Blockchain and Crypto
Major global banks back R3 with $100 million
- R3 CEV has raised more than $100 million from 40 banks including Barclays, HSBC, UBS, TD and Wells Fargo
- The first two tranches of the Series A round were made available R3 members only; the final tranche will be open to other institutional investors
Bank consortium R3 CEV has secured $107 million in the second portion of its series A funding round -- one of the largest blockchain funding rounds to date. R3 said it is using the funds on the deployment of its technology and to develop more strategic partnerships. The company endured some minor PR blows last year when some of its high profile members defected from the consortium, including Goldman Sachs, Santander, Morgan Stanley, National Australia Bank and as of last month, JPMorgan Chase. Bank of America Merrill Lynch, Bank of Montreal, Bank of New York Mellon, Barclays, BBVA, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, HSBC, ING, Mizuho, Royal Bank of Canada, Societe Generale, TD Bank, The Bank of Tokyo-Mitsubishi, The Northern Trust Company, The Royal Bank of Scotland, U.S. Bank, UBS and Wells Fargo are among the 43 member participants. R3 made the first and second portions of the round open to the consortium’s bank members only; the third and final part will also be open to non-member institutional investors. R3 expects to reach at least $150 million when the third tranche closes. “Our strength has always been our global reach, helping people do business within and across borders all over the world,” said Kaushalya Somasundaram, head of fintech strategy and partnerships at HSBC. “We’re keen to explore ways to make financial markets, and payment and trade networks more connected, more accessible and more secure,” which HSBC plans to achieve through the collaborative approach at the heart of R3’s model. The company will focus its technology deployment efforts on Corda, its blockchain-like distributed ledger for exchanging financial agreements among financial instituttions; as well as its infrastructure network for partner built financial applications. R3 did not disclose its valuation or its investment framework, in which interest initially rose in November members began dropping out of the group. Santander said it would refocus its blockchain efforts on other bank co-led projects -- like Utility Settlement Coin and the Global Payments Steering Group -- and JPMorgan, which is also involved in other bank blockchain collaborations, wanted to pursue a technology path that’s “at odds” with R3’s strategy. But Goldman reportedly backed out when conditions of the investment framework changed. R3 initially sought to raise $200 million from its members in a round that would have granted them 90 percent of the firm’s equity with the remaining 10 percent going to R3 itself. That deal was renegotiated in the fall to a $150 million target that would give members a a 60 percent equity stake and R3 the remaining 40 percent. Goldman allegedly sought more leverage in the deal and a board seat. The funding announcement comes a day after R3’s rival Enterprise Ethereum Alliance, the R3-like group building solutions with the open source ethereum, revealed it has exploded in new members -- bringing its total membership to 116 from 30.