The Crypto Tug Of War


Jan 09, 2021



Jan 09, 2021



2021 has certainly hit the ground running, with the seemingly inexorable rise of BTC as one of the main attention grabbers. As we write, BTC has topped $40k, and the cryptocurrency market value has surpassed $1 trillion for the first time (if BTC was a publicly tradable company, it would be the 7th most valuable in the world today).

Institutional affirmation continues to pile on, with JP Morgan saying a price of $146k per Bitcoin is a long-term possibility - matching the total private sector investment in gold via ETFs, bars, and coins. The OCC also issued an interpretative letter outlining how banks may use independent node verification networks (INVNs) and stablecoins - making it a very real possibility that public blockchains will become the foundation of a next generation payments system in the US.

But there has also been trouble in paradise. Major crypto exchanges such as Coinbase are suspending trading in XRP (Ripple), on the back of an SEC complaint against its developer claiming that XRP is an unregistered security. The UK FCA’s ban on the sale of derivatives and exchange-traded notes (ETNs) to retail investors has also gone into effect. Looming in the background in the US is FINCEN and Treasury’s move to require full KYC and data collection on funds sent to self-hosted crypto wallets.

Novelty always entails a degree of uncertainty, and the start of 2021 is suggestive of a continued tug of war among public and private players. Let’s hope the regulators are as cute and cuddly as this fella!

Portfolio News

TradeBlock acquired by CoinDesk to service institutional interest in Bitcoin - We are very pleased to share that FinTech Collective portfolio company TradeBlock has been acquired by CoinDesk. Currently, more than $20b of investment products use TradeBlock indexes, and billions of dollars in monthly trading volume is quoted against them. With this acquisition, CoinDesk (which is owned by Digital Currency Group) is positioned to be the leading source of crypto news, information and data for the financial industry. Read more

How Flutterwave saved 2020 for its community - Flutterwave is one of the brands that stepped up to offer a helping hand to businesses and individuals facing the harsh reality of 2020. The brand rolled out solutions to keep small businesses afloat, entered partnerships to provide more leverage for its community and powered several initiatives, all with the aim of ensuring businesses and individuals are well equipped to survive the tragedies of 2020. Read more

Latin America’s workforce is adapting to a new normal — and it’s here to stay - After surveying more than 375 companies with operations in Latin America about the future of work in the region, Courtney McColgan, founder and CEO of portfolio company Runa, writes about the future of work in Latin America - and how it is looking much more flexible and less dependent on human contact than before the pandemic. Several large tech companies are planning to allow remote work indefinitely, while others have long-term plays to maintain high levels of telecommuting. Read more

Franklin Templeton partners with Vestwell to deliver advisor managed account offering in modern record keeping construct - Through the partnership, Vestwell is building Franklin Templeton's proprietary methodology natively into it's recordkeeping infrastructure to provide advisors entirely digital, open-architecture, and cost effective managed account solution. Read more

The Crypto Tug Of War

Crypto market value tops $1t as Bitcoin hits $38,000 - Digital coins are jumping in a world awash with fiscal and monetary stimulus, even as some commentators fear an inevitable bust and others question the basic integrity of crypto markets. Proponents of Bitcoin argue it offers a hedge against dollar weakness and the risk of faster inflation, a bit like gold, while critics decry the intellectual soundness of comparing the two assets. Read more

OCC regulator implements groundbreaking cryptocurrency guidance for banks and the future of payments - Interpretive Letter 1174 explains how banks may use new technologies, including independent node verification networks (INVNs) and stablecoins, to perform bank-permissible functions, such as payment activities. Said simply, a bank may use stablecoins to facilitate payment transactions for customers. In doing so, a bank may issue stablecoins, exchange stablecoins for fiat currency, as well as validate, store, and record payments transactions by serving as a node on a blockchain (INVN). Read more

Square CEO pushes back on FinCEN's proposed crypto rules - Square says its current methods of leveraging blockchain tracing with the wallet addresses has been effective thus far, working to track unlawful activity and resulting in convictions and arrests. But FinCEN's new requirements would instead make it so there's a static requirement for companies to collect names and physical addresses from users who aren't enrolled with the institution allowing the transfers. That, according to Square, will result in “unnecessary friction and perverse incentives” that will force crypto customers to go to unregulated sources to make transactions. Read more

UK’s ban on crypto derivatives goes into effect today - The Financial Conduct Authority’s (FCA) ban on the sale of derivatives and exchange-traded notes (ETNs) passed in October went into effect Wednesday. Read more

JPMorgan says Bitcoin could surge to $146,000 in long term - Bitcoin’s market capitalization of around $575b would have to rise by 4.6 times -- for a theoretical price of $146,000 -- to match the total private sector investment in gold via exchange-traded funds or bars and coins, strategists wrote in a note. But that outlook depends on the volatility of Bitcoin converging with that of gold to encourage more institutional investment, a process that will take some time, they said. Read more

XRP delisted on more platforms following SEC's Ripple complaint - The SEC complaint accused Ripple of effectively running a $1.3b unregistered offering with its sales of XRP, which the regulator deemed a security and not a cryptocurrency. Exchanges and finance platforms including Crypto.com, Coinbase, and OKCoin said they were suspending trading of the XRP token. Wirex, a crypto-payments firm, and Ziglu, an app, followed suit. Read more

Industry News

Online lender SoFi to go public via SPAC backed by Chamath Palihapitiya - The merger with Palihapitiya’s SPAC, Social Capital Hedosophia Corp V, will value SoFi at $8.65b. SoFi was last valued at $5.7b in private markets, and has raised cash from venture capital giants such as SoftBank and Peter Thiel. Shares of the SPAC buying SoFi rose 29% in Thursday trading after the announcement. Read more

