Crypto Exchange FTX Reaches $25 Billion Valuation

Cryptocurrency exchange FTX reached a valuation of $25 billion in a new funding round that includes heavyweights from traditional finance, such as the Ontario Teachers Pension Plan and funds managed by

BlackRock Inc.

BLK 0.36%

FTX Trading Ltd., the exchanges parent company, said Thursday that it had raised just over $420 million in the new round. The news came three months after FTX closed a previous round at a valuation of $18 billion.

Since then, cryptocurrencies have rebounded from a summer slump. Bitcoin powered to a record of above $66,000 on Wednesday, after this weeks debut of the first U.S. bitcoin-focused exchange-traded fund.

Singapores sovereign-wealth fund Temasek Holdings Pte. Ltd. joined the new funding round, along with Silicon Valley venture-capital firms Sequoia Capitalan existing investor in FTXand IVP. Other investors included New York-based Tiger Global Management and Iconiq Growth, an affiliate of Iconiq Capital LLC, which has managed money for

Mark Zuckerberg

and other tech billionaires.

The backing of high-profile investors is a vote of confidence in FTX, which has grown rapidly since starting operations in 2019. FTX has handled nearly $13 billion worth of trades on an average day this month, making it the worlds third-largest crypto exchange by volume, according to data provider CryptoCompare. Binance and OKEx are the worlds first and second-largest exchanges, respectively.

Binance also has sought new funding in recent months, targeting a valuation of as much as $300 billion, people briefed on the discussions said. But some investors have balked at that price tag, in part because of the regulatory risk surrounding Binance, one of the people said.

A Binance spokeswoman said: As we continue to grow responsibly in cooperation with global regulators, the potential of this industry is virtually impossible to project today. She didnt comment directly on the funding effort.

A bitcoin mining facility in upstate New York is using electricity from a local hydroelectric plant powered by the Niagara River. The company is part of a group of miners attempting to make the industry more sustainable, both environmentally and financially. Illustration: Alex Kuzoian/WSJ

Much of the volume at both FTX and Binance is in cryptocurrency derivativesrisky and volatile instruments that can be used to bet on whether various digital coins will rise or fall in price. Regulators have been wary of crypto derivatives. This summer, Binance stopped offering derivatives in Germany, the Netherlands, Italy, Hong Kong and other jurisdictions after coming under official pressure. Another rival, BitMEX, agreed to pay $100 million in August to settle accusations from the Commodity Futures Trading Commission that it let Americans trade derivatives without following U.S. rules.

FTX has avoided public clashes with authorities. It keeps its main exchange off-limits to Americans to comply with U.S. financial regulations, while running a U.S. sister exchange that focuses on less exotic products. In August, FTXs U.S. affiliate said it was acquiring LedgerX, a small, CFTC-licensed trading platform for crypto futures and options, to help build out a regulated U.S. derivatives business.

FTX recently moved its headquarters from Hong Kong to the Bahamas, in part because of the archipelago nations crypto-friendly regulatory regime. FTX has raised more than $1.4 billion in its two recent funding rounds.

In an interview, FTX founder and Chief Executive

Sam Bankman-Fried

said the firm could spend the money on acquisitions. Such deals could be used to obtain assets with regulatory licenses, like LedgerX, or to buy crypto ventures with local expertise in various countries, he said.

Mr. Bankman-Fried, a California native, voiced hope that FTX would eventually offer Americans crypto-linked investment products. The firm is in the process of acquiring a U.S. broker-dealer, he said, without providing details. Such an acquisition could allow FTX to legally offer securities trading to Americans.

Were starting to see the tip of the iceberg in terms of institutional cryptocurrency-related products in the United States right now, with the bitcoin futures ETF that just launched, Mr. Bankman-Fried said. Wed be super-excited to help contribute to those over time.

FTX has sought to boost its visibility in the U.S. with sports sponsorships, minting deals with the Miami Heat professional basketball team and National Football League star Tom Brady, among others. Major League Baseball umpires have been wearing an FTX patch on their uniforms as a result of one such deal.

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