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International Bitcoin Exchange Buttercoin Raises $1M to Revamp RemittanceLora Kolodny
August 19, 2013
(c) 2013 Dow Jones & Company, Inc.
Four-employee financial tech startup Buttercoin has raised $1 million in seed funding to scale its international bitcoin exchange, co-founder and Chief Executive Cedric Dahl told VentureWire.
Buttercoin's investors include Google Ventures, Y Combinator, Initialized Capital, Floodgate and Reddit co-founder Alexis Ohanian.
Bitcoin is a virtual currency introduced in 2009 that recently gained regulatory scrutiny and legitimacy in the U.S. Federal regulators have placed bitcoin exchanges under the same requirements as traditional money-transmission businesses, and a Texas judge this month recognized bitcoins as a legal currency.
On August 16, Bitcoins were selling on the largest existing exchange, Mt. Gox, for $108 to $112. Buttercoin will compete with Mt. Gox and a range of money-transmission businesses, like Xoom Corp ., PayPal and others.
Currently participating in the Silicon Valley accelerator Y Combinator, Palo Alto, Calif.-based Buttercoin, which is operated by Digital Currencies FinTech Co., partners with banks, credit unions and licensed financial services businesses around the world to offer remittance through bitcoins.
Here's how it works: People who want to send money to another country log onto a bitcoin exchange on a financial services firm website, "powered by" Buttercoin. They use their local currency to buy bitcoins, which they can then send instantaneously across borders.
Switching from one currency to another through bitcoin, the financial services firm may gain some value from arbitrage, but that part would remain invisible to the consumer sending the money, Mr. Dahl said.
"The benefit to a financial service company that becomes our partner is that [Buttercoin] gives them access to fee-free, bitcoin buying and selling," he said, adding that the company charges the end-user a 0.1% fee per transaction to use the service and splits that fee with its partner.
At this point, Buttercoin has not struck any partnerships with banks but has inked several deals with remittance companies in India, Canada, Brazil and Hong Kong.
Seed investor Mr. Ohanian said that Buttercoin eliminates foreign exchange risk for financial services firms. Based on this feature alone, he says, Buttercoin has the potential to massively disrupt the international remittance industry.
Mr. Dahl says he wants to ultimately help hardworking immigrants transfer money back home to their families overseas, without giving up a high proportion to entities like PayPal or Western Union .
The market for remittances hit $513 billion in 2011, according to data from the World Bank .
Venture investors have been increasingly interested in bitcoin businesses. Union Square Ventures invested in Coinbase, a startup that allows people to store bitcoins in a digital wallet and transact with merchants who accept the currency. Bit Angels, an angel network and incubator focused on early-stage bitcoin and virtual currency startups, raised 53,620 bitcoin in order to fund virtual currency startups.
Boost VC launched a specialized fund and incubator program to back and support Bitcoin startups. Lightspeed Venture Partners , Rothenberg Ventures, the Bitcoin Opportunity Fund and Ben Davenport all invested in the fund.
http://buttercoin.netWrite to Lora Kolodny at
lora.kolodny@wsj.com. Follow her on twatter at @lorakolodny
