Payward, Inc., the owner of US-based digital currency exchange Kraken, announced on 25th March that it has raised $5m in new capital as part of a Series A fundraising round.
Kraken, first launched in September 2013, allows users to buy and sell bitcoin, namecoin, dogecoin and Ripple, among other digital currencies.
The round was led by Hummingbird Ventures, an early-phase venture capital firm that has invested in digital properties like Dubai-based price comparison platform Souqalmal.com and object-based software defined storage service provider Amplidata in recent months.
The funding will be used by Payward to strengthen Kraken’s position in the global digital currency market.
Conservative approach
Jesse Powell, CEO at Kraken, told CoinDesk that the company plans to deploy its new funding to meet key development and regulatory needs.
“We’re taking a very conservative approach to [regulation and compliance], and this funding allows us to continue to be conservative and to be compliant to the law, and we think this is just the best approach in the long term.”
The news comes as the US government issued new guidance on digital currencies. The Internal Revenue Service announced on 25th March that it would treat them like property, making them subject to capital gains tax treatment.
Given the increased burden of compliance requirements, Kraken is taking its approach to these matters seriously.
“We’re really excited, we’ve been putting the round together for a long time, the funding is going to go to development, regulatory stuff, getting all the licenses in the United States and around the world. A lot of it is going to go into legal.”
Pressure on exchanges
Earlier this week, Kraken announced that it had passed a verifiable proof of reserves audit. The test was carried out in order to bolster confidence in the exchange’s ability to meet customer balance demands.
During the interview, Powell went on to speculate that some exchanges may face greater scrutiny in the months ahead.
“This has been more of an issue lately with exchanges like Gox going down. We may see an increasingly greater heat on these unlicensed money transmitters and these exchanges that are a little more shady.”
In the wake of the collapse of Mt. Gox, exchanges have faced financial difficulties. China-based Vircurex froze withdrawals this week, in just the latest in a string of high-profile bitcoin exchange issues.