Blockchain Raises $40 Million in Fresh Funding

London-based startup Blockchain has raised $40 million (GBP 31.5 million or roughly Rs. 258 crores) in a fresh round of funding as the software company rides a wave of enthusiasm for digital currency technology.

The financing round, the largest for a financial technology company since Britain's vote last year to leave the European Union, was led by the venture capital arm of Alphabet Inc and Lakestar, Blockchain said on Thursday.

Nokota Management and Digital Currency Group also participated in the financing round, which boosted Blockchain's total funding to more than $70 million

Tom Hulme, general partner at Alphabet's venture firm GV, said the firm invested because "the pace of innovation in the digital currency space is unmatched."

Founded in 2011, Blockchain makes software that allows consumers and businesses to make transactions using digital currencies such as Bitcoin. The firm is named after the Internet platform that records and validates transactions between two parties without relying on an intermediary such as a bank.

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Co-founder and Chief Executive Peter Smith said that, as of March, the company was completing the equivalent of $2.5 billion (roughly Rs. 16,136 crores) in transactions on a monthly basis through its consumer virtual wallet product.

"Anybody with a reasonable ability to use a smartphone can use it," Smith said. "My grandmother uses our product today."

The growing acceptance and adoption of digital financial products has helped startups like Blockchain attract investor attention.

Last week, American International Group announced a blockchain-based insurance product.

Bank of America, Citigroup, Goldman Sachs, Wells Fargo and other banks have invested in blockchain startups, and many will roll out commercial blockchain products this year.

In the first quarter, blockchain startups raised a total of $141 million from investors, a 57 percent increase over the fourth quarter but an 18 percent drop from the first quarter of 2016, according to data provider CB Insights.

Some sceptics say blockchain will never be adopted broadly or pose a threat to traditional banks, while others point to the volatility of Bitcoin, the digital currency based on the technology.

While far from mainstream, digital currency has enjoyed growing popularity that Smith attributes to the instability of traditional currencies in places such as Brazil, and political uncertainty in Britain and the United States.

The day after Donald Trump was elected US president, Smith said, Blockchain had the second-highest number of new users sign up in a single day.

"In you're in an environment of rapidly deteriorating geopolitical stability," Smith said, "you are open to new ideas and new products."

© Thomson Reuters 2017