Notabene, a New York-based startup specializing in crypto regulatory compliance, announced it raised a $10.2 million Series A round on the heels of finalized guidance from the global watchdog Financial Action Task Force (FATF).
Chicago-based Jump Capital and Cambridge, Mass.-based F-Prime Capital led the round. Jump’s Peter Johnson will serve on Notabene’s board.
Notabene, founded in April 2020, announced a nearly $1.8 million seed round led by Castle Island Ventures in November 2020. It also raised previous support from Y Combinator and others.
The startup largely focuses on helping crypto firms and financial institutions comply with the FATF’s "travel rule," which requires so-called virtual asset service providers (VASPs) to “obtain, hold, and transmit required originator and beneficiary information.” FATF released its finalized crypto guidance on Oct. 28 after issuing a draft in 2019. Compliance with the guidelines will be crucial for exchanges seeking operating licenses.
“Really what it says is that if you’re a crypto exchange, and you are sending funds on behalf of your customer to another crypto exchange, you need to understand who is the ultimate beneficiary of that transaction,” Notabene CEO Pelle Braendgaard told The Block. These include withdrawals and deposits to exchanges, he said.
Notabene estimates that more than 80% of the world’s exchanges will have to implement the travel rule by the second quarter of 2022.
“It’s really difficult — it’s not an easy thing to do,” Braendgaard said.
Notabene already counts exchanges like Bitso, Crypto.com, Luno and Paxful among its customers. Financial institutions and banks are also reaching out to Notabene, Braendgaard said. The company will use the fresh funds to continue building out its product team.
The global nature of exchanging digital assets appears to be driving some of this urgency to comply with the travel rule. VASPs are not just faced with the challenge of appeasing their own regulators — they also have to figure out how to not lose overseas transaction volumes in the process, Braendgaard explained.
For example, South Korean exchanges will be required to implement the travel rule by March. But now, any exchanges sending large amounts of transaction volumes from South Korea — whether or not they’re based in the country — also have to heed those regulations.
“So, we’re seeing a large influx of companies that are moving up their own internal travel rule compliance so they don’t lose transaction volume," Braendgaard said.
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