PayPal’s venture arm is backing crypto risk management startup TRM Labs as part of a $4.2 million funding round that also includes Initialized Capital and Y Combinator.

TRM Labs analyzes cryptocurrency transactions to detect signs of illicit activity in real-time. It serves financial institutions, helping them avoid crypto-related fraud and crime, embrace crypto-related products and partnerships, and meet the regulatory requirements to do so.

The year-old company, based in San Francisco, plans to use the funds to grow its engineering and data science teams locally, expand into new markets, and accelerate product development, Esteban Castaño, co-founder and CEO of TRM Labs, told Cheddar Thursday.

The funding is more evidence of the renewed interest in the surveillance of cryptocurrency networks, an area of the industry that has so far been led by Chainalysis and Elliptic. As the regulatory landscape has matured, digital asset businesses have become subject to more regulation and are generally expected to do more to identify illicit activity in connection with their businesses.

Chainalysis, incidentally, laid off 39 employees Thursday, about 20 percent of its workforce to prioritize its path to profitability and go-to-market strategy.

This latest investment brings TRM’s total funding to date to $5.9 million.

TRM is PayPal Ventures’ second investment in a blockchain company, following its participation in the identity ownership startup Cambridge Blockchain’s Series A raise in April. These investments say little about PayPal’s crypto or blockchain strategy. In the past two years, the payments giant has filed a patent to speed up cryptocurrency transaction rates and launched an internal blockchain-based rewards system for employees. PayPal was also a founding member of the Libra Association but withdrew its participation from the Facebook-led digital currency project last month.

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