Fintech Update, 8/2-8/8
Hi! It’s Monday, August 9, 2021.
Leading Off
The Biden Administration's new infrastructure bill’s expansion of tax and other requirements on crypto activities is creating confusion and concern among crypto firms and industry bodies. // In other news, BaaS firm Synapse launched a new credit services offering; Robinhood experienced a volatile week of trading; blockchain-based lending Figure said it will merge with mortgage lender Homebridge; Binance. US CEO Brian Brooks stepped down after only four months; and Rapyd raised $300M in new funding at a $8.75B valuation. // All this + more below!
Heavy Hitters
Proposed infrastructure bill creates crypto regulation drama. There is a row brewing between certain legislators and the crypto industry over provisions in the the Biden Administration’s infrastructure spending bill that would defray the costs of the bill by tightening the tax treatment of crypto services. Specifically, the administration has suggested that it will pay for $28 billion of the new spending by increasing and enforcing taxes on certain crypto-related activities by expanding the IRS’s definition of a broker to “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
The crypto industry has pushed back on such a broad application of the term, with industry bodies and firms warning about ''financial surveillance and unintended impacts for cryptocurrency miners and developers.” A group of senators – Ron Wyden (D-OR), Pat Toomey (R-PA), and Cynthia Lummis (R-WY) – has proposed an amendment to clarify that the expanded broker definition “does not apply to individuals developing block chain technology and wallets”; but another group – Rob Portman (R-OH) and Mark Warner (D-VA) – has added to the confusion by proposing a separate amendment that would only “exempt ‘proof of work’ systems from new financial reporting requirements, while keeping [the new] rules in place for those using a ‘proof of stake’ system.”
As TechCrunch’s analysis notes, the choice seems strange because “proof of stake is emerging as an attractive, climate-friendlier alternative . . . [than] proof of work mining,” and regardless appears to be an example of legislators trying to “pick winners and losers.”
Our take? Increased crypto regulation and taxation was only a matter of time: this is just the beginning of a debate over who to burden, how, and why. The crypto industry and anyone with crypto holdings should buckle up – things may get bumpy. Nevertheless, even necessary regulation comes with concerns about government overreach chilling innovation. Legislators should be encouraged to craft light-touch rules that achieve the necessary aims without doing harm to nascent industries, or we may pay for infrastructure today by crippling our trajectory into the future.
Quick Takes
Synapse launches credit offering. The banking-as-a-service firm added to its existing stack of API-based banking offerings with the announcement of its Credit Hub, which will allow clients to build and offer “white-labeled credit products — including card issuance, credit-building tools, lending accounts and cashback rewards — in as little as six weeks.” Synapse’s Credit Hub is built on the Mastercard network.
Volatile week for Robinhood. The trading app that powered the meme stock phenomenon has arguably become one itself as its share price has wildly gyrated since IPOing last week, resulting in trading suspensions. Robinhood revealed on Thursday that some 97M shares will be sold by VC backers over time, denting the surge in its share price.
Figure merges with mortgage lender Homebridge. The digital lender, founded by former SoFi CEO Mike Cagney and built on a proprietary blockchain, agreed with Homebridge to a “landmark deal that will reshape the technology landscape of the nation’s mortgage industry.” Figure’s technology will help Homebridge “double their capacity for fulfilling loans,” Cagney predicts.
Bloom Credit launches new reporting tool. The API platform, which helps firms connect and share data with credit bureaus, launched Furnish to help clients to easily and more accurately “report consumer activity to all three credit bureaus at once.” According to a recent Consumer Reports study, over 34% of consumers “discovered inaccuracies on their credit reports in 2020.”
Brian Brooks steps down as CEO of Binance.US. The former acting Comptroller of the Currency left his position only four months into his tenure as head of the crypto exchange. Brooks announced his resignation on Twitter citing “differences over strategic direction.” Many believe that Brooks was hired to give regulators more confidence in Binance.US’s legitimacy approach to compliance.
Raypd raises $300M amid the fintech-as-a-service boom. The API-based financial platform announced its Series E this week (at valuation of $8.75B), having raised an identical round in January. The surge in investment in these ‘FaaS’ startups reflects the possibility of the “finance anywhere” concept their infrastructure powers.
Pop Flies
Crypto exchange Coinbase acquired crypto data aggregator Zabo to allow users to easily track balances and transaction history across different crypto wallets.
Apple reportedly has struck a deal with Affirm to offer buy-now-pay-later services in Canada through Affirm’s PayBright product.
Fintech infrastructure provider Pico, which offers services like infrastructure hosting, network connectivity, and market data, will go public via SPAC at a $1.75 billion valuation.
Expat-focused banking service Sable announced a new integration with Wise that allows customers to “transfer money internationally directly through Sable quicker and cheaper.”
The Economist took a look at today’s ‘Unicornicopia,’ the VC boom that it concludes is a risk for investors and a gift for everyone else.
More Fundings!
Wealth management
401k provider Human Interest raised $200 million in Series D funding at a $1 billion valuation. 🦄
Money management app Snoop raised £15 million.
Lending
Octane Lending, which provides financing for big ticket items like motorcycles and ATVs, raised $52 million in Series D funding at a valuation just over $900 million.
UAE-founded BNPL provider tabby raised $50 million in its latest funding round at a $300 million valuation to accelerate expansion into new markets.
Banking
Indian consumer neobank Jupiter raised $45 million in a Series B funding round co-led by Nubank at a valuation of just over $300 million.
Nigerian challenger bank Kuda raised $55 million in a Series B funding round at a valuation of just over $500 million.
Payments
B2B payments provider Reserve Trust raised $30.5 million in a Series A funding round led by QED investors.
BharatPe, the Indian QR code-based payment app for offline businesses, raised $370 million in a Series E funding round led by Tiger Global at a post-money valuation of $2.85 billion. 🦄🦄
Corporate
Finance concierge for startups and small businesses Zeni raised $34 million in Series B funding.
Infrastructure
Identity verification startup Sentilink raised $70 million in a Series B funding round with participation from a16z and NYCA.
Fintech-as-a-service provider FintechOS raised $10 million in new funding from the International Finance Corporation (IFC), the asset management and investment advisory arm of the World Bank.
Insurtech
South African insurtech platform Naked raised $11 million in new funding.