Deals

Safello, a Swedish Bitcoin transactor, rakes in $600,000, all hype aside

Above: Saffelo cofounder and CEO Frank Schuil

Image Credit: Frank Schuil

Don’t count Bitcoin down for the count. Just yet.

Safello, a Swedish Bitcoin online processing exchange headquartered in Stockholm and targeting the European market, has received $600,000 in seed money and is moving aggressively into the controversial marketplace.

“So far, we’ve transacted, in volume, more than $1 million in turnovers since last September,” all for the European market, Safello cofounder and CEO Frank Schuil told VentureBeat during a phone interview early Monday.

The nine-employee startup launched last August with $30,000 raised from private investors. Schuil said the latest infusion of capital will take the startup through the end of 2014. After that time, Safello will begin looking to officially raise a Series A round from institutional investors.

Investors in this round included Erik Vorhees, a Bitcoin investor, advocate and founder of Coinapult.com, and Zubair Quraishi of Nemcv.com. More than a dozen others also ponied up.

Safello touts itself specifically as an online crypto-currency market exchange where users can safely buy, sell, store, and use the nascent Bitcoin for commercial online purchases through commerce sites. Its staff includes encryption specialists, entrepreneurs, and Bitcoin experts.

Schuil pointed out his young team is working closely with Swedish and German government financial regulators to combat fraud and money laundering, two unwanted facets of other crypto-currency exchanges that have incurred the ire of prominent U.S. lawmakers and the FBI.

Safello transfers hard currency into Bitcoins and vice versa and then processes the transactions for online buyers and sellers. Safello prefers the European markets because some EU members, in particular Germany and Sweden, have devised workable legislation on how the virtual currency is taxed and used.

Currently, Bitcoin transactions are not subject to the EU’s dreaded Value Added Tax, long considered by many European business and extreprenuers as an impediment for conducting business, Schuil said.

“The European landscape is a lot different from the U.S. market, and Sweden and Germany have been very explicit on how it is being taxed. Even so, both European and U.S. markets have been relatively pretty positive about regulating the market without quashing innovation,” Schuil said.

That may change on the U.S. side.

Democratic New York and West Virginia Senators Charles Schumer and Joe Manchin came down hard on Bitcoin in a 2011 letter to U.S. Attorney General Eric Holder, saying the Bitcoin online marketplace Silk Road was being used to buy and sell illegal drugs such as heroin and ecstasy.

Indeed, the FBI arrested Silk Road founder Ross William Ulbricht last October in San Francisco, charging him as the owner of the Silk Road marketplace. Charges against Ulbricht included narcotics transactions, money laundering, murder-for-hire schemes, and computer crime.

After the arrest, the feds also seized 144,000 Bitcoins worth $28 million they say belonged to Ulbricht.

While the site remained online during the crackdrown, all the Bitcoins in its escrow accounts, valued at $2.7 million, were reported stolen.

As its stands, people commonly buy and sell Bitcoins through exchanges, although users must have an account — a digital Bitcoin wallet where their money is stored — to conduct transactions.

Safello has steep competition, and Schuil pointed to two of them:  Scandanavia-based Payward/Kraken, which provides secure Bitcoin trading, and Slovenia-based Bitstamp.

Japan-based Mt. Gox is a Bitcoin transactor, as are Bitcoin.de in Germany. Both companies have deeper pockets than Safello.

For Schuil, Bitcoin is quickly emerging as the fastest crypto currency unit on the market. And it’s here to stay, he told VentureBeat.

“Whether its Bitcoin or the hundreds of other crypto currencies out there, we feel its the most time-tested online currency protocol out there,” he said.

VentureBeat writer Rebecca Grant helped with this post.

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