Crypto VC Paradigm bets $13.5 million on stablecoin startup Crown in first Brazil investment

Premier crypto venture capital firm Paradigm, which has invested billions of dollars in blockchain startups, has made its first investment in Brazil, a nation seen as having significant potential for digital asset adoption.

Paradigm said Monday it invested $13.5 million in a Series A funding round for stablecoin startup Crown, valuing the company at $90 million, according to a statement.

The firm’s Ricardo de Arruda, a native Brazilian who serves as an investment and research partner at Paradigm, said Crown’s leadership and past experience working with both fintechs and institutional clientele played an important role in the VC’s decision to make Crown its first investment in Brazil. But so too did Crown’s early success in scaling. 

“The liquidity network effects that you build when you are the main stablecoin of a currency are extremely strong. That’s why Tether and Circle are doing so well,” de Arruda told The Block. “That’s why we expect Crown to do so well, because Crown is already way far ahead in terms of liquidity than any other of the BRL stablecoins.”

Crown, the creator of the BRLV stablecoin, which is pegged to the Brazilian real (BRL), said its token has become the world’s largest emerging market stablecoin. BRLV is fully backed by Brazilian government bonds.

Brazilian stablecoin’s early success

Crown is co-founded by John Delaney and Vinicius Correa, the latter of whom has a tech background and previously worked at the successful fintech Nubank. Delaney is a New York lawyer who moved to Brazil about 15 years ago before becoming interested in crypto and “arbitraging Bitcoin” in the early 2010s.

Delaney said founding Crown was rooted in his belief that stablecoins have massive potential in Brazil, but only if two issues can be resolved.

“Interest rates in Brazil are really high, today the base interest rate is 15%, and you have Tether that gives zero percent of yield to any of its partners, and that has worked for them,” Delaney told The Block. “In the Brazilian real market, it’s very unlikely that anyone’s going to be able to get away with that. So we built our architecture to solve that problem, number one.”

Secondly, Delaney said that as most stablecoin flows are institutional, he knew larger firms would require “institutional grade safety and security.” The CEO says Crown has met that challenge and that’s a major reason for their growth after launching the token about a year and a half ago.

BRLV has over R$360 million (roughly $66 million) in subscriptions, according to Crown. For now, BRLV is available exclusively to institutional customers who, according to Crown, gain exposure to Brazil’s high interest rates by holding BRLV. Crown earns yield from the government bonds it holds to back BRLV.

“Where we’re seeing a lot of demand is on the sort of institutional access to the Brazilian interest rate, so just like a carry trade,” said Delaney. “This is like a version of the real that can deliver the interest natively.”

In Brazil, the fifth largest crypto market globally, and where more people have invested in digital assets than equities, according to Crown, the stablecoin firm expects exponential growth on both the institution and retail side, although Delaney said the latter segment will likely be a “long tail phenomenon” as his firm initially focuses on institutional demand.

“Our North Star is ambitious. It’s one trillion reais in BRLV circulating in ten years,” said Delaney. “We project that that’s a high single-digit percentage of the Brazilian money supply.”

Crown announced a $8.1 million seed round earlier this year. The round was led by Framework Ventures, with participation from Valor Capital Group, Coinbase Ventures, Norte Ventures and Paxos. Nubank co-founder Ed Wible also invested.

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