Crypto Sleuthing Firm Elliptic Raises $23 Million in Fundraise Led by SBI

Blockchain forensics firm Elliptic has raised $23 million in a Series B funding round led by Tokyo-based financial institution SBI Holdings.

Announced Wednesday, the funding will help drive Elliptic’s Asia expansion, which includes a recently opened Singapore office and one in Japan that will open this week.

Tomoyuki Nii, executive officer for overseas investment at SBI Investment, who will be joining Elliptic’s board of directors, told CoinDesk that the Japanese company contributed $10 million to the funding round.

Also participating in the round were AlbionVC and existing investors including SignalFire, Octopus Ventures, and Santander Innoventures. (Ed Lascelles of AlbionVC will also be joining the Elliptic board.)

James Smith, CEO and founder of Elliptic, said Tokyo and Singapore were attractive locations not only because of their vibrant crypto communities but also because of the technologically-advanced regulators in those jurisdictions. Smith told CoinDesk:

“The Monetary Authority of Singapore and the Japanese Financial Services Agency are very well-versed in crypto. Japan has its own licensing scheme for exchanges; I think all that is really key to the growth of crypto because once you set the ground rules, then businesses can engage and innovate.”

Asia and beyond

Elliptic uses artificial intelligence and machine learning to trace and locate suspicious transactions on blockchains. Smith said Elliptic would be used across SBI’s suite of crypto businesses including its exchange, VC Trade, and custody business, and more broadly across SBI’s portfolio of blockchain companies and its banking and financial partners. 

“There’s going to be a strong market push together, where we will be working hard with SBI to capture the Japanse market and then the Asian market more broadly,” Smith added.

Founded in 2013, Elliptic previously raised $12 million over five seed and Series A rounds; the last round in December 2017 led by SignalFire raised $5 million.

Beyond Asia, Elliptic’s funding will also be used to develop monitoring services for Facebook’s Libra network and incipient central bank digital currencies (CBDCs).

On the subject of Libra, Smith said: “I think that could be a huge leap forward for the adoption of digital currencies more broadly and we’ll ensure that that’s supported on our platform.” 

XRP factor

As well as building a raft of crypto-facing businesses, SBI Holdings (previously known as Softbank Investment) is the largest external investor in XRP, the native cryptocurrency of the Ripple blockchain system. 

SBI has ambitious plans to build an XRP ecosystem in Japan where the coin has a sizable “hardcore [group] of fans,” according to SBI’s Nii. It’s also one of the reasons Elliptic was attractive to SBI since it happens to be the best blockchain sleuthing firm when it comes to XRP.  Nii told CoinDesk:

“The good thing about Elliptic is they can trace XRP – unlike some other anti-money-laundering (AML) platforms. We looked into those companies and actually I think Elliptic’s product was the best in terms of AML.”

Smith said that Elliptic is agnostic when it comes to which coins it monitors, but said many customers had asked about XRP, particular as his firm turned its attention to Asia. According to Smith, the Ripple ledger carries a high volume of data on-chain because of the way market makers are built into the system and this leads to lots of information about bids and offers on trades.   

“There are huge amounts of data in that blockchain; it’s probably the biggest blockchain by data, so much information is recorded on it. It’s also used in slightly different ways to some of the other cryptocurrencies, as in there are more financial institutions like SBI who are using it as part of their business operations,” said Smith.

Nii said SBI’s goal is to see XRP showcased as a global cryptocurrency at the 2020 Summer Olympics in Tokyo, adding:

“At the Tokyo Olympics, a lot of people will come to Japan. They will be shopping and travelling around and they will be able to use XRP in a secure way, protected by a platform like Elliptic.”

Elliptic founder and CEO James Smith at Consensus 2018, image via CoinDesk archives