Fintech Update, 5/23 - 6/5
Hi! It’s Monday, June 6, 2022.
The Rundown
The worsening market for technology stocks and crypto isn’t just creating “super bad feeling[s]” for companies like Tesla; the cloudy tech market outlook is causing fintechs across the board to tighten their belts and reduce their workforces. In the past two weeks alone, Klarna announced it would lay off 10% of its nearly 7,000-person team; Coinbase doubled down on its previously announced hiring freeze, and also rescinded some existing offers to candidates; Bolt is reducing headcount by about ⅓, or roughly 250 employees; PolicyGenius cut 25% of its team, despite raising $125 million less than three months ago; and Gemini is cutting back by 10% despite raising $400 million last year. The challenges are not limited to the US market, either: German digital bank Nuri also plans to lay off 20% of its staff. While we expect these contractions to ease back after the initial shocks of this tech downturn level off, we also see fintechs interpreting these conditions as harbingers of a new normal and rationalizing their costs accordingly. (Meanwhile, we know many people are affected by this difficult wave of layoffs – if we can be helpful, feel free to reach out to us at fintechupdate@gmail.com)
Staffing cuts aren’t the only reason Gemini has had a couple of rough weeks: The Commodity Futures Trading Commission also sued the firm in the U.S. District Court for the Southern District of New York for violating the Commodity Exchange Act. The complaint dates back to 2017 and alleges that Gemini “made false or misleading statements of material facts, or omitted to state material facts, to the CFTC” while the agency was evaluating whether to allow Gemini to self-certify a bitcoin futures contract by a designated contract market. The complaint further alleges that, among other things, Gemini personnel knew or reasonably should have known that they were making false or misleading statements about the susceptibility of their Bitcoin Futures Contract to being manipulated. Oof. We feel confident that Gemini will be fine in the long term (and of course will await the outcome of this case) but still, tough week for them. Try to read the CFTC’s complaint without cringing, we dare you.
Moving from one New York-based legal body to another… the New York Senate passed a bill banning “crypto mining operations that use carbon-based fuel to power their facilities,” sending it to the desk of Governor Kathy Hochul for ratification or veto. The bill specifically targets proof-of-work mining, which is used by the Bitcoin and Ethereum networks and is known to be more energy intensive, calling for a two-year moratorium on such operations to reduce New York’s carbon footprint and study the environmental impact of proof-of-work mining. Although we’re sympathetic to arguments that this bill may hurt New York in the short term by driving more crypto mining to “states such as Texas, Tennessee, Washington State, and elsewhere that provide solar, wind, hydro and other sources of clean energy,” we’re much less sympathetic to the conclusion that this is a negative. Crypto mining is notoriously bad for the environment, and when combined with the questionable utility of many tokens in the first place, the New York Senate’s conclusion feels like an encouraging step away from a race to the bottom among states seeking crypto business within their borders. ‘Mining can continue, but let’s at least not burn fossil fuels while we’re at it,’ seems like a reasonable stance to us.
Stripe launched its App Marketplace, a service allowing third party apps to seamlessly integrate with Stripe. In its latest step beyond payment solutions, Stripe “will both provide access to third-party apps, as well as scripts created by app publishers, users and Stripe itself, that incorporate those apps with Stripe.”
Safaricom, East Africa’s largest telecom provider and the operator of the M-Pesa mobile money network, partnered with Visa to launch a virtual debit card that will “enable 30 million M-Pesa users to make cashless payments at Visa’s global network of merchants” after years of being being constrained only to transactions at M-Pesa’s network of merchants.
Affirm partnered with Stripe to allow businesses using Stripe’s payment processing solutions to offer BNPL to their customers. Stripe has similar partnerships with Afterpay and Klarna as well.
FTX reportedly is investigating getting deeper into traditional stock trading via acquisition, kicking off conversation with Webull, Public.com, and Apex.
A report from the CTFC shows that crypto scams are on the rise, with over 46,000 Americans losing $1 billion since the beginning of 2021.
Tether users have withdrawn $10 billion from the project since the start of the crypto crash, roughly one-eighth of the stablecoin’s total reserves.
A16z raised a monster $4.5 billion fund to invest in crypto firms while their prices are depressed.
Question: who in their right mind would invest in Luna 2.0?
Selected fundings
Berlin-based B2B BNPL Mondu raised $43 million in Series A funding.
Blockchain infrastructure firm InfStones raised a $66 million Series C led by SoftBank’s Vision Fund 2 and GGV Capital.
Crypto tax service company Zenledger raised $15 million in Series B funding.
Intake-to-procure solution provider Zip raised $43 million in Series B funding at a $1.2 billion valuation.
Revenue-based financing company Bloom raised $377 million in debt and equity.
Indian consumer financial platform Slice raised $50 million in a new financing round.