Coinbase and Cruise Alumni Raise $15 Million for Crypto Compliance Startup CipherOwl

Venture firms General Catalyst and Flourish Ventures led the seed round, with participation from investors such as Coinbase Ventures and Enlight Capital, among others. Liu Liang, co-founder and CEO of CipherOwl, declined to reveal the valuation his company raised in its round.

“As we see a shift from the cash ecosystem to a more on-chain payment infrastructure, there will need to be the same — or even more complex — compliance and fraud systems,” said John Onwuwalu, director at Flourish Ventures. luck.

Cryptographic compliance – with artificial intelligence

There is already a crowded field of companies monitoring transactions involving cryptocurrencies such as Bitcoin and Solanaincluding established brands like Chainalogy, Elliptic, and TRM Labs. These companies are becoming more in demand such as major banks JPMorgan Chase and Morgan Stanleywhich has historically been one of the most conservative financial institutions, is delving deeper into the cryptocurrency space.

However, Liang and his co-founder Ming Jiang believe they can carve out a niche in a competitive field. The duo are longtime colleagues who first worked together at Cruise, a self-driving car startup GM It was purchased in 2016 and then closed in December. After Cruz, the two software developers moved to Coinbase, where they worked on building the cryptocurrency exchange’s compliance program.

In 2024, Liang and Ming decided to leave Coinbase and start their own compliance firm. In what Liang calls the “dark forest” of cryptocurrencies, where pseudonymous transactions race through obscure blockchains, the duo want their startup to act as a sentinel, or “owl,” looking out for their customers. (That’s how the two arrived at CipherOwl, the name of their startup.)

Since December, when the duo first started selling their software, they have attracted big-name clients. They include Coinbase, cryptocurrency exchange OKX, as well as public sector clients, including law enforcement, whose identities Liang and Ming said they could not publicly reveal.

Liang and Ming said CipherOwl outpaces current employees with just eight employees, an artificial intelligence company. While all cryptocurrency compliance firms use generative AI to speed up their operations, CipherOwl has integrated it into its operations from the ground up, said Mark Bhargava, managing director at General Catalyst.

“I just expect that the AI ​​team implementing these improvements is more likely to benefit from all this new technology rather than some incumbent,” he said. luck.

For example, after CipherOwl flags a transaction, the startup uses AI to create an easy-to-read report that explains why the transaction was likely flagged and gives human reviewers a head start in diagnosing why a cryptocurrency transfer is suspicious.

“It’s less expensive and more efficient,” Miang said.

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