TRM Labs: A Cryptocurrency Risk Management Platform

We believe firmly that cryptocurrencies are going to be an increasing share of the world economy. However, where there is novel economic activity, there are also inevitably criminals looking to exploit new systems. As such, I’m very happy to be able to announce our investment in TRM Labs, which is building a cryptocurrency risk management platform and giving financial institutions the tools they need to detect fraud and prevent money laundering.

Historically, there has been a misconception that Bitcoin is an anonymous network, when in fact it is pseudo-anonymous, with machine readable addresses standing in place of real identities. It turns out it is often possible to penetrate this pseudo-anonymity and determine who is sending Bitcoin to whom, but this is a hard technical problem. TRM uses their technical expertise to ingest all the data from blockchain networks, make sense of it, and present it to their customers in an understandable way.

One of TRM’s key insights is that risk management for blockchain networks is no longer just a problem for financial institutions that deal with the blockchain directly. Rather, as cryptocurrencies become commonplace in our economy, all financial institutions are going to need a solution for blockchain risk management, because their customers are increasingly going to be using these cryptocurrencies.

In TRM, we found a crypto native team with a strong execution record and extreme emphasis on customer development. Esteban and Rahul worked together for years in their previous roles at McKinsey. They are exactly the type of plain speaking, product-focused founders we love to back at Initialized. In our conversations with them, the degree to which they had done their homework on the problem, the market, and their customer needs was remarkable.

We’re excited to be investing alongside Blockchain Capital and Paypal in a $4.2M seed round. Both are strong partners to have on-board as TRM uses the funds to build out their team and product. It’s going to be a lot of fun for us all to watch these founders attack this market, given their mission to ensure that cryptocurrencies fulfill their potential to democratize economic systems without also enabling bad guys in the process.