Online wallet provider Xapo has raised its funding total to $40m, leapfrogging BitPay to become the best-funded bitcoin startup to date.

Announced today, the startup’s second Series A-1 funding round took $20m in total. Spearheaded by Index Ventures and Greylock Partners, the round also included Emergence Capital Partners, venture capitalist Yuri Milner, PayPal co-founder Max Levchin and former Yahoo! CEO Jerry Yang.

Back in March, Xapo’s initial round was led by Benchmark Capital, Fortress Investment Group (FIG) and Ribbit Capital. At the time, it was the second-biggest funding round in the bitcoin space.

The wider ecosystem

In a blog post, the company stated that the record-breaking sum was good news “for the bitcoin ecosystem as a whole”, rather than Xapo itself.

Wences Casares, Xapo’s CEO and founder, also used the opportunity to announce two new board appointments: Reid Hoffman and Mike Volpi. The pair will join Matt Cohler as Xapo’s board observers.

.@Xapo Raises $20M, Led by Greylock and Index – Reid Hoffman and Mike Volpi joins board… http://t.co/hFx1DYTBdU pic.twitter.com/3b2kOHBANv — Xapo (@xapo) July 8, 2014

Casares noted that Hoffman and Volpi have a “proven history of recognizing emerging technologies before they reach the masses,” having both helped to usher in disruptive digital innovations (Facebook, Paypal, SoundCloud) in the past.

The CEO said Xapo will remain committed to bolstering the ecosystem, with the aim to bring bitcoin’s technology to a much wider audience.

“Looking ahead, we will continue to invest the funds in building our team and our suite of services. We are committed to developing the framework that allow bitcoins to be used by consumers in their everyday lives while also continuing to offer highly secure bitcoin storage for Wall Street funds, exchanges, and financial institutions handling bitcoins,” he said.

The VC perspective

Both of the VC firms who lead the round, Index Ventures and Greylock Partners, issued their own comments on the investment.

In a company blog post, Greylock Partners stated that bitcoin holds disruptive potential on three levels: as an asset, as a currency and as a platform for the creation of alternative financial applications. However, the firm believes bitcoin needs security to succeed:

“Unfortunately, it is both costly and risky for consumers to build their own technology infrastructure, process and physical infrastructure to secure their bitcoins. Xapo has created a system where average consumers can be comfortable and secure with holding and using bitcoins.”

Index Ventures also praised Xapo’s emphasis on security. However, the investor group stated that bitcoin still has a long way to go, describing it as a “baby in the financial markets”. It added:

“Bitcoin will never replace the US dollar or the euro, and that’s not its main goal. The more appropriate analogy for bitcoin is gold – a value system that doesn’t have a political affiliation, yet plays a part in overall monetary policy.”

The firm says it plans to focus its investment strategy on alternative payment systems like BitPay, currency exchange services such as Oanda and bitcoin storage services like Xapo.