Kiran Raj, chief strategy officer of Bittrex, spoke about blockchain regulations at the TF Blockchain Conference in Seattle. (GeekWire Photo / James Thorne) Founded by former Amazon and Microsoft security engineers, cryptocurrency exchange defies the Wild West reputation of the blockchain world with an appetite for government oversight. What does Bittrex want more than anything? “Regulatory clarity,” said , chief strategy officer at Bittrex, a Seattle-based company that allows users to buy and sell 200 different currencies, such as Bitcoin and Ethereum. Raj said that current regulations put U.S. startups at a disadvantage. “It’s really difficult to complete with an unlevel platform,” Raj said during a conference hosted by TF Blockchain Conference in Seattle. Raj said the lack of regulatory clarity in the U.S. has hurt innovation and forced startups, including Bittrex, to set up shop in Europe and elsewhere. Bittrex has a European branch that operates within the EU’s legal framework. “It’s not too late for regulatory clarity,” he said. “There are ways to get some of this innovation back to the U.S.” Raj is not alone with his request. Several members of the House of Representatives to SEC Chairman Jay Clayton, asking for plans to regulate cryptocurrency. This past November, Clayton said cryptocurrency ETFs (exchange-traded funds) won’t be approved until “market manipulation” concerns are addressed, according to . Raj’s perspective on regulation isn’t too surprising. He came to Bittrex after working at the Department of Justice and the Department of Homeland Security. Raj was at the DoJ when the FBI was working on taking down Silk Road, an online marketplace known for using Bitcoin to sell illegal drugs. Bittrex co-founders , and bring over 30 years of experience in security engineering at Amazon and Microsoft. “Our executive team is probably one of the oldest teams in crypto,” said Raj. But that experience has also given Bittrex the ability to help other blockchain companies play by the rules, such as by performing background checks on users to comply with anti-money laundering laws. Raj said the founders set out to build an exchange for blockchain-related products with security in mind. After starting Bittrex in 2014, the founders ran the exchange as a side business until leaving their previous jobs in 2016 and 2017. Raj was optimistic that regulated cryptocurrency exchanges will eventually win out over unregulated ones. “We’re hoping for a level playing field in the long term,” Raj said. “We know we can compete. We just have better technology.”
Paul Stahura. (Donuts Photo) Cryptocurrency has yet to catch on with mainstream consumers, in large part due to its volatility. Bitcoin, for example, went from $900 in December 2016 to nearly $20,000 one year later, before dropping back down to less than $4,000 this past December. Now some entrepreneurs have come up with a potential solution: stablecoin, a newer form of cryptocurrency that is pegged to a fiat currency such as the U.S. dollar and allows prices to remain more stable. The idea has caught the attention of , co-founder of domain registrar companies such as Donuts and eNom. He’s leading a $1.2 million round in Seattle startup , which today announced the Series A investment. Stably has developed its own stablecoin called StableUSD (USDS). When a user gives Stably $1 to buy its cryptocurrency, it mints one of its digital tokens. If someone gives Stably back that 1 USDS, it removes the coin from circulation and returns $1 from its cash reserve. The idea is to provide benefits of cryptocurrency — fast transaction speed; anonymity; etc. — with less fluctuation in value. Stably CEO Kory Hoang. (Stably Photo) “We’re simply turning dollars into digital dollars,” said CEO . Stahura, who co-founded Donuts in 2010 and remains chairman at the Seattle area company, said he sees many parallels between cryptocurrency — specifically dollar-backed tokens — and domain names. He said there was room for many companies such as eNom or GoDaddy who were selling the exact same product (.com names). “Same with dollar-backed tokens,” Stahura told GeekWire. “How hard can it be to sell a dollar for $1, especially if that dollar has more utility and lower fees, say, than a credit-card dollar?” Stahura pointed to , a startup backed by big-name investors such as Andreessen Horowitz and Founders Fund that recently passed $200 million in market capitalization for its stablecoin TrueUSD. “I invested because of the sort of familiar opportunity I see, plus I like the energetic and experienced team,” Stahura said. Hoang said that the most immediate use case of stablecoins is as a medium of exchange and a store of value for cryptocurrency traders. “Many exchanges don’t let you easily convert between cryptocurrency and traditional fiat currency,” he said in an email. “A cryptocurrency that has the same value as fiat (i.e. a stablecoin) fixes that, and gives traders more control over their investments, especially in times of volatility.” Hoang, who was previously an analyst at PitchBook, added that the long-term vision is to “enable fast and borderless payments, an efficient and cheaper solution for remittance, and a reliable alternative to money in developing or hyper-inflationary economies.” “The world that stablecoins can enable is one where you can buy a cup of coffee with cryptocurrency,” he said. Stably makes “flat income” on the cash reserve it holds that backs the USDS coins. The company employs nine people and expects to grow as a result of the funding. Other backers include 500 Startups, Beenext, and angel investors. Total funding to date is $1.7 million.
