Uphold
will add integrations with Ripple as part of Greg Kidd's $57.7
million investment.
Thomson
Reuters
Greg Kidd, an early investor in Coinbase and Twitter,
just invested $57.5 million toward Uphold, a currency
exchange that also trades in cryptocurrencies.
Uphold will use part of the money as insurance for its
users to guarantee that their deposits to the exchange are
protected in the event of a hacking incident.
Uphold will also use the funds to add integrations with
Ripple and begin trading in its cryptocurrency XRP, which is up
almost 4000% since it started trading in
April.
Greg Kidd has had big success with his early investment in
Coinbase, the cryptocurrency exchange now valued at $1.6 billion.
Before that, he was an early investor in Twitter and Square,
before their respective IPOs.
Now Kidd, a federal regulator turned entrepreneur, has invested
$57.5 million into Uphold, a
four-year-old currency exchange where traders can convert USD
into traditional currency like euros as easily as they can
cryptocurrencies like the red-hot bitcoin.
The investment was made through his firm, Hard Yaka.
A big part of where that funding will go: Adding support to
Uphold for trading in XRP, the red-hot cryptocurrency from
startup Ripple, making it one of the few mainstream currency
exchanges to do so.
Greg
Kidd
Greg Kidd
In a bigger-picture sense, Kidd's backing is all in the name of
making Uphold more secure than smaller crypto-exchanges, while
simultaneously positioning it as more innovative and experimental
than the $1.6 billion leader of the pack Coinbase, which has been
cautious about adding new cryptocurrencies to its exchange.
The biggest part of Kidd's investment is an insurance fund for Uphold's users,
which will be used to compensate users in the event of a
successful cyberattack on the company.
Hack attacks on cryptocurrency companies has become
increasingly commonplace, as many of these exchanges sit on
millions of dollars in digital assets.
Currently, Uphold only holds an
extra 1% on top of its users' deposits in reserves, according to
Kidd. This will go up to 20% with the investment, the company
said. While regulated institutions like banks are required to
have some money on reserve, cryptocurrency exchanges aren't
regulated in the same way.
"As an ex-regulator, that seemed
thin to me," Kidd said about Uphold's 1% reserves. "It's fine in
normal day-to-day operations, but there are a lot of hacks. And a
hack could put you out of business."
Kidd believes that guaranteeing
users that they will get their money back, even in the case of a
hack, could give Uphold a leg up on its competition, and prevent
it from collapsing completely if things do go wrong.
"It's to level the playing
field," said Kidd. "People just assume Coinbase has enough
money and can withstand a hack. But if you're a smaller exchange,
people are like, 'What kind of assurance do I have if something
bad happens?'"
Part of Uphold's mandate is to add XRP to its exchange
In addition to the reserves, 20% of Kidd's investment is a cash
deal to fund Uphold Labs, a
research facility that Kidd hopes will be as important to the
future of cryptocurrency as the legendary Bell Labs was to
telecommunications and computing.
As part of Kidd's investment,
Uphold Labs has a mandate for several projects, including
platform integrations with
the Ripple ecosystem, as well as GlobaliD — a universal
digital identity and payments company, which Kidd runs as
CEO.
Ripple, where Kidd worked as
chief risk officer from 2013 to 2015, is a growing
blockchain-based payments company that primarily works with
banks. Ripple offers its own cryptocurrency called XRP,
which has exploded in the last few weeks, and is trading at
around $1.22 — nearly 4000% from where it first started trading
in April.
A
Ripple price chart, current as of January 18th, showing the rise
of the currency.
Markets
Insider
Kidd said that Uphold plans to
add XRP trading in the near future. While XRP has had a lot of
attention in the last few weeks because of major price gains,
it's not available on certain mainstream trading platforms,
including Coinbase and Gemini.
Uphold's willingness to add
cryptocurrencies other than bitcoin, known in the community as
"altcoins," is one of the reasons that Kidd became interested in
the company.
"Out of all the thousands of coins, someone's going to have to
decide which ones are worth making markets in, which ones are
going to be compliant enough," Kidd said. "Market interests make
it worth their while."
Kidd also has a right to buy 10% of the company
The final part of the investment
is a warrant for a 10% stake in the company. This means Kidd has
a right to buy that much of the company at a set price for a
select period of time, though he retains the right to change his
mind and back out.
Adrian Steckel, CEO of Uphold,
said in a statement that the company will use the funding to
accelerate its product development, and add new assets and
"connectivity" to financial institutions and "blockchain and
Ripple-centric projects."
"This is a landmark
partnership for the crypto market. We have always provided our
Members with unparalleled transparency and safety, as well as the
greatest choice of currencies, now we’re also giving them
unprecedented asset protection,” Steckel
said.
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