Peak XV and HongShan, the Indian and Chinese investment firms that split from powerhouse Sequoia last year, have co-led a $10 million seed investment in KAST, a neobank-like platform that allows customers to hold and spend stablecoins through traditional payment avenues. This marks the first joint deal for the firms since their separation from Sequoia in June 2023.

KAST, founded by Raagulan Pathy and Daniel Bertoli, targets emerging markets where access to USD is restricted and remittance costs are high. The platform does not operate in India or China due to regulatory constraints, but it serves the large offshore workforce from these markets. Pathy, who previously ran Circle's Asia Pacific operations, highlighted the severe lack of cross-border capabilities in banking infrastructure in many countries, which KAST aims to address by bypassing traditional banking networks.

KAST's launch comes at a time when stablecoin adoption is experiencing rapid growth, with over 20 million people using stablecoins every month across the world, primarily in emerging markets. The startup's focus on stablecoin-based infrastructure is also bolstered by Stripe's $1.1 billion acquisition of stablecoin infrastructure provider Bridge in October, signaling growing mainstream corporate interest in the technology.

The neobank-like platform faces competition from both crypto-native firms and traditional fintech companies expanding into stablecoins. PayPal has launched its own dollar-pegged token, while Revolut and Ripple have announced plans to issue stablecoins. The sector is also heavily concentrated, with Tether controlling roughly three-fourths of supply. However, KAST's co-founder Daniel Bertoli argues that existing neobanks struggle with blockchain integration because their core systems were not designed for crypto, and that the next generation of digital banks will be inherently global and built on stablecoins from the ground up.

Partners from DST Global and Goodwater Capital also invested in the round. Although KAST declined to disclose user numbers or its valuation, the startup reported that its growth had exceeded projections in its first four months of operation. The company plans to launch savings products and expand its remittance services while maintaining a focus on stablecoin-based infrastructure.

Alex Svanevik, co-founder and chief executive of analytics platform Nansen.ai and an early-backer of KAST, highlighted the benefits of KAST's stablecoin-based approach, offering customers "a safe haven for hard-earned income when local currencies decline." He also noted that digital nomads receiving salaries in stablecoins can now bypass the hassle of legacy rails, enabling international transfers that once took weeks to be completed instantly and at virtually no cost.

The investment marks a significant milestone for Peak XV and HongShan as they increasingly operate beyond their traditional geographic boundaries. HongShan has expanded into Europe and North Asia as it works to deploy its $9 billion pool of capital, while Peak XV has established a presence in the U.S. The firms' former parent Sequoia is also reportedly in advanced stages of deliberation to back fintech Vance, which would be the firm's first investment in India since the separation.

The deal underscores the growing interest in stablecoin technology and its potential to disrupt traditional banking infrastructure. As the fintech landscape continues to evolve, KAST's innovative approach and Peak XV and HongShan's strategic investment position the startup for significant growth and impact in the emerging markets it targets.