Fintech Update, 12/5 - 12/11
December 5-11, 2017
Leading Off
The FIA raised concerns over the use of a self-certified regime for upcoming bitcoin contracts; the SEC’s new cyber fraud detection until charged a Canadian cryptocurrency firm with violating securities laws; U.S. bitcoin futures climbed in their first day of trading on the Cboe Futures Exchange; SoFi partnered with WSFS Financial to launch SoFi Money, a cash management account; and the New York Times profiled Coinbase, one of the world’s largest digital currency firms, which it calls “the heart of the bitcoin frenzy.”
The Week in Review...
FIA raises concerns over bitcoin futures. In an open letter [full text] to CFTC Chairman Christopher Giancarlo, the Futures Industry Association (FIA), which represents the world’s largest banks and clearinghouses, expressed concern that CFTC-regulated exchanges like the CMC and CBOE could operate under a self-certified regime for their upcoming contracts. The FIA argues that using a self-certification scheme for “these novel products does not align with the potential risks that underlie their trading and should be reviewed” more formally by the CFTC.
SEC charges Canadian crypto firm with violating securities laws. The Securities and Exchange Commission’s new cyber fraud detection unit charged Canadian crypto firm PlexCorp with violating securities laws after the firm sold nearly $15M of shares in an initial coin offering (ICO). According to an SEC statement [full text], PlexCorp told investors that each coin would yield a 1,354% profit in less than 29 days.
Bitcoin makes Wall Street debut. Futures on the world’s most popular cryptocurrency surged as much as 26% in their debut session last night on Cboe Global Markets exchange, triggering two temporary trading halts designed to calm the market as initial volume exceeded expectations, reports Bloomberg. The launch of bitcoin futures on a regulated exchange is a “watershed” moment for the industry. CME Group and NASDAQ will debut similar offerings next year.
SoFi to launch a cash management account next year. The online lender announced a two-year agreement with Delaware-based bank WSFS Financial, which will process payments and provide debit card sponsorship services for SoFi Money, a cash management account that will debut early next year.
The Bitcoin Boom. The New York Times profiles Coinbase, one of the largest digital currency firms and “the heart of the bitcoin frenzy.” The company has grown from 5.5M to 13.3M users in less than a year, and is now the leading platform where “ordinary Americans go to buy and sell virtual currency.” Yet, it faces several challenges as virtual currency markets become mainstream.
Bitcoin reaches nearly 18K. While investors know that bitcoin has yet to replace cash as the central method of payment for consumer purchases, bitcoin enthusiasts have been hoarding the digital currency as if it were “virtual gold.” Central bankers, financial executives, technologists, and everyday consumers await what appears to be the beginnings of a new financial system.
Will the SEC increase action on ICOs in 2018? According to some insiders, the SEC may be on the verge of significant action to broadly address concerns related to ICOs and other cryptocurrency issues. The SEC has taken a more cautious approach than regulators in China and South Korea, who have banned ICOs outright. However, recent charges against two fintech firms suggest the “wait-and-see stance” may evolve into more action next year, TechCrunch reports.
Prominent Chinese AI firms maintain close ties to state security. The NYT profiles IFlyTek, a leading Chinese AI startup that provides speech recognition services for carmakers like Delphi, Volkswagen, and Mercedes Benz. The firm’s close ties with the Chinese government, along with China’s “loosely enforced” privacy laws, give AI companies “considerable resources and access to voices, faces, and other biometric data in vast quantities.”
China’s JD partners with SV's Plug and Play Accelerator. Chinese e-commerce giant JD.com, considered to be “the closest rival to Alibaba in China,” announced a collaboration with fintech accelerator Plug and Play. JD will be Plug and Play’s first Chinese partner, and will share AI and cloud technologies with portfolio companies and prepare those firms to enter Chinese markets.
Have a great week!
The Fintech Update Team