Mumbai-based blockchain startup Nuo Bank has raised $250,000 (Rs 1.6 crore) from payment gateway firm PayU India's chief executive officer Amrish Rau and managing director Jitendra Gupta, a top executive has told VCCircle.
Nuo Bank, whose platform went live this week, was founded by Varun Deshpande, Ratnesh Ray and Siddharth Verma. It is a blockchain- and cryptocurrency-based virtual bank which operates a decentralised crypto-banking platform.
Savings are stored on the blockchain and instead of interest on savings, customers gets a virtual share in the revenue of the bank. Nuo Bank will offer around 20% of its 1 billion tokens - Nuo Coins - to customers.
The value of these coins will be determined by smart contracts, where the terms of the agreement are written into lines of code. These contracts will stipulate that up to 25% of the bank's revenue should be reserved for these tokens.
The bank will generate revenue from the transaction fees, or merchant discount rate ( MDR), on its payments products as well as a share of the premium from its peer-to-peer lending business.
The app’s peer-to-peer lending facility will allow users to pledge Ethereum-based tokens and borrow money from a lender, who will be another customer of the bank.
Nuo Bank backer Amrish Rau was previously the founder and chief executive officer of consumer payments firm Citrus Pay.
In 2016, PayU, owned by South African Internet conglomerate Naspers, had agreed to buy Citrus Pay for $130 million (Rs 865 crore) in one of the largest takeover deals in the fintech space.
Rau was appointed CEO of the joint entity, PayU India.
Jitendra Gupta was also a co-founder at Citrus Pay before going on to become a managing director at PayU India.
Last July, the duo had invested $250,000 in Bengaluru-based fintech startup Open.
Earlier this month, Aetlo Tech, a Mumbai-based blockchain startup incorporated by two IIT-Bombay graduates, was acqui-hired by UK-based banking and financial services company Page Solutions.
It is unclear how the government will view entities such as Nuo Bank.
Finance minister Arun Jaitley had said last month that the Indian government doesn’t consider cryptocurrencies legal tender but will adopt blockchain technology to encourage the digital economy.
Jaitley did not specifically state that trading in cryptocurrencies was illegal, which is why it continues to be business as usual for Indian cryptocurrency exchanges such as Zebpay and Unocoin.
The income tax department said in January that it had sent tax notices to thousands of people dealing in cryptocurrencies after a nationwide survey showed more than $3.5 billion worth of transactions had been conducted over a 17-month period.
The Indian government’s policy think tank, Niti Aayog, is believed to be testing waters to employ the blockchain technology in education, health and agriculture.