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The FTX blow up has highlighted this strategic question. This is one WITHOUT a magic quadrant. Crypto is either a regulated asset or a disruptive technology – but it cannot be both. If you believe that crypto is a regulated asset, the easy trade is to buy Coinbase stock (COIN). Coinbase is fully regulated in […]
The post Is crypto a regulated asset or a disruptive technology? first appeared on Daily Fintech.
Ronald Regan once said: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Does this “One size fits all” approach work for crypto? In recent months there has been a flood of cryptocurrency news, due to market volatility and piecemeal regulatory developments. The crypto crash — […]
The post Sometimes a duck is not a duck first appeared on Daily Fintech.
Last week the EU reached an agreement on its Markets in Cryptoassets (MiCA) directive, delivering a single rule book across 27 countries and bringing years of debate on how to regulate the digital-asset industry to an informal close. As the final step, it still needs to be approved by the Council and the European Parliament. […]On one day in April I ran a simple experiment. I typed Fintech into a search engine and hit News and looked at the top 10 news items through a West or Rest lens. Among the top 3 results, 2 have a Rest slant with one being an Indian company and the other being a […]
The post Part 2. A round up of recent news about FinTech innovation from the Rest. appeared first on Daily Fintech.
Scanning this week’s news there were a few stories that caught my eye. The Central African Republic has adopted bitcoin as legal tender, becoming the second country in the world to do so after El Salvador. To say that this is big news is an understatement. Oddity, a D2C makeup company, is offering a security token […]
The post Whose eyeing your wallet? Blind regulators appeared first on Daily Fintech.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO and Editor of Daily Fintech and author of The Blockchain Economy. Hoping 3 pictures will paint a thousand words
The post Real Entrepreneurs want to STO appeared first on Daily Fintech.
If you were in London over the last couple of weeks, you wouldn’t have missed the activities of the extinction rebellion. While I don’t condone all their actions, they are making a valid point and it is being heard at the highest and the lowest levels. A week ago, I explained to my five year […]
The post BoE Mandates Climate risk stress tests, can Fintechs help? appeared first on Daily Fintech.
Move fast and break Facebook. It will soon be conventional wisdom that Facebook Libra will fail and you only make money before the herd catches on. In this article, Daily Fintech Subscribers learn why Facebook Libra will likely fail and who/what will win if Facebook Libra fails and how to profit from that. Bernard Lunn […]
The post How to profit from the now likely failure of Facebook Libra. appeared first on Daily Fintech.
TLDR. Napster blew up the music business with free and illegal. Then we had low cost and legal like Spotify, Pandora and iTunes. The same is happening to innovation capital. The summer of 2017 ICO, kicked off by Bancor, was the now illegal way to raise a lot of money easily and at virtually no cost. That was a lousy deal for investors and naturally then regulators jumped in.
This update to The Blockchain Economy digital book covers:
What is broken in the legacy innovation capital business
In March 2017, in Crypto equity via ICO and the other innovation chasm we wrote that:
“Most entrepreneurs understand the chasm between MVP (Minimum Viable Product) and PMF (Product Market Fit). The low cost to build MVP increases supply, but real demand does not change that fast, so lots of MVP ventures fall into the chasm (i.e. they fail).
The next chasm is less well understood. This is the chasm between PMF and Liquidity (via an IPO on the Public Markets and failing that via trade sale).
Today, we don’t see this chasm so clearly because there is a very expensive bridge across it – in a few locations. The very expensive bridge is provided by the big PE/VC Funds.”
Why the ICO went too far in the opposite direction
In 3 hours that shook my world: the Bancor ICO in June 2017 we described Bancor raising over $150 million in 3 hours in an ICO that kicked off the ICO craziness in 2017 when ventures could raise huge sums on not much more than a “minimally viable white paper”. The ICO went too far in the opposite direction – good for the entrepreneur and bad for the investor.
The news about Blockstack and Reg A
The news as reported in many media outlets was that the SEC gave Blockstack the go-ahead to conduct a $28 million digital token offering under Regulation A (which enables smaller companies to raise money from the public with less strenuous accounting and disclosure standards than a traditional IPO).
This is big news because the SEC is creating a new protocol for token offerings under Reg A. This is tokenized early stage crowdfunding. While neither tokens nor crowdfunding are new, this the first time they have been combined in a global market that US public investors can participate in.
America has been losing ground in crypto as it was not perceived as a friendly regulatory environment. This news is a big win for American entrepreneurs and investors.
Reg A Basics
“is an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period; and Tier 2, for offerings of up to $50 million in a 12-month period. For offerings of up to $20 million, companies can elect to proceed under the requirements for either Tier 1 or Tier 2.
