PayPal continues blockchain investments with funding for TRM Labs

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PayPal Ventures is part of an investment group that has raised $4.2 million for cryptocurrency risk management platform TRM Labs.

PayPal joins Initialized Capital, Blockchain Capital and Y Combinator in supporting TRM Labs and its work in helping financial institutions prevent cryptocurrency fraud and money laundering. It also helps banks meet regulatory requirements as they embrace cryptocurrency-related products and partnerships.

San Francisco-based TRM Labs has raised $5.9 million in its seed round.

"PayPal has been trusted by consumers for over 20 years because of its emphasis on fraud prevention and risk management," Rahul Raina, co-founder and chief technology officer of TRM Labs, said in a Tuesday press release. "Their strategic investment in TRM signals their continued commitment to ensuring safety and compliance as the digital payments landscape evolves and innovates."

payThe growth of cryptocurrencies has been a mixed bag for financial institutions that see the opportunity in the underlying blockchain technology, but have to contend with a new set of risks.

TRM says it is accelerating the safe adoption of crypto assets with its platform designed to help financial institutions monitor and mitigate these risks at scale. Financial institutions use TRM to risk-score their cryptocurrency-related transactions, customers, or partnerships, helping them to simplify customer due diligence and meet regulatory requirements.

TRM integrates with more than a dozen blockchains and analyzes billions of virtual asset transactions to detect signs of fraud and financial crime such as money laundering in real time.

The company launched out of the startup accelerator Y Combinator and has since delivered its cryptocurrency compliance and risk management solutions to global financial institutions including major banks, brokerages, and exchanges across the U.S., Latin America, Asia and Europe.

"Illicit activity is an existential problem for crypto since it impacts the willingness of financial institutions, regulators, and consumers to embrace crypto," said Garry Tan, co-founder and managing partner of Initialized Capital, in the release. Initialized Capital was an early investor in crypto services Coinbase and Digit.

"We can't imagine more mission-oriented founders who can bridge the worlds of traditional finance, compliance, and crypto to tackle this critical problem," Tan added.

TRM says the new funding will be used to expand engineering and data science teams, new markets and product development. TRM was founded in 2018.

PayPal's investment in the TRM Labs cryptocurrency platform comes just more than a month after the e-commerce payments giant pulled its participation in Facebook's Libra crypto project. PayPal was initially participating in the Libra Association, which functions as Libra's governing body.

PayPal made its Libra decision not long after lawmakers raised various concerns about the project. The decision triggered other payments companies to back out as well.

Earlier this year, PayPal invested in startup Cambridge Blockchain, a data management distributed ledger technology provider.

PayPal did not disclose the size of its investment total in Cambridge, but the company was part of a $3.5 million portion of a funding round extension. It was reported to be PayPal's first investment in blockchain technology.

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