Mexico-based bitcoin exchange Volabit has received $250,000 in new funding, an amount the company says will be used to further establish itself in the digital currency market.
The capital comes from Bitcoin Opportunity Corp, a investment vehicle headed by SecondMarket and Bitcoin Investment Trust CEO Barry Silbert. Speaking to CoinDesk, Silbert said that he is confident Volabit can gain the users it needs to target the country's underserved consumer market, and that his firm's investment is a reflection of this belief.
Silbert told CoinDesk:
"Through the use of bitcoin, Volabit has the potential to radically transform the US-Mexico remittance corridor, one of the largest money transfer corridors in the world."
Notably, Bitcoin Opportunity Corp invested the same amount in Sweden-based cryptocurrency exchange Safello two weeks ago. At the time, that was the largest investment the firm had made outside the US.
Volabit launched earlier this year under the name Coincove, and was in beta until May. The exchange officially opened at that time with the stated aim of becoming the 'Coinbase of Mexico'.
Pivoting from remittance
Volabit was created by former Carnegie Mellon students Hannah Kim and Tomas Melis. As Coincove, it took part in the Boost VC incubator program and developed a focus on remittances services in Latin America.
This focus has shifted to a certain extent, as certain markets like Argentina and the US proved problematic. These regulatory challenges forced Coincove to rethink its approach and put remittances on the backburner.
Volabit co-founder Hannah Kim explained:
"While testing the first version of our service, we came to the realization that the cash collection infrastructure essential to a bitcoin-based remittance system was out of reach for bitcoin companies. This is in part due to the unclear regulatory environment, especially at a state-by-state level where money licensing laws apply."
The company is now keen to enter another niche in Mexico by providing affordable financial services to consumers that lack access to banking, though Kim says, here too, its target markets will require a unique approach:
"In-person, cash transactions for bitcoin may sound counterintuitive, but given that most of the target population do not have bank accounts and are risk-averse when it comes to sending money, it makes sense that they would not interact with bitcoins in the way that’s familiar to the bitcoin-savvy crowd."
She added: "The confluence of all these factors makes it very difficult, at this time, for anyone to develop a service that the target market would use."
Despite these challenges, Kim notes that Volabit is optimistic that advances on the US regulatory front will eventually allow the company to achieve its original goal of providing low-cost remittances.
In the meantime, Kim told CoinDesk that there are numerous opportunities beyond remittances for Volabit to seek, especially in Latin America:
"In Mexico, for instance, loans and credit are very expensive, credit card adoption is very low. [The lack of] access to competitive financial services inhibits the people living in countries with such conditions – the underbanked population in particular. Bitcoin, however, has the potential to transform this situation by increasing the choices available to those living in countries whose financial systems are very localized by connecting them to the global economy."
Volabit says the new investment will fuel product development efforts on these fronts. The company is currently developing a partnership with a peer-to-peer lending company to bring low-rate loans to Mexico.
Image via Volabit