Merit CEO and co-founder Adil Wali. (Photo via Merit) You’ve probably read or heard about cryptocurrency in the news. Maybe your techie friend owns some Bitcoin. But you likely don’t own any digital currencies or let alone know how to obtain them in the first place. is on a mission to change that. Led by , a veteran entrepreneur who previously co-founded ModCloth (acquired by Walmart last year), the Seattle startup today unveiled its invite-only cryptocurrency called MRT. Wali helped come up with the idea for Merit after he and his co-founder wondered why so few people — even those within the tech industry — actually own cryptocurrency. They concluded that it was a problem around usability and accessibility. “If you want to create the world’s most-used cryptocurrency, what do you do? You have to make it simpler, you have to make it safer, and you have to make it a community,” Wali told GeekWire. Simplicity, safety, and community are the pillars of Merit — the third of which is perhaps most important, Wali said. Part of what makes Merit different from other cryptocurrencies, and what helps build community, is the invite-only requirement to obtain and own MRT. Wali explained that the anonymity associated with many existing cryptocurrencies enables hacking and theft too easily. He said Merit enables an “active stewardship model” and can track, across its blockchain, who is bringing in who to the community. Merit also changes the fundamentals of mining, or the process by which cryptocurrency is made via powerful computers. The company has created what Wali calls “proof of growth mining.” Since the service is invite-only, Merit can better assess and control who is rewarded with MRT. “What that enables is folks can actually mine merit without a computer,” Wali said. Another differentiator is how Merit allows its currency to be exchanged between owners. Rather than exchanging long 34-character public key strings, Merit built its own protocol. “We created an escrow on the blockchain that can hold money for you to claim it,” he said. MRT can be created and sent via SMS, Twitter, or various other communication tools. Merit also features decentralized vaults, password-protected transactions, and cancelable transactions. It is launching today without an ICO, as Wali said the company wants the community to determine price. Wali, who sold his most recent startup Fox Commerce to a blockchain commerce company, said his 10-person team is focused on making Merit accessible to just about anyone, regardless of technical knowledge. That feeds into the company’s vision of getting more people owning and using cryptocurrency. “Any currency is only as useful as the number of people who use it. If you can’t transact with it, what’s the point?” he said. “If we have dramatically less than a percent of the world’s population using crypto, it’s a really big problem when you think about the viability of the space at large.” Merit is bootstrapped, with the founders investing an initial $1 million in the company. The business model is split between Merit Labs and a non-profit called the Merit Foundation. A percentage of all MRT distributed goes into a genesis block, which is allocated across the foundation. “The idea of Merit is that with a decentralized launch and a longer-term approach, we are incentivized to make Merit valuable everyday,” Wali said. “With both the non-profit and for-profit, we’ll sell a little bit of Merit over time to continue operations in the organization. As the value of the currency goes up, then we’re able to do that more.” Cryptocurrency remains a hot — yet still relatively misunderstood — area of the startup world. According to PitchBook, 179 venture capital investors in the U.S. in at least one crypto startup deal in the past two years. noted this week that top VC firms Andreessen Horowitz and Union Square Ventures “are increasingly investing in public blockchains and cryptoassets broadly.” this week reported that the parent company of the New York Stock Exchange is working on an online trading platform for Bitcoin. That followed news of Goldman Sachs’ plan to open a Bitcoin trading unit. Some are still skeptical. Speaking on CBS this week, Bill Gates called Bitcoin and ICOs “one of the crazier speculative things.” “As an asset class, you’re not producing anything and so you shouldn’t expect it to go up. It’s kind of a pure ‘greater fool theory’ type investment,” Gates said. “I agree I would short it if there was an easy way to do it.” Gates previously weighed in on the subject during a in which he called cryptocurrencies “super risky.” Merit is one of several cryptocurrency/blockchain-related companies and organizations sprouting up in the Seattle area. There are startups like and a blockchain consulting group called ; and an investment group called that with blockchain company RChain Cooperative to invest a cryptocurrency equivalent of more than $190 million in blockchain apps and startups. “There is just phenomenally great talent here,” said Wali, who re-located to Seattle in 2016. “We have the ability to be one of the epicenters of cryptocurrency.”