UK fintech review to propose changes to visa and listing rules - The review has been tasked by ministers to come up with ideas on how to support the UK’s buoyant fintech sector. The government sees the industry as a key area of focus as it considers where to prioritize future industrial strategy efforts after Brexit. London has been the centre for much of the fintech industry in Europe, with so-called “unicorn” companies worth more than £1b such as Revolut, Monzo and TransferWise setting up in the UK capital. Read more

Trump issues new ban on Alipay and other Chinese apps - Mr. Trump said the apps can access private information from their users. It could be used by the Chinese government to “track the locations of Federal employees and contractors, and build dossiers of personal information,” he added. The order takes effect in 45 days—after Mr. Trump leaves office. Read more

Lender Affirm seeks to raise almost $935m in IPO - The San Francisco based company said in a filing Tuesday that it planned to sell 24.6m shares for $33 to $38 each. At the top of that price range, Affirm would have a market value of $9.22b based on the outstanding shares listed in its filing. Including employee stock options and restricted share units, Affirm would have a valuation of more than $11b. Read more

Venmo adds a check-cashing feature, waives fees for stimulus checks - The company’s move into check cashing doesn’t make the peer-to-peer payment app an alternative to online banking, however. Instead, it serves largely as a way for Venmo to benefit from the influx of stimulus payments that are rolling out now to its U.S. users. Read more

Brexit forces bankers to shift trading of European stocks out of London - Britain’s membership of the EU had meant the region’s banks and investors could bypass the home exchanges of stocks and trade them in London over alternative venues. Those venues included Turquoise, a trading facility majority-owned by the London Stock Exchange Group PLC, and rival platforms Aquis Exchange PLC and Cboe Global Markets Inc.’s Europe-based marketplace. But with the Brexit trade agreement taking effect Jan. 1, that option ended. Read more

China plots ‘rectification’ drive to bring Jack Ma’s Ant Group to heel - The plan under consideration for Ant involves shifting its financially-licensed businesses — which include its payments, lending, insurance and wealth management ventures — into a new holding company. Ant may also need to raise capital to satisfy PBoC guidelines, which along with requirements on capital adequacy, risk control and governance, make financial holding companies more akin to banks than tech companies. Read more

Their finances ravaged, customers fear banks will withhold stimulus checks - In the past week, the largest United States banks have pledged to temporarily zero out their customers’ negative balances so they can get access to their stimulus money and put it toward whatever expense seems the most pressing. However, some regional and community banks — which often serve areas where there is little competition, including poor neighborhoods and rural communities — are pursuing different approaches. Read more

Limit on contactless payments could be raised from £45 to £100 in one of Britain's first steps away from EU rules - The idea was raised to the Treasury by UK Finance, a City lobby group, who joined with card service providers to highlight the need for the limit increase. Although the Treasury's response to the idea was positive, it will need to gain the approval of the Financial Conduct Authority before plans go ahead. Read more

BBVA says that it is shutting down banking app Simple, will transfer users to BBVA USA - BBVA told users of Simple — the pioneering mobile and online banking app that it acquired for $117m in 2014 — that it is planning to shut down the service, moving accounts to BBVA’s USA business in the process. Read more

Ana Botín: Banking regulation needs a reset - The Executive Chairman of the Spanish lender Santander says in the FT that rules should be amended to remove Big Tech’s advantages and promote green finance. Read more

Mexicans in U.S. sent record remittances despite Covid-19 pandemic - Mexicans working in the U.S. sent record amounts of money to relatives back home last year, illustrating the resilience of the U.S. economy despite the shutdowns imposed to fight the pandemic. Remittances rose 11% to $36.9b in the first 11 months of the year, more than the record $36.4b sent in all of 2019. Read more

What China’s new digital currency tells us about a cashless future - The WSJ gives us a glimpse, in a short video, of what Beijing’s new system looks like and how it would work. Read more

Select Financings

Betterfly - Chile based life insurance startup raised $9m in additional Series A funding led by QED Investors. Read more

Bibit - Indonesia based robo-advisor raised $30m in growth funding led by Sequoia Capital India. Read more

CRED - India based bill payment and rewards platform raised $81m in Series C funding led by DST Global. Read more

Divvy - Utah based corporate spend management company raised $165m in Series D funding from investors including Hanaco, PayPal Ventures, Whale Rock, Schonfeld, NEA, Insight Partners, Acrew, and Pelion. Read more

Glia - New York based provider of a digital customer service platform for insurance companies and financial institutions raised $78m in Series C funding led by Insight Partners. Read more

Groundspeed Analytics - Michigan based maker of software for the property and casualty insurance industry raised an undisclosed amount of Series C funding led by Insight Partners. Read more

Mambu - Berlin based SaaS banking platform raised €110m in new funding led by TCV. Read more

Oxygen - San Francisco based digital banking platform raised $17m in Series A funding from Runa Capital, S7V, 1984 VC, EFG Hermes, Rucker Park and Inventures. Read more

Pennylane - France based accounting startup raised €15m in Series A funding from Global Founders Capital and Partech. Read more

SimpleNexus - Utah based home sale and mortgage platform raised $108m in Series B funding led by Insight Partners. Read more

TagPay - France based core banking platform raised €25m in new funding funding led by Long Arc Capital. Read more

TaxBit - Salt Lake City based cryptocurrency tax automation software company raised an undisclosed amount of funding from PayPal Ventures, Coinbase Ventures, and Winklevoss Capital. Read more


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