Compound Labs founders developing regulated financial products for the blockchain
Superstate, a company built by the founders of Compound Labs, has just secured $4 million in equity funding to bring regulated financial products to blockchain networks.
Investors participating in the round include ParaFi Capital, 1kx, Cumberland Ventures, Coinfund and Distributed Global.
One of the first products that Superstate plans to bring is a short-term government bond fund that can be held in a cryptocurrency wallet or by a crypto custodian.
Superstate filed a draft prospectus with the US Securities and Exchange Commission for the product on Monday.
The fund will enable shareholders to record that they own a government bond fund on the Ethereum blockchain.
“We are creating a new fund that has its own prospectus, which then shares of that fund can be held in blockchain wallets,” Robert Leshner, the founder of Compound Labs, told Blockworks.
Holding bond funds on a crypto wallet will primarily benefit crypto-native hedge funds and venture funds, he said.
“If you’re set up to trade crypto assets, you’re probably not set up with traditional brokerage accounts,” Leshner said.
With yields in DeFi now often lower than in traditional finance markets, holding government bonds in your crypto wallet enables you to use all existing systems that these investors already have in place.
“This is an opportunity to hold a TradFi fund in your crypto custody process,” he said. “So you as a firm can hold a record of your ownership of this mutual fund alongside stablecoins or other crypto assets in the same place in the same platform.”
Government bond funds in crypto wallets will only be available to US customers and not available to any offshore investors, Lensher notes.
Although Superstate will not be the first company to bring institutional-grade products onto the blockchain, Jake Brukhman, the founder and CEO of CoinFund, told Blockworks blockchain technology will have to converge with traditional technologies and regulators and governments to “sensibly come to market.”
“The founder, the strategy and the approach are just world-class, so we’re just very excited about it,” Brukhman said.
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