• Lithuanian crypto AML/KYC startup Micapass closed a EUR 240K acceleration round
• The solution integrates into DeFi protocols, adding to their safety and compliance
• The funds will be used for product expansion and preparations for next year’s Pre-Seed round

This October, a young Lithuanian startup Micapass attracted EUR 240K of investment. The investors were the Lithuanian incubator Super How? and the accelerator FIRSTPICK.

The Beginnings and the Founders

Micapass doesn’t have a long history as a company as it was founded only this year by Gintarė Košubienė (CEO & CTO) and Justas Rožėnas (CMO).

Ms Košubienė is a PMP-certified IT project manager with over 5 years of experience in the digital passports industry. She used to be a senior product manager at Super How?’s R&D, specializing in DARQ (Distributed Ledger Technologies, Artificial Intelligence, Extended Reality, and Quantum computing) and leading digital identity, privacy, CBDC, and securities-related projects.

Mr Rožėnas, on the other hand, was a creative director at 15min.lt, one Lithuania’s biggest news portals, and can boast about more than 15 years experience in marketing.

The Rise of the Compliance Issue

‘In the exhilarating heyday of crypto, our team embarked on crafting a revolutionary privacy mixer for institutional investors. Just two weeks before our mainnet launch, our rival, TornadoCash, faced regulatory sanctions, throwing our plans into disarray. Instead of surrendering, we took it as an exhilarating challenge,’ Ms Košubienė recalls.

Over the following six months, the team delved deep into research, driven by a mission to create a solution that balanced privacy, compliance, and decentralization. The result was Micapass as a testament to their tenacity and creativity.

‘Micapass didn’t just break barriers. It redefined the real-time regtech landscape, proving that builders thrive on adversity, and obstacles are but stepping stones to groundbreaking innovations,’ the CEO shares.

‘Micapass develops a niche product for a niche market. A few years ago, the GDPR came into force, and there was an explosion of regulatory technologies in this niche. The same can be expected in the cryptocurrency markets, so the startup Micapass aims to use the right timing and regulatory opportunities in the market,’ FIRSTPICK’s partner Marijus Andrijauskas shares.

KYC in DeFi

Micapass’ function is to prevent sanctioned individuals and illicit crypto funds from accessing decentralized finance protocols. Users undergo a Know Your Customer (KYC) process once, receiving a smart contract-based digital identity that showcases their legitimacy. Such a proof belongs to the user, not to a third party, leaving a decentralization angle. This digital identity grants access to DeFi protocols. It’s regularly monitored to ensure the continued user compliance with current AML regulations. Naturally, Micapass prioritizes user’s privacy and doesn’t store or share any personal data.

‘Micapass operates at protocol-to-protocol level. This means that DeFi protocols integrating Micapass to serve their compliance needs do not require any backend / API integration, AML checks could be done at smart contract level, making the integration DeFi-friendly, seamless and the most secure,’ Ms Košubienė explains.

According to the startup, Micapass’s primary B2B clients include any DeFi protocols such as decentralized exchanges, staking, lending and borrowing platforms, DAOs, launchpads and others. Additionally, Micapass serves KYC/AML providers and Crypto AML companies, assisting with expansion of their business to web3 space offering on-chain credentials, which are helping VASPs (Virtual Asset Service Providers) to be compliant with MiCA Travel Rule and other regulatory requirements.

The EU Leads the Way

In view of ‘MiCA’ in the name, Micapass primarily targets the EU clientele. The EU does often lead in regulation, and MiCA is indeed among the first documents attempting to regulate the crypto asset service providers. However, since crypto is inherently global, so is the solution, and Ms Košubienė’s team anticipates other countries to follow MiCA’s lead. Countries such as Singapore, Switzerland, Canada, Australia, and Japan and more are already following the EU’s MiCA regulations for crypto assets, the CEO reminds.

According to Super How?’s co-founder and CEO Andrius Bartminas, the decision to invest in Micapass stems from the firm belief in the transformative potential of their innovative compliance solution for the Web3 and DeFi ecosystem.

‘Micapass addresses critical needs in the Web3 space by pushing compliance to the edge – end users, offering ongoing AML wallet screening, continuous KYC/AML monitoring, and on-chain operation, making it seamlessly compatible with various DeFi protocols. We see Micapass as a valuable addition to the blockchain landscape, promoting security and compliance in a decentralized world,’ Mr Bartminas says.

Milestones and Further Ambition

Aside from securing EUR 240K in the acceleration investment round, Micapass milestones include:

• Achieving a top 10 ranking among 500 pitches at the European Blockchain Convention in Barcelona.
• Victories at the Startup Fair and Tech Hub events in the Baltics.
• Successful launch of the product and reaching over 8,000 users and growing.

Since the product is already launched and ready for early adopters, Ms Košubienė’s tells ITKeyMedia that the investment will be used for expansion on other EVM based networks and self-service of checking risk level of crypto assets for both individual’s wallets and DeFi protocols.

‘The need for regulatory technology in crypto markets will only grow, and Micapass is creating a tool that will be in demand both by current players in the decentralized finance market and by institutions that want to take advantage of these opportunities but are hesitant to do so because of the lack of AML and CTM practices,’ Super How?’s co-founder and CIO Vytautas Kašėta concludes.

‘In the decentralized realm, users are entrusted with self-regulation, pushing compliance to the individual level. Users must act responsibly within the web3 ecosystem, providing evidence of their actions and making informed choices about participating in high-risk transactions. Collectively, we all recognize that regulators are on the defensive and playing catch-up. However, this reality does not dampen our motivation. Micapass is on a vision to revolutionize regtech solutions by providing real-time compliance for instant crypto payments,’ Ms Košubienė adds.

Micapass is preparing for a Pre-Seed round of EUR 1.2M in 2024.