Coinbase Ventures joins $15M stake in crypto exchange Mauve
Violet co-founders Philipp Banhardt (left) and Markus Maier. Courtesy of Violet
After the offshore exchange FTX collapsed last year due to massive fraud, do we really need another crypto exchange? Markus Maier and Philipp Banhardt, the founders of crypto compliance firm Violet, believe this is exactly what we need and have persuaded prominent investors to back their vision in the form of Mauve – a decentralized exchange they have described as the anti-FTX.
On Thursday, Violet announced that hedge fund Brevan Howard and Coinbase Ventures had invested $15 million in Mauve, which is scheduled to go live this summer.
“Mauve is a direct response to the FTX fallout, which has significantly eroded confidence in crypto globally by misusing funds. Its future depends on the continued use of non-custodial exchanges,” Maier said in a statement.
In an interview with Fortune, Maier and Banhardt explained that Mauve will set itself apart by offering users the best aspects of decentralized finance – including secure self-sharing and modular design – along with all the strict compliance controls of traditional banks and brokerages.
“The things that make DeFi magical are the non-custodial nature — you own your own assets — and the composability,” Maier said, adding that for the technology to really take off, it needs to include regulatory safeguards such as know-your-customer laws and anti-money laundering tools.
DeFi, which describes a Lego-like set of autonomous software tools that allow people to trade assets without any central intermediary, first took off during the so-called DeFi summer when crypto traders engaged in a flurry of speculation about decentralized trading. While much of this activity revolved around the trading of fly-by-night tokens that quickly collapsed, the period also confirmed the viability of DeFi exchanges such as Uniswap that have since grown into billion-dollar businesses.
But even though DeFi attracted a lot of attention in the media – including one Economist cover—it’s still a small and niche field even within the crypto world.
Maier and Banhardt predict that Mauve will help change this by bringing in sophisticated institutional investors who are eager to engage with DeFi but are currently intimidated to do so due to the lack of a robust compliance regime.
Mauve, they say, will alleviate those concerns by building in not just traditional know-your-customer tools, but security features like geofencing that will prevent those in nations under U.S. sanctions from using the platform. Maier and Banhardt did not say exactly when the platform would be available to customers in the US – which is in the midst of a fierce regulatory crackdown on crypto – but said Mauve is in regular contact with regulators.
The pair also did not reveal exactly how Mauve, which is currently inviting users to sign up for its waiting list, will make money, but hinted that a future revenue model would be based on transaction fees. Meanwhile, parent company Violet is also looking to license its compliance software to others in the crypto ecosystem.
According to Banhardt, Mauve will offer trading in assets such as stablecoins and Ethereum, but the selection of available assets will be determined by the customer’s nationality. Here is an overview of the trading platform:
Mauve has a pending registration in Grand Cayman, which has established 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.
