Solidus Labs, an Israeli start-up that monitors cryptocurrency risk and ensures market integrity, has closed a $45 million Series B funding round led by Liberty City Ventures.
The round also featured investment from notable figures from the American financial field, such as former US acting comptroller of the currency Brian Brooks; Plural Ventures, a venture community including among its members former CFTC Christopher Giancarlo and former CFTC chief innovation officer Daniel Gorfine; and former New York State Department of Financial Services executive deputy superintendent, Matthew Homer.
There has been mounting regulatory and public pressure to protect crypto investors and improve market integrity standards and investor protection in digital asset markets in recent months as crypto and decentralized finance (DeFi) adoption has increased.
Some estimates place the total value locked in DeFi at more than $200 billion in the beginning of 2022 – but on the other side of the (bit)coin, there has been a surge in fraud, manipulation and market abuse.
As such, Solidus has reported massive demand for its solutions, and has more than quadrupled its team since the beginning of 2021.
In March 2022 the firm unveiled its all-in-one crypto-native risk monitoring suite, “HALO,” which was built to address the new challenges presented by crypto and DeFi and to enable institutional and mainstream adoption.
HALO currently services dozens of leading crypto and DeFi platforms, financial institutions and regulators, monitoring more than one trillion trading events per day in more than 150 markets and protecting upwards of 25 million crypto market participants and investors.
According to Asaf Meir, Solidus’ founder and CEO, the future of decentralized finance and the theoretical next stage of the internet – deemed “Web3” – hinges on the presence of solid risk management and security.
“For Web3 and the DeFi economy to truly fulfill their massive potential, there’s a need to mitigate new risks – both in terms of liquidity enablement and on the consumer and investor protection side,” he said.
“This is where Solidus’ crypto-native solutions come into play, and the reason we’ve been experiencing a 560% year-over-year revenue increase. The additional funds will allow us to support the growing cohort of financial institutions looking to expand into the DeFi space, accelerate the deployment of our threat intelligence capabilities, and expand our R&D to solve a fast-growing array of DeFi specific use-cases and needs,” added Meir.
In February 2022, Solidus initiated the launch of the Crypto Market Integrity Coalition (CMIC) – a group of 30 leading crypto firms including Coinbase, Gemini and Robinhood – and pledged to prevent market manipulation and advance safe crypto markets.
In July 2021 the firm hired ex-Consumer Financial Protection Bureau director Kathy Kraninger as VP regulatory affairs, adding to a veteran crew of executives, investors and advisers including senior former financial regulators like former CFTC chairman Christopher Giancarlo, former SEC commissioner Troy Paredes, and leading entrepreneurs including StarCompliance founder Marc Epstein, International Securities Exchange founder David Krell, and AngelList founder Naval Ravikant.
“Solidus’ experience in traditional finance, combined with years of crypto risk monitoring, formidable regulatory relations and deep understanding of the digital asset and DeFi landscape today makes the company best-positioned to enable the potential, while addressing the evolving risks,” said Emil Woods, partner at Liberty City Ventures. “How fast crypto and DeFi will be able to grow depends on how effective are critical guardrails, checks and balances – and Solidus is consistently leading the market in providing innovative, crypto-native market integrity solutions.”
The cryptocurrency market has seen dramatic movement this month as the price of bitcoin – which could be seen as the standard indicator for the entire market – plummeted by nearly 25%, from $38,400 to $29,700 in only 15 days. As bitcoin fell, so too did many other common crypto assets, such as ethereum (-28%), litecoin (-29%) and solana (-41%), representing a significant decrease in the value of the market as a whole.
Some experts have chalked up this huge dip to low liquidity: as central banks have increased their rates, crypto activity has seen a decline – and in turn, so too have prices. While there is little chance that this is the end of the crypto market, it could mean the beginning of a bearish market, at least until investors adapt to the new playing field.
An example of the critical effects of banks’ increased trading rates can be found in TerraUSD, a “stablecoin” cryptocurrency intended to match the price of one US dollar. Beginning March 9, following a NASDAQ plunge, the price of TerraUSD diverged greatly from its intended $1 value, collapsing to $0.20 in just six days, leading investors to dump their holdings, wholesale. In just six days the stablecoin, considered one of the largest in the market, collapsed from a market cap of over $18 billion to $2 billion.
“Interest rates increased, crypto markets dumped,” said noted crypto community expert Wendy O in a market-analysis TikTok.
“Personally, I feel [bitcoin] may bottom out at $29,000 again and get a pump in July. This is why you should have a bullish and bearish plan because the markets can switch super-fast.”