Elliptic co-founder and CEO James Smith said part of the investment will be used for expansion in Asia. Photo: Elliptic

Wells Fargo invests in crypto monitoring firm Elliptic

San Francisco-based banking giant Wells Fargo has invested US$5 million in British startup Elliptic, a provider of risk management systems for the cryptocurrency sector.

The investment came from Wells Fargo Strategic Capital, the venture unit of the fourth-largest US bank by assets, as an extension of Elliptic’s US$23 million Series B funding round announced in September.

Before the latest investment, Elliptic has raised US$35 million since its founding. Among its backers were former SoftBank subsidiary SBI Group, Spanish bank Santander’s corporate venture capital fund Santander InnoVentures, Washington-based Paladin Capital Group, Digital Currency Group, Octopus Ventures, London-based AlbionVC and SingalFire.

The latest investment from Wells Fargo shows “banks are interested in how we can help them understand and manage risk that relates to crypto”, Elliptic co-founder and chief executive James Smith told CNBC.

Founded in 2013, London-based Elliptic provides blockchain-tracking and intelligence analysis software to law enforcement agencies, private companies, as well as some of the world’s largest cryptocurrency platforms such as Binance and Circle, to help them find and block illicit digital currency transactions.

The startup offers an integrated suite of products and services for corporate clients to screen volumes of crypto-flows that amount to billions of dollars in transactions per day, analyzing them for links to illicit activity such as money laundering, terrorist financing, sanctions evasion, and other financial crimes.

It has also sold tools on crypto forensics and cryptocurrency investigation services direct to law enforcement agencies in the United States and Europe.

Its technology solutions were once deployed to uncover the Al-Qassam Brigades, the military wing of the militant Palestinian group Hamas which used bitcoin to finance its operations.

Elliptic’s software was able to track suspicious transactions on the cryptocurrency’s blockchain. Consequently, clients were flagged on where their money was going, prompting them to cut off the funds.

In a report last November, Elliptic said it supported more than 85 percent of all crypto assets by value.

Blockchain and crypto analytics firms Chainalysis and BlockSeers are considered Elliptic’s main rivals in the market.

Elliptic plans to use the fresh capital mainly to support its newly launched Discovery solution, which is aimed at financial institutions to help them identify whether clients’ funds are passing through over two hundred global cryptocurrency platforms without the appropriate compliance checks in place.

The investment will also be used for the firm’s expansion outside the United Kingdom, particularly Asia.

In an announcement for the Series B funding round last September, Elliptic said its offices in Singapore and Japan will spearhead the expansion into Asia.

Amid the growing popularity of digital currencies in the region, the company’s revenue from Asia-based clients increased 11 times over just two years in 2019, Elliptic said.

Explaining the firm’s significant revenue growth in the region, CEO Smith said countries like Singapore and Japan have developed clear crypto-asset regulatory frameworks while businesses there are serious about meeting compliance obligations.

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