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State Street digital asset custody partner Copper raises $196 million. Plans to return some?

digital asset custody

UK digital asset custody firm Copper has raised $196 million in Series C funding. While the filings were only made in the last few days, the bulk of the money was received last year. Earlier this year it was reported that Barclays Bank is one of the investors. However, the startup didn’t formally announce the funding and a recent move by the company indicates it may plan to return some money to investors. 

State Street Digital previously announced that Copper would be its technology partner. 

The UK’s regulator, the FCA, which provides AML licenses, failed to grant one to Copper, which withdrew its application in late June after joining the Swiss self-regulatory organization, VQF. At that point, it moved customers that fell under the UK registration to its Swiss subsidiary.

Regarding the funding first reported by Bloomberg, according to the company’s accounts, it received $127m out of $181 million last year, which was initially treated as a loan. Additionally, a $15 million loan was converted as part of the Series C. 

Plans to return money to investors?

In a relatively unusual move, the company has just decided to convert £100 million ($111m) of its share premium reserve. This is usually done to enable a loss-making company to distribute dividends. 

We’ve asked Copper about the purpose but didn’t receive a response in time for publication.

Sources told us this was just an accounting rejig.

The accounts stated that the money advanced last year had some strings attached to the completion of the Series C. This is complete speculation, but it’s possible certain investors wanted some of the money back. Or perhaps it’s in order to compensate employees without diluting their shareholdings. Another potential reason is that investors needed to book a return to report to their limited partners.

As a custody firm, Copper does not show its clients’ digital assets on its balance sheet. Although in the United States, the SEC wants companies to do so. At the end of last year, Copper held £3.3 million of its own digital assets. Suppose it held onto them, given the state of the crypto markets, that will be reflected in losses next year. In 2021, the company made a loss of GBP 10.72 million ($11.9m).

Meanwhile, two major TradFi institutions went live with digital asset custody this week: BNY Mellon and the SIX Digital Exchange.

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