Circle Ventures Backs $4M Round for Blockchain-Based Debt Provider Obligate

Obligate, a startup offering blockchain-based regulated debt securities, announced a $4 million seed extension round.

The funds will help the firm, which was formerly known as FQX, scale its debt platform that is set to go live next month on the Polygon blockchain.

Blockchange Ventures and Circle Ventures participated in the extension, joining initial seed investors Earlybird and SIX Fintech Ventures. Combined with its initial fundraise in late 2021, Obligate’s seed round now totals more than $8.5 million.

Switzerland-based Obligate essentially allows companies to issue on-chain bonds and commercial paper – or debt securities that define the terms of a loan – to receive funding from investors in a regulated decentralized finance (DeFi) environment. Alternate routes of fundraising could become more popular as venture capital firms and traditional finance (TradFi) investors take a more cautious approach after the collapse of multibillion-dollar centralized crypto exchange FTX.

"Obligate combines the benefits of DeFi with the trust and regulation of TradFi,” Obligate co-founder and CEO Benedikt Schuppli told CoinDesk in an email. “Obligate is more efficient than many other bond platforms as we allow a direct issuance of blockchain-based bonds from the issuer to the wallet of the investors.”

Issuers have to go through Know Your Customer (KYC) verifications before creating a bond program suited to their liquidity needs, which can be done with a few clicks. The liquidity will be denominated in stablecoins such as USDC but can be quickly converted into U.S. dollars, explained Schuppli.

Investors will be able to access Obligate through their existing crypto wallet. For each investment, the investor holds the respective eNote (ERC20 token), which carries the right to receive payment at maturity or collateral in the case of a default

Read more: Circle, Uniswap Research Says DeFi Can Solve $2 Trillion FX Risk Problem