Unchained Capital, a Bitcoin lender and custodian, raises $60 million following competitors’ collapse

April 18, 2023, 3:00 PM UTC
Unchained cofounders Dhruv Bansal and Joe Kelly in front of a blue background.
Dhruv Bansal (left) and Joe Kelly launched Unchained Capital in 2017.
Courtesy of Unchained Capital

The chill of Crypto Winter and the contagion of FTX, the now-bankrupt exchange, felled a series of crypto lenders in 2022. Unchained Capital, a Bitcoin financial services firm that lets customers put up Bitcoin as collateral for loans, is not one of them.

The company, which also provides Bitcoin custodial services, allows customers to buy Bitcoin, and has a Bitcoin IRA product, announced on Tuesday that it had raised $60 million in a Series B funding round led by Valor Equity Partners.

Other investors include NYDIG, Trammell Venture Partners, Ecliptic Capital, and Highland Capital Partners. A spokesperson for Unchained declined to provide the company’s implied valuation.

“We’re trying to show how, if you do it right, cryptocurrency lending is not like the Wild West of broken promises,” Dhruv Bansal, cofounder and chief strategy officer at Unchained, told Fortune in an interview.

The firm’s funding announcement is rare in a landscape where, in less than a year, a suite of crypto lenders once valued in the billions, including Voyager, Celsius, and BlockFi, declared bankruptcy as the bottom fell out of the crypto bull market in 2022. 

“Particularly in lending, [Unchained] has differentiated itself by minimizing risk to both the lender and the borrower,” Vivek Pattipati, a partner at Valor Equity who also will be joining Unchained’s board, said in a statement.

Founded by Bansal and CEO Joe Kelly in 2017, Unchained originally began as a Bitcoin custodial firm where users’ cryptocurrency was kept in “cold” storage, or on a hard drive not connected to the internet. As opposed to other crypto custodians, it has what it calls “collaborative custody,” or a system in which Unchained can’t access customers’ Bitcoin without explicit permission.

When Unchained launched a lending product where customers could secure cash if they offer up Bitcoin as collateral, it continued its cautious approach to deposits. Their “collaborative custody” system, cofounders Bansal and Kelly say, prevents rehypothecation, or when firms use customers’ collateral to give out loans, make investments, or pay out interest. This strategy can help financial institutions reap outsize rewards, or in the case of Lehman Brothers during the Great Recession, fail precipitously.

While Voyager, Celsius, and BlockFi collapsed for myriad reasons, each firm repurposed customer collateral, according to their websites and public documents. “Historically, that’s what our industry does,” Bansal, in reference to rehypothecation, told Fortune. “We’re contrarian. That’s not what we do.”

With their new injection of capital, Bansal and Kelly say that they’re looking to expand Unchained beyond Bitcoin custody, trading, IRAs, and lending to mirror the offerings of a traditional financial services provider. That means, for example, exploring the possibility of creating checking and savings accounts for customers. Bansal and Kelly are also looking to add to their current team of 87 employees in a “disciplined manner.”

“Instead of just being a Bitcoin company,” Bansal told Fortune, “we’re growing into a broader financial services company.”

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