Bitcoin Wallet Start-Up Gets Record $25m Funding

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By Jerin Mathew | December 13, 2013 6:33 PM EST

Signs on window advertise a bitcoin ATM machine. (Reuters)

A start-up that offers digital wallet services to buy and sell bitcoins has secured a multi-million-dollar venture capital funding, in further indication that investors are highly optimistic about the prospects of the virtual currency.

Coinbase, a San Francisco-based tech started, received a $25m (£15m, €18m) funding from investors led by led Andreessen Horowitz, the most influential venture capital firm in Silicon Valley. The funding is the largest secured by a bitcoin start-up.

So far, the firm raised about $31m for its expansion.

Coinbase has more than 600,000 consumer Bitcoin wallets that are used to trade and store the increasingly popular virtual currency.

Consumers can use Coinbase to convert to and from other currencies and to pay for goods and services, while merchants can accept payments and convert currencies using the service. Furthermore, developers can build new services using Coinbase's platform.

"We are nearing a tipping point for broad adoption of Bitcoin - what we at Coinbase believe to be one of the most important shifts in the global economy in our lifetime," the company said in a blog post.

"This funding solidifies our position as the largest and fastest growing Bitcoin service in the U.S. We plan to use the funds to expand our team, continue to educate the market, and promote the mainstream adoption of Bitcoin."

Rising Popularity of Bitcoin

The peer-to-peer virtual currency was launched in 2008 and is traded within a global network of computers. They can be transferred without going through banks or clearing houses, reducing fees involved in the services significantly.

The value of the virtual currency surpassed $1,000 (£610, €726) recently, as more and more businesses and consumers used the currency to buy and sell products and services.

Meanwhile, investors used the coin as a gold equivalent to hedge against currency fluctuations. The currency is not backed by any government or companies.

Taking cues from the virtual currency's growth, US banking major JP Morgan has filed to patent an online payment system that is similar to Bitcoin.

Nevertheless, critics say that Bitcoins could be used for drug transactions, money-laundering and other illegal activities due to its near anonymity.

The European Banking Authority (EBA) has earlier warned consumers on the risks of virtual currencies such as Bitcoin that is continuously gaining popularity among investors and merchants.

Earlier in October, US regulators shut down an online marketplace using Bitcoins named Silk Road on charges of buying and selling illegal drugs and regulators seized $3.6m worth of Bitcoins.

China, the world's second largest economy, has also barred its banks from Bitcoin transactions, noting that the virtual currency has no legal status.

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