The majority of world trade is conducted in US dollars. This presents problems for companies in countries that have a shortage of dollars. Blockchain startup XREX was created to assist cross-border businesses in emerging countries with faster transactions using products such as a payment escrow and crypto-fiat platform.
Today, the Taipei-based company announced that it raised $17 Million in pre-Series A funding from CDIB Capital Group. SBI Investment, a subsidiary of SBI Holdings, Global Founders Capital and ThreeD Capital participated in the oversubscribed round as well as participation from Systex Corporation. XREX's most recent funding was a $7 Million seed round in 2019.
The new round will allow you to apply for financial licences in Singapore, Hong Kong, and South Africa. You can also partner with financial institutions such as banks and payment gateways.
TechCrunch spoke to Wayne Huang, co-founder of XREX and chief executive officer. We wanted to create a regulatory-friendly captable. It is difficult for startups like ours to raise money from public and private companies. But, as you can see, we did it deliberately and were successful.
In 2013, Huang sold his previous startup, Armorize Technologies, an anti-malware SaaS software developer, to Proofpoint. Armorize was a source code analysis company that found vulnerabilities. Many of its clients were from Bangalore and Chennai so Huang spent much of his time there.
There were many cross-border money transfer problems. Huang stated that it seemed almost impossible to stop. These issues were not something we experienced growing up in Taiwan and the U.S. That was the seed that was planted, and then Satoshi Nakamoto published the bitcoin whitepaper, which was huge for cybersecurity experts.
He started to think about how blockchain could support financial inclusion in emerging countries like India. Huang teamed up XREX cofounder Winston Hsiao to create BTCEx-TW, Taiwan's first bitcoin exchange. Hsiao was born in India, and he founded Verico International to export Taiwan-manufactured electronics and semiconductors to other countries. He is also well-versed in cross-border trade issues.
XREX Crypto Services gives merchants in low U.S. Dollar liquidity the tools to trade digital fiat currencies. They need to have quick access to the U.S. Dollar and be able pay it out quickly enough to secure the commodities they want to import. That's what we are trying to solve.
Merchants and customers can sign up for the XREXs wallet. This wallet includes Bitcheck, a commercial escrow company. Huang explained that it works in the same way as a standing letter of credit from commercial banks. Buyers can use it to ensure they are able to pay. Bitcheck uses stablecoins, such as USDT or USDC, digital currencies that are tied to the U.S. Dollar.
Merchants pay suppliers stablecoin and XREX escrows funds until the supplier submits proof of shipment. At that point, it moves the payment. XREXs cryptofiat exchange lets users convert USDT or USDC into U.S. Dollars. They can also withdraw money and deposit via the platform.
Part of XREX's funding will go to expanding its fiat currency platform. Huang stated that it does not plan to add too many cryptocurrencies as they were not designed for crypto traders. They are going to use whatever the U.S. Complimentary of the Currency has deemed a stablecoin.
XREXs partners include anti-money laundering and compliance providers such as Sum&Substance, CipherTrace and TRISA. Part of XREXs funding is used to improve its security and compliance features. This includes Public Profiles which are mandatory for customers and the user Reputation Index that increases transparency.
Ryan Kuo, head of CDIB Capital Innovation Fund, stated that CDIB was an early investor at XREX. We were impressed by the company's rapid revenue growth and compliance record and decided to double our investment to lead this strategic round.
