Crypto payments company Ripple has led a $72 million Series B funding round into digital asset market maker Keyrock. Ripple has also been a key client for the firm for the last three years.
Venture firms Six Fintech Ventures and Middlegame Ventures also participated in the round, which closed mid-September. Keyrock CEO Kevin de Patoul declined to share the valuation but said in an interview with The Block it was a significant lift in valuation — the firm last raised €4.3 million in Series A funding in October 2020.
Market makers like Keyock offer a buy-and-sell price for an asset to platforms such as exchanges. Typically, they earn revenue by charging higher selling prices than what they buy the asset for, pocketing the difference between the two, known as the spread.
The firm also provides its market-making proposition as a service to clients for a set monthly fee. This means providing liquidity to markets that are yet to reach trading volumes sufficient to drive revenue for the market maker.
"A big chunk of our vision is to provide liquidity on the markets that need it the most," explained de Patoul. "On those markets, the ability to generate revenue on the spread is very limited so we work with a fee structure [to provide liquidity]."
Along with a focus on options and ramping up over-the-counter operations, the company is looking to use the funding to further build out its market making-as-a-service offer.
Much like its competitors, Keyrock also invests in companies and funds. It recently backed LeadBlock Partners new $150 million fund. LeadBlock is a European crypto venture fund set up by former Goldman Sachs employees.
Making a market
Still, Keyrock's raise comes at a time of pressure for its competitors. Both GSR and Wintermute recently came under the microscope for possible exposure to FTX, although ultimately said their exposure was manageable. Now, there's talk of a so-called "Alameda Gap" with the fall of trading firm Alameda Research, which was closely aligned with FTX, drying up liquidity in the crypto market.
Keyrock itself isn't immune from the FTX fallout. For instance, the FTX-acquired Liquid is a client of the company. On Nov. 20, the Japanese exchange suspended trading on its platform five days after halting withdrawals.
"We have a very proactive counterparty risk management and we were able to get our funds out of Liquid before withdrawals were suspended... so none of our funds or clients' funds were impacted," said de Patoul.
Mostly, de Patoul is positive about the increased apprehension in the markets, saying that the company hasn't had any downtime since FTX's collapse.
Meanwhile, it is also busy plowing ahead with expansion plans. With the funding, the Brussels-based company is planning to expand to Switzerland and Singapore next year with an office already in London.
In all these jurisdictions, it's looking to procure regulatory licenses and is currently in the process of obtaining licensing in the UK.
Midstage deals, such as the round raised by Keyrock, are an increasingly a rare occurrence in the current market. According to The Block Research, mid-stage deals fell approximately 63% from 30 deals in Q2 to just 11 last quarter.
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