Former DFS regulator secures $5.1 million for cryptocurrency venture fund supported by Winklevoss twins and Robert Leshner
The crypto industry is filled with former regulators who typically work as legal counsel for top companies or advisors on political lobbying efforts. It is rare to see a regulator become an investor at a venture firm, let alone a founding partner, with the exception of Katie Haun, a former Department of Justice prosecutor.
Matthew Homer, previously a senior superintendent overseeing crypto at the New York Department of Financial Services, is challenging the norm. After leaving DFS in 2021 and working at venture firm Nyca Partners, Homer founded his own crypto-focused venture firm called the Department of XYZ, which recently raised $5.1 million.
The fund has limited partners who serve as advisors to portfolio companies, including former regulators from various agencies, along with top industry participants such as Robert Leshner of Compound, Kyle Samani of Multicoin, and the Winklevoss twins.
In an interview with Fortune, Homer stated that XYZ aims to provide essential advisory resources to startups on their cap tables rather than leading funding rounds. He emphasized the importance of having a strong regulatory support system in the venture space, which motivated him to launch the fund.
“We may not be your biggest investor, but we will be the regulatory experts you can rely on,” Homer added.
Homer’s Journey
Homer started his career as a regulator at the Federal Deposit Insurance Corporation in 2012 when crypto was not yet a major focus for governments. He later worked at Quovo, which was acquired by Plaid, before returning to a supervisory role at DFS in 2019. During his time at DFS, he played a key role in overseeing the agency’s research and innovation division, including the emerging crypto sector.
DFS has been at the forefront of crypto regulation, creating the BitLicense program in 2015 to regulate digital asset companies. Despite criticism from the crypto industry for its rigorous approval process, DFS is seen as a model for responsible oversight by blockchain-friendly lawmakers and entrepreneurs.
Homer’s experience at DFS made him realize the unique potential of crypto to offer more transparency compared to traditional financial institutions. After leaving DFS, he joined Nyca Partners and later founded XYZ to focus on financial infrastructure, stablecoins, and DeFi platforms. The fund has already made strategic investments in companies like Mountain Protocol and Superstate.
Navigating Regulation
As the regulatory landscape in the U.S. remains uncertain, Homer believes that founders can benefit from having a regulatory expert like him on their side. By helping startups anticipate and avoid regulatory pitfalls, Homer aims to support the growth of innovative crypto projects in a challenging regulatory environment.
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