Fintech Update, 2/6 - 2/12
Hi! It’s Monday, February 13, 2023.
Happy Monday post-Super Bowl! Or, the annual day we question why this isn’t just a national holiday as we nurse a pizza and chicken wing hangover on the way to the office. Congrats to all the Chiefs fans out there, and condolences to Philadelphia – so much light pole grease for naught. Did anyone else see any crypto ads last night?? Us neither! What a difference a year can make…
The Rundown
Crypto staking appears to be coming under fire: Early this week, Coinbase CEO Brian Armstrong tweeted about “rumors” that the SEC is considering banning staking for retail consumers. On Thursday, crypto exchange Kraken settled with the SEC for $30 million and closed its staking operation in the US, having failed to properly register that business. That development cast a pall on the market, with ether dropping on Friday. SEC Chair Gary Gensler said the Kraken ruling “should put everyone on notice in this marketplace.” The SEC has not given formal guidance on which crypto assets are securities and which are not, but Gensler’s remarks place staking squarely in the regulatory crosshairs.
The Treasury Department issued a report on the “potential benefits and challenges associated with the increasing trend of financial sector firms adopting cloud services technology.” The Treasury report was motivated by several factors, including the emergence of a small number of service providers (Amazon Web Services, Google and Microsoft Azure) that have come to dominate the financial service sector’s cloud market, raising concerns about “concentration [that] could expose many financial services clients to the same set of physical or cyber risks (e.g., from a region-wide outage).” You can read the full text of the report here.
PayPal paused its stablecoin project, which was supposed to launch in the coming weeks, amid increased regulatory scrutiny of crypto. Separately, longtime CEO Dan Schulman announced he will step down at the end of 2023.
Speaking of stablecoins… Controversial stablecoin issuer Tether recorded its first quarterly profits: $700 million. The company says the money will be added to its reserves, as it looks to put concerns about those questionable reserves behind them. We remain skeptical.
The Securities and Exchange Commission (SEC) is expanding its investigation into the use of WhatsApp and other unsecure tools by some Wall Street employees to conduct business. The probe, which now includes major hedge funds like Point72 and Citadel, has been met with concerns about "serious privacy implications” for individuals’ “health and financial information.”
Identity verification and fraud detection firm Alloy expanded its operations into the UK, with former COO and new Head of Global Edwina Johnson launching the company’s new office in London. Alloy “connects to more than 170 data sources, enabling financial institutions to automate customer approval and account opening, and monitor transactions in real time.” Bank fraud cost British consumers nearly £610 million in the first half of 2022.
Affirm laid off 485 employees, some 19% of its workforce. The announcement of layoffs was followed by a not-great earnings call for the BNPL provider, with “second quarter earnings that fell below analyst estimates on both the top and bottom lines.” Affirm also announced that it is shutting down its cryptocurrency service.
Diving into that hotbed of M&A activity – Hungary! Hungarian fraud prevention software provider Seon acquired AML/KYC screening tools provider Complytron for ~€2.5M.
Selected fundings
Danish neobank Lunar raised $38 million in new funding.
Digital asset protection company Coincover raised $30 million in new funding.
Southeast Asian cross border payments company TazaPay raised $16.9 million in a Series A funding round led by Sequoia Capital Southeast Asia.
Embedded bill pay provider Blip Laps raised $2.1 million in seed funding.