New York’s Blossoming Crypto Scene
Ayesha Kiani and Edward Simendinger

New York City excels in a number of various fields, and financial technology is certainly no exception. With so many stock exchanges, investment banks, and trading firms to be found, the Big Apple provides an ideal environment for integrating technology into financial operations. For the past decade, much of this innovation has been in the form of mobile apps. But the landscape continues to change. In 2008, the still-anonymous Satoshi Nakamoto published a paper that introduced the world to Bitcoin, a decentralized digital currency built on a technology known as blockchain. Realizing the vast potential of the technology, visionary entrepreneurs and engineers are establishing blockchain startups throughout New York City.

LedgerX is an exchange for trading bitcoin and bitcoin options. Formed in 2014, it is the first cryptocurrency derivatives exchange to be approved by the U.S. Commodity Futures Trading Commission where it is regulated as a Swap Execution Facility, Designated Contract Market, and Derivatives Clearing Organization. In its first funding round in August 2014, LedgerX raised $4.5 million from investors such as Lightspeed Venture Partners and Google Ventures. In May 2017, a Series B funding round was held for $11.4 million, led by Miami International Holdings and Huiyin Blockchain Venture. Both firms later added $4 million in total to LedgerX in January 2020. LedgerX’s parent company, Ledger Holdings, also oversees LedgerPrime, a quantitative digital asset hedge fund that seeks superior risk-adjusted returns through its market neutral investment approach. Trading both spot and derivative instruments, LedgerPrime gained $12 million in investments in March 2019 in addition to $8 million more in commitments.

Other cryptocurrency exchanges call New York their home. Paxos began in 2012 in Singapore under the name itBit, but they have since moved to the United States. Their exchange—still known as itBit today—became the first crypto-asset trading platform to register with the New York State Department of Financial Services (NYSDFS) in May 2015. Paxos also offers several cryptocurrencies, like the PAX Standard. This is a fiat-backed stablecoin that is pegged to the US dollar at a 1:1 rate. Since its inception, Paxos has raised over $93 million in funding, including a $65 million Series B round in May 2018.

The primary competitor of Paxos, Gemini, was formed in 2014 also in New York City. Its eponymous exchange was the first in the crypto industry to gain System and Organization Controls (SOC) 2 Type 2 certification, and its trust company is also regulated by the NYSDFS. The trust company issues its own stablecoin, the Gemini dollar. Like the PAX Standard, the Gemini dollar is fiat-backed against the US dollar and built on the Ethereum Network following the ERC20 standard. Gemini is largely supported by its founders’ own venture firm, Winklevoss Capital.

Even outside of exchanges, funds, and coins, there are plenty of innovative startups fostering the blockchain industry. Chainalysis, a blockchain compliance company, was founded in 2014. Providing expertise in analysis and financial crime prevention, Chainlaysis helps its clients to take advantage of modern crypto technology in a safe and informed manner. In 5 rounds, the company has raised over $53 million, including a $30 million Series B round in February 2019. Major investors include Accel, Benchmark, Mitsubishi UFJ Financial Group, and Sozo Ventures. Lukka, which also began in 2014, takes on the accounting and auditing aspects of the blockchain world. The strong traditional finance background of Lukka’s leadership allows them to bridge the gap from the current financial landscape to emerging blockchain ecosystems, with solutions including crypto asset valuation and financial information automation. The company works with a variety of entities within crypto, from funds to firms to miners. Having raised over $23 million in funding, Lukka has received support from investors like Liberty City Ventures. Their most recent funding round was in August 2018 for $15 million.

With so many favorable startups coming into fruition, New York City’s crypto scene has flourished as of 2020. But it doesn’t end here—these companies will continue to grow and further evolve the industry. LedgerX plans to offer Ethereum spot and options contracts, and LedgerPrime aims to become a full asset management firm, introducing more products, market making, and venture operations. Paxos is developing a blockchain trade settlement project for traditional stocks, while Gemini strives to launch a bitcoin ETF. Chainalysis and Lukka will continue to match their technologies to future developments within the industry. And, of course, completely new ideas and businesses will also arrive to make their own impact on blockchain.