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Coinbase Ventures joins $15M bet on new crypto exchange Mauve—a ‘response to the FTX fallout’

Violet cofounders Philipp Banhardt (left) and Markus Maier.
Courtesy of Violet

After offshore exchange FTX collapsed last year as a result of massive fraud, do we really need another crypto exchange? Markus Maier and Philipp Banhardt, founders of crypto compliance firm Violet, think that’s exactly what we need and have persuaded prominent investors to back their vision in the form of Mauve—a decentralized exchange they’ve described as the anti-FTX.

On Thursday, Violet announced that the likes of hedge fund Brevan Howard and Coinbase Ventures had invested $15 million in Mauve, which is slated to go live this summer.

“Mauve is a direct response to the FTX fallout, which has significantly eroded trust in crypto globally by misappropriating funds. The future is dependent on the continued adoption of noncustodial crypto exchanges,” said Maier in a statement.

In an interview with Fortune, Maier and Banhardt explained that Mauve will stand out for offering users the best aspects of decentralized finance—among them secure self-custody and modular design—along with all the stringent compliance checks of traditional banks and brokerages.

“The things that make DeFi magical are the noncustodial nature—you own your own assets—and the composability,” said Maier, adding that for the technology to really take off, it must incorporate regulatory safeguards like know-your-customer laws and anti-money-laundering tools.

DeFi, which describes a Lego-like set of autonomous software tools that let people trade assets without any central intermediary, first took off during the so-called DeFi summer when crypto traders engaged in a flurry of speculation on decentralized trading. While much of this activity turned on trading fly-by-night tokens that quickly collapsed, the period also confirmed the viability of DeFi exchanges like Uniswap that have since grown into billion-dollar enterprises.

But even as DeFi attracted plenty of media attention—including an Economist cover—it is still a small and niche field even within the crypto world.

Maier and Banhardt predict that Mauve will help change that by bringing in sophisticated institutional investors that are eager to engage with DeFi but are currently skittish about doing so owing to the lack of a robust compliance scheme.

Mauve, they say, will assuage those concerns by building in not only traditional know-your-customer tools, but security features like geofencing that will bar those in nations under U.S. sanctions from using the platform. Maier and Banhardt did not say when exactly the platform would be available to customers in the U.S.—which is in the midst of a fierce regulatory crackdown on crypto—but did say Mauve is in regular contact with regulators.

The pair also didn’t reveal how exactly Mauve, which is currently inviting users to sign up for its wait list, will make money, but suggested a future revenue model will be based around transaction fees. Meanwhile, parent company Violet is also seeking to license its compliance software to others in the crypto ecosystem.

According to Banhardt, Mauve will offer trading in assets like stablecoins and Ethereum, but the range of available assets will be determined by a customer’s nationality. Here is a view of the the trading platform:

Mauve has a pending registration in Grand Cayman, which has created a legal regime for decentralized exchanges. The other investors in Mauve’s $15 million funding round include BlueYard Capital, Balderton Capital, Ethereal Ventures, and FinTech Collective.

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