Fintech Update, 2/20 - 2/26
Hi! It’s Monday, February 27, 2023.
The Rundown
Representative Patrick McHenry (R-NC), Chairman of the House Financial Services Committee, formally introduced a bill to update American financial data privacy laws, particularly the Gramm-Leach-Bliley Act. The bill [full text] aims to give financial services customers more control over their personal information “without strangling innovation” and would require financial institutions to tell consumers why they’re collecting data, allow consumers to opt out of sharing, and ensure that relevant data could be deleted if the customer does opt out.
Federal prosecutors tacked on four new fraud charges to former FTX co-founder and CEO Sam Bankman-Fried’s (SBF) pending criminal case, bringing the total charges against him to 12. The charges, filed in the Southern District of New York [full text], include an allegation that he violated federal elections laws by “making additional donations under others’ names” in order to skirt Federal Election Commission campaign contribution limits. SBF reportedly donated over $40 million to “primarily Democratic-leaning PACs and politicians” in the lead-up to the 2022 midterm elections. The new fraud charges also include “additional counts related to wire fraud and money laundering.”
The Securities and Exchange Commission (SEC) reportedly is considering legal action against crypto infrastructure company Paxos for its role in issuing the Binance stablecoin BUSD. The SEC is cracking down on stablecoins in the wake of the FTX scandal and, if it decides to charge Paxos for helping issue an unregistered security, the decision would have significant impacts on the crypto industry. For its part, Paxos rejects the SEC’s argument that BUSD is a security under the Howey or Reves tests; although the company has terminated its relationships with Binance.
Stripe is partnering with card issuers like Discover and Capital One in an effort to fight fraud. The payment processor will be giving issuer access to its Radar fraud scoring to improve authorization outcomes for legitimate transactions and “recover revenue” that would otherwise be declined.
Swedish BNPL giant Klarna announced that the U.S. is now its largest market by revenue. Reporting a “71% year-over-year increase in gross merchandise value (GMV) in the U.S. last year,” the company’s American revenue surpassed that of Germany. Klarna has been making a dedicated push into the U.S. since 2018, and adoption appears to be taking off now.
The Linux Foundation launched its OpenWallet Foundation with the goal of creating a “technological core that any other third-party can use to power their own digital wallets.” The Linux Foundation hopes to “support interoperability between digital wallets through open source software,” reducing the walls that exist between tools like Apple Pay and Google Pay.
Some of Wall Street’s largest financial institutions – including Bank of America, Citi, Deutsche Bank, Goldman Sachs, and Wells Fargo – are restricting or completely banning employees from using ChatGPT for business purposes amid concerns about privacy, bias, and response accuracy.
The New York State Department of Financial Services (NYDFS) granted a BitLicense and money transmitter license to investment and trading platform eToro, allowing the firm to offer crypto services in the state.
The Bank of Japan announced it will pilot test a “digital yen” central bank-backed digital currency (CBDC) in April.
The Reading Nook
Francisco at Chaos Engineering wrote a great piece on how ChatGPT can learn fintech. Just, you know, don’t tell that to the folks at BoA, Citi, Deutsche, Goldman, or Wells…
Bloomberg wrote about the “writedown hangover” VCs and Wall Street giants are feeling after years of investments in fintech firms that have not paid off.
Selected fundings
Digital estate planning company Trust and Will raised $15 million in new funding from strategic investors such as Amex Ventures, Northwestern Mutual Future Ventures, SEI Ventures, & USAA.
Nestment, the company that allows friends and family to co-buy investment property, raised $3.5 million in pre-seed funding.