Crypto compliance startup TRM Labs partners with financial firms

This year


in the crypto markets has seen billions of dollars disappear from the digital asset ecosystem. But one startup, TRM Labs, is seeing increased interest in its back-end tools used by a slew of players working on digital assets despite — or because of — the turn of the market.

TRM Labs co-founder and CEO Esteban Castaño told Insider that TRM Labs experienced the fastest growth ever in the second quarter, surpassing record growth at the start of the year. The startup has raised $80 million since its launch in 2017, including a $60 million Series B round last December that saw participation from the venture arms of financial giants like Citi, PayPal and American Express. And last June, TRM Labs announced its acquisition of British blockchain training company CSITech.

Based in San Francisco, TRM Labs provides compliance, risk management and anti-fraud tools to financial firms, blockchain players and regulators. The startup has signed partnerships with at least one major financial firm, JPMorgan — which announced a strategic investment in TRM Labs in February — and counts Shopify and crypto-native giants like Circle and FTX as customers.

“We see crypto firms continue to mature their compliance programs and make significant investments to improve their ability to monitor money laundering, financial crime and sanctions exposure,” Castaño said.

The financial sector, he added, represents TRM Lab’s second fastest growing customer base, after the public sector but ahead of crypto-native businesses. As an example, payment companies in particular, like Shopify, have adopted TRM Labs’ transaction monitoring tools to combat money laundering. Chainalysis, another crypto compliance service in an increasingly crowded space, estimates that over $8 billion worth of crypto was laundered in 2021.

Aircraft carriers vs speedboats

JPMorgan, which announced the opening of a virtual branch in the Metaverse in February, is not the only Wall Street bank considering new digital asset offerings this year.

Goldman Sachs topped the list among suitors interested in buying the assets of troubled crypto lender Celsius, CoinDesk reported in June. And in May, State Street partnered with Credit Suisse and another crypto startup, Paxos, to work on a same-day equity settlement pilot.

For banks that are increasingly partnering with crypto startups or catering to clients with crypto assets, TRM Labs offers a particularly in-demand product called “Know-Your-VASP” – or service provider. virtual assets.

“A large bank could pull a report from TRM to get the overall risk profile of, say, a large cryptocurrency exchange, and then decide if they want to service that exchange,” Castaño said.

TRM Lab’s technology is built on 26 different blockchains, including the recent addition of Polygon, the Ethereum-based platform. According to Castaño, the startup builds its compliance tools in three main areas: “A cup of raw blockchain data, a half cup of threat intelligence, and another half a cup of advanced analytics.” He sees TRM Labs’ services as similar to Google Maps – layers of intelligence and tracking tools live above a flat level of data.

According to Castaño, over the past five years, most traditional financial firms have been in a “research phase” when it comes to digital assets. Now, these same names are moving into a “deploy phase,” actively rolling out new crypto products and adopting new compliance tools.

“While a two-person crypto startup might operate more like a speedboat, large financial institutions can sometimes operate more like aircraft carriers,” Castaño said.

“They’ve just spent the last three years re-steering the ship and steering it into digital assets and crypto, and we see that momentum continuing to continue even across any

bear market

,” he added.

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