Passion Capital backs Coinfloor

The announcement of the early-stage funding by Passion and Hinrikus is in conjunction with the launch of Coinfloor's website, which is now open to account registration. Trading is believed to be scheduled to begin on 5 November.

Bitcoin is a decentralised, peer-to-peer (P2P) digital currency or "cryptocurrency" that was created as an alternative to fiat currency. It has a capped number of coins in circulation – once 21 million bitcoins have been distributed, issuance of new bitcoins will cease. Bitcoin is currently unregulated due to regulatory authorities not regarding it as legal tender.

The cryptocurrency's value is determined by supply and demand and has fluctuated wildly throughout 2013. In April the currency reached its peak of $266 per bitcoin, having started the year with a value of just $13 per coin. The price per coin then plunged to $70 in June, before climbing back up to $140 in October, only to fall again to $100 when the FBI seized approximately 1.5% of all bitcoins in circulation (144,000 bitcoins, believed to be worth $28.5m) following the shutdown of online black market Silk Road, which exclusively used bitcoins for transactions.

Passion Capital is a London-based venture capital firm that invests in digital media and technology start-ups. The firm recently took part in a $3.8m funding round for Narrative, a Swedish developer of micro-camera technology, alongside True Ventures and LDV Capital. It also backed EyeEm, a Berlin-based mobile photography online marketplace, in June alongside Earlybird Venture Capital and Wellington Partners. The consortium injected $6m into the business.

Company
Founded in 2012 and headquartered in London, Coinfloor is a bitcoin exchange that allows people to buy and sell bitcoins on an open trading floor. The company aims to differentiate itself from other bitcoin exchanges by focusing heavily on asset security and compliance with anti-money laundering regulations, the latter of which is regarded as a major problem with bitcoin.

Coinfloor operates under a cold storage policy, meaning that bitcoins are stored offline and encrypted with private keys that are then split between several USB devices and stored in various deposit boxes in underground vaults across a number of locations. The premise behind the cold storage system is to prevent hackers from stealing any bitcoins if they successfully broke into Coinfloor's servers.

The company is also conducting full electronic "know your customer" (KYC) and anti-money laundering (AML) checks on its users and traders to verify their accounts. Coinfloor is currently unregulated, like all bitcoin exchanges, but has adopted KYC/AML procedures and is in talks with UK and EU authorities in the event of the UK's Financial Conduct Authority ever choosing to begin regulating the space.

People
Coinfloor was founded by CEO Mark Lamb and COO Amadeo Pellicce. Stefan Glaenzer is a partner at Passion Capital.

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