficient manner.”
Saraf called DCG “an extension of an R&D wing,” and said Western Union is investigating a variety of technologies, including Ripple, a company that employs distributed ledger technology for international payments, and has engaged with other partnerships such as international calling and texting services Viber and WeChat. “At this point, it would be best for us to be partnered with a firm like DCG as they are really dedicated in the space and have a portfolio that is really, really wide – not just on the technology side, but also in that they are supporting companies in various different countries,” says Saraf.
Calling the strategic partnership with Western Union “a no-brainer,” Silbert says, “They have a global footprint and they understand the friction and the pain points around moving money around the world. Being able to work with us and our companies to create some efficiencies using digital currency and blockchain technology is a fantastic opportunity for us.” DCG’s portfolio includes more than 15 digital currency exchanges around the world as well as companies in more than 20 countries.
The investment by HCM International, Foxconn’s investment arm, connects a firm that works on supply chain management and trade finance with DCG portfolio companies looking to create more efficiency in those areas.
Prudential’s interest mirrors that of previous DCG investors, the insurance companies New York Life and Transamerica, who are exploring how blockchain technology can make insurance processes, including underwriting and onboarding customers, more efficient. Another insurance firm, USAA, invested last year in Bitcoin startup Coinbase.
DCG also announces new additions to its board and advisory team. New board members include Silver Lake’s Hutchins, who also serves on the boards of NASDAQ and the Federal Reserve Bank of New York and so brings investment, public company and government experience. Long-time mentor to Silbert Lawrence Lenihan, who was a series A investor in SecondMarket and runs a venture firm that invests in early-stage fashion companies, also joins the board. New senior advisors to DCG include Summers, who brings economic and government insight, as well as Gavin Andresen, the former lead developer of the Bitcoin protocol, who now works at the MIT Digital Currency Initiative, who has technical expertise.
The funding follows last October’s undisclosed amount of investment in DCG by MasterCard, Bain Capital Ventures, New York Life, CME Ventures and others.
And it comes just ahead of next week’s Consensus 2016 blockchain conference, hosted by CoinDesk, a subsidiary of DCG, a three-day affair that is much expanded from the one-day event last September. The arrival of blockchain in corporate America is evident in the conference’s top sponsors — Microsoft, Deloitte and IBM — just about sold-out attendance, as well as the marquee attendees, who include investors such as Goldman Sachs, enterprises such as Visa, and governmental institutions such as the Federal Reserve Bank of New York.
“We’ve pretty much hit peak blockchain hype cycle, where for the past six months we’ve seen every major bank and Wall Street firm announce their interest in the technology,” says Silbert. “Now it’s become not just common but somewhat expected that if you are a global organization that is involved in the movement of money around the world, whether for yourself or on the behalf of your clients, you need to pay attention to blockchain technology. You should learn about digital currency and learn about the impact it will have on your organization. So we’re constantly approached by these financial institutions and corporates to help them understand what they should be doing. So between [the last conference] and now, there’s been the level of education needed. Last summer as compared to today is night and day.”
First appeared at Forbes.com