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In the largest financing to date for a company focused on the Bitcoin digital currency, Coinbase has raised $25 million in a Series B funding round.  Venture capitalist firm Andreessen Horowitz took the lead, backing Coinbase with a $20 million investment.

Other investors, Union Square Ventures and Ribbit Capital, added another $5 million, bringing the total raised by Coinbase to-date up to $31 million.

Similar to what Paypal accomplished a decade ago, Coinbase provides a wallet and payment processor for merchants as a simple online means for transactions.

Coinbase has increased its consumer wallets from the 130,000 it announced in May to 600,000, according to Fred Ehrsam and Brian Armstrong, the company’s co-founders.

With a growing number of users, Bitcoin has also become an attractive option for over 16,000 merchants, allowing them to manage Bitcoin transactions in one place.

Andreessen Horowitz backs Bitcoin

Venture Capitalist firm Andreessen Horowitz backs Bitcoin company Coinbase with a $20 million investment. Image: Flickr, Antana

As part of the current deal, Andreessen Horowitz’s Chris Dixon and Union Square Ventures’ Fred Wilson will join the board of directors at Coinbase.

Dixon, who let the round, has been looking at Bitcoin seriously since he became a VC last year and was planning to make investments in Bitcoin-related companies, he told TechCrunch earlier this year.  He later expressed that Bitcoin adds an economic layer that has long been needed on the Internet.

Distinguishing itself from intermediaries like credit card companies, Bitcoin cuts charges by creating a universal measure of agreed-upon value between transacting parties.

As Bitcoin has gained attention, especially over the past weeks, the international response of financial institutions has been mixed.

The People’s Bank of China recently denied the validity of Bitcoin, prompting several Internet and mobile companies to strip the crypto-currency from their payment options.

A recent senate hearing in which officials from the Department of Justice and FINCEN acknowledged Bitcoin’s benefits, provided money-laundering risks are properly handled, has U.S. markets taking a more favorable approach.

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