Updated: May 29
Unbanked, the prominent blockchain-based financial service provider, has announced its decision to wind down. Co-founders Ian Kane and Daniel Gouldman, expressed their disappointment and offered an explanation for the unexpected news.
The unexpected news comes just 25 days after the startup closed its recent equity crowdfunding round on StartEngine for $155,000, two months after the company won $25,000 in StartEngine's "Shark Pitch" Competition, and three months after the company received an investment from KingsCrowd, including becoming rated a "Top Deal" on the platform. This also comes just 8 months after the company closed its $2.23 million Republic round.
Unbanked was launched in 2018 with a vision of leveraging blockchain technology to transfer value via cryptocurrencies or stablecoins, connecting them to the existing global financial system for everyday use. This connection was intended to offer customers a "best of both worlds" scenario, granting them better control over their money with lower fees and added convenience.
The founders explained how the crypto landscape five years ago was vastly different from today, with a significant number of skeptics who doubted that banks or card networks would support Unbanked's mission. Contrary to these assumptions, Unbanked has successfully supported over 25 companies across multiple countries, serving hundreds of thousands of users.
In the pursuit of legitimacy and sustainability, Unbanked had chosen to establish its operations on-shore in the United States. This decision was made with a belief that engaging with regulators and adhering to strict regulations would position the company for long-term success. However, this turned out to be a less favorable strategy, leading to excessive costs, wasted time, and curtailed growth due to regulatory constraints.
Unbanked's primary financial backing has been largely non-institutional, coming mostly from crowdfunding campaigns and revenue from operations. The startup raised $4M over five years from approximately 6,000 investors, many of whom are individuals who believed in the potential of blockchain and the importance of regulatory adherence.
Just three weeks ago, Unbanked signed a term sheet for a $5 million investment at a $20 million valuation, a deal that would have enabled the company to not only maintain its operations but also to expand. However, this funding has not yet materialized, leaving Unbanked in a precarious financial situation.
In light of these challenges, Unbanked has urged its customers and white-label partners to begin withdrawing all funds as soon as possible. The company has assured users that customer funds have always been kept separate from business operations and maintained on a 1:1 ratio, regardless of the asset type. Withdrawal functionality will remain active for the next 30 days.
This decision to wind down Unbanked has not been taken lightly. Despite relentless efforts and dedication from the team to explore all possible solutions, the regulatory and financial hurdles have proven insurmountable.
The Unbanked team remains hopeful that, with better funding, they can revive Unbanked or another company can continue their core mission. They extend their deepest thanks to all who have supported and understood them during this trying time.