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James Smith of Elliptic speaks at an event in New York City.

John Lamparski | WireImage | Getty Images

When Hamas was trying to raise bitcoin by funneling it through a number of digital wallets, one start-up was able to see what was going on and warn its customers.

Based in London, Elliptic sells blockchain analytics tools to some of the world’s largest cryptocurrency platforms — including Binance and Circle — as well as banks. The company’s software is used to investigate criminal activity on bitcoin’s digital ledger and monitor transactions to prevent money laundering.

The company recently learned that the Al-Qassam Brigades, the military wing of Hamas, used a donation website that generated a different bitcoin wallet address for each person that visited. That made it harder to track the funds and see where they were sent. The group has been designated as a terrorist organization by Israel, the U.S. and the EU.

“Because we are always on top of what’s about to happen, we can see when those funds start to move to exchanges,” Elliptic’s co-founder and CEO James Smith told CNBC in a phone interview. “We were able to let our customers know that these funds were heading towards them, and they were able to stop them.”

The firm on Wednesday said it raised $23 million in a funding round led by Japan’s SBI Holdings to fuel an aggressive expansion into Asia. SBI, a financial services business spun off from SoftBank, has made headlines in the past due to partnerships with blockchain companies like Ripple and R3. Elliptic also counts Spanish bank Santander as an investor.

Terrorist funding is just one area of illicit activity the firm’s platform deals with. It’s also used to track people trading child pornography and drugs, as well as hacks that result in funds being stolen. Elliptic shows a different side of the crypto industry, in that its technology is seen as more favorable to financial services businesses and regulators.

‘It’s out of the box’

Smith said the cryptocurrency industry has seen more growth in the last 18 months than it has in previous years. It’s enjoyed publicity from bitcoin more than doubling in value since the start of the year and Facebook announcing plans to launch an asset-backed virtual currency called Libra, in partnership with other tech and finance firms.

But Libra has been faced with fierce regulatory pushback. President Donald Trump has said Facebook may be required to seek a banking license to launch it, while several U.S. lawmakers have panned the company’s digital currency plans. Central bankers have also poured cold water on the idea, with Federal Reserve Chairman Jerome Powell saying the project should be halted until regulators’ concerns are addressed.

Elliptic’s boss said that, though Facebook is “taking the flak,” plenty of other companies are exploring asset-backed virtual currencies. “It’s out of the box,” he said. “People are now thinking about this and what’s the right way of doing it.” Even central bankers are floating the idea, with Bank of England Governor Mark Carney proposing a reserve digital currency and China’s central bank claiming it’s close to releasing its own virtual tokens.

Going forward, Elliptic is opening offices in Singapore and Japan as part of a push into the Asian market. Japan is an example of a country that’s shown more advances in the industry than others, Smith said, with “major banks” examining ways of offering cryptocurrency services to their customers. The company said revenues in Asia have increased tenfold in the last 12 months alone.

Elliptic said it would also use the fresh funds to further develop its product to support new digital currencies including Libra, Link — a token being developed by Japan’s Line Corporation — and central bank cryptocurrencies.

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