New Crypto-based Financial Company Secures $100 Million Funding

A new cryptocurrency financial company, Amber Group, has raised $100 million in funding. This funding round places the Hong Kong-based start-up at a valuation of $1 billion. It was led by investment bank China Renaissance, with participation from other high-profile investors including New York-based Tiger Global Management. Other existing investors, including Coinbase's venture arm, were also involved.

The latest funding round adds to the increased funding startups in the cryptocurrency industry have been experiencing.

In the second quarter of 2021, the total venture capital investment into cryptocurrency and blockchain start-ups stood at $14 billion. This is a major increase compared to the $600 million recorded in the same period last year.

Interest in crypto particularly in bitcoin, went up this year as institutional investors and large corporations hopped on the digital currency bandwagon. Payment company Square and EV-maker Tesla are among the companies that have purchased a large quantity of Bitcoin. With their founders, Jack Dorsey and Elon Musk, being avid Bitcoin enthusiasts.

However, despite reaching a peak of $64,829.14 in April, the number one coin has plunged by nearly half.

Business Model

Amber Group has typically sold products to institutional investors and wealthy individuals including algorithmic trading and lending products.

Rather than just being a crypto exchange that lets users trade individual digital coins, the company's CEO, Michael Wu said the company is bringing a "private banking experience to the everyday customer."

Wu says the company offers investors a variety of different cryptocurrency products to invest in, and that it is on track to book revenue of $500 million by the end of this year and has been profitable "since inception."

According to CEO Wu, about 70% and 80% of the company's revenue comes from net interest margin — which is a measure of lending profitability.

Amber Group takes on customers' deposits and offers them an interest rate. This money is lent out from a pool of deposits to other entities at higher interest rates, making the company. 15% of revenue comes from trading fees.

Wu revealed that the company is working to target individual investor customers, as the bulk of its current customers are institutional investors.

"We don't advocate heavy speculation or high use of leverage, rather we want our customers to be more long term, focus on risk management and get stable and attractive yield," Wu said.

This new funding raised will be channeled towards "aggressive" hiring and making strategic acquisitions in areas such as cybersecurity.

According to Wu, the company is on the lookout to acquire other companies that have regulatory licenses in certain jurisdictions, enabling Amber Group to enter a new market.

Regulation around cryptocurrency investing varies around the world.

"I think regulation is always a challenge for this industry because it's a very global industry," Wu said. "It's always about staying ahead or at least staying aware of the different regulations. We always take a very conservative approach to that."