There are certain basic requirements applicable to both Tier 1 and Tier 2 offerings, including company eligibility requirements, bad actor disqualification provisions, disclosure, and other matters. Additional requirements apply to Tier 2 offerings, including limitations on the amount of money a non-accredited investor may invest in a Tier 2 offering, requirements for audited financial statements and the filing of ongoing reports. Issuers in Tier 2 offerings are not required to register or qualify their offerings with state securities regulators.”
Blockstack Basics
Blockstack describe themselves as the” easiest way to build decentralized apps that can scale” and claim over 120 independent developer teams that have built apps on Blockstack.
Like Ethereum and many ICOs, Blockstack is a developer-focussed open source platform. It is the sort of innovation that the crypto community needs.
Jurisdictional competition will continue
In Some Governments Want To Shut Down Bitcoin But They Don’t Know How we wrote that:
“For a long time, entrepreneurs faced competition and regulators sent them the rule book. Regulators were government employees who thought about competition only in the abstract; competition was something that other people had to worry about.Today, the environment is more fluid as governments recognize the economic return on innovation in terms of jobs and GDP growth. The regulators now face real competition because their political masters have to keep citizens happy and citizens care about jobs and GDP growth. Both Fintech upstarts and incumbent global banks are increasingly mobile; so jobs can disappear fast if regulators get it wrong. Plus, innovation is the primary driver of productivity which drives GDP per capita. Pity the poor regulator who must balance that with protecting citizens from fraud and enforcing existing laws.”
This jurisdictional competition is a good thing because while, the SEC may have got it almost right with Reg A and the Blockstack token offering, there is still room for improvement. If you look at the details, you will see that accredited investors get in early and the public get in later. The public gets in earlier than they do in a traditional IPO, but this is still a two tier market. In a global market with jurisdictional competition, expect big moves by Singapore, Hong Kong, UK, Switzerland the EU and other tech/finance centers.
Context & References
3 hours that shook my world: the Bancor ICO in June 2017.
Crypto equity via ICO and the other innovation chasm
Some Governments Want To Shut Down Bitcoin But They Don’t Know How
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
The post Amazingly, the SEC may have got it almost right with the Reg A Blockstack token offering and this may define a new innovation capital market appeared first on Daily Fintech.
The 2019 Cryptovalley Conference remains true to its nature. Three days, three stages, and overweight technical and economics content. I attended for two days and became A cool kid on the Blockchain.
The narrative has clearly changed. Lots of evidence around us. Yesterday the BIS, the umbrella organization, announced the launch of a global innovation hub in Basel,Hong Kong, and Singapore to help Central Banks to “identify relevant trends in technology, supporting these developments where this is consistent with their mandate, and keeping abreast of regulatory requirements with the objective of safeguarding financial stability”.
The EU is very serious about supporting Blockchain technology. Tom Lyons announced the Convergence conference this coming November sponsored by the European Commission, the EU blockchain observatory & Forum, Consensys, Alastria, and INATBA[1].
Several speakers and panelists participated at the Cryptovalley Conference from Central banks around the world. Of course, they repeatedly stated that they share personal opinions and not the CBs official position. Between the BOE, the Fed, the SNB, and the Bank of Italy, the conversations went deeper.
We were reminded that unconsciously we are going back to the 19th century when multiple entities issued money. I like to add to that observation that we are also going back to bearer instruments. Tomaso Atse, director of the UCL Center for Blockchain Technologies, pointed out that what is new in our era is programmable money and the creation of hybrid types of value (like combining digital identity with money or some other value) and the ability to exchange it).
Alexander Lipton, the EPFL visiting professor and founder of SILAmoney, poked and provoked and defended his point of view. In a nutshell, he is the godfather of the DLT version of Narrow Banking concept. This is a way for Central banks to deploy DLT technology by issuing a fiat-backed digital coin (FBDC). The idea is that the central bank will allow and work (indirectly) with a consortium of validators that manage the issuance of the FBDC. It is worthwhile reading about this concept `Narrow Banks and Fiat-backed digital coins` by Alexander Lipton, Alex Pentland, Thomas Hardjono (MIT). What jumps out of it is that right now, we are faced with Facebook intending to implement this kind of concept through the LIBRA association. While each Central bank is doing its in-house due diligence, concerned only with its local country monetary policy and reserves; there is a clear need for Central banks to get together. They should be designing a Central bank coordinated narrow bank consortium.
This is a wakeup call to nightmares of whether Central banks will be able to control reserves and rates on reserves if LIBRA scales. LIBRA`s adoption in countries with currency instability, is troublesome if it really scales. Can LIBRA create hyperinflation in Venezuela? Alexander Lipton, says yes.
The narrative has clearly changed, and we are shifting in a phase where understanding monetary economics is becoming important.
When I raised the question last week about the governance of the LIBRA association (see here) and whether there could be collusion; I didn’t mean in the DAO technical sense (i.e. more 50% of validators collude and validate an invalid transaction). I meant collusion in terms of decisions about, for example, the management of the LIBRA reserve fund. Which currencies will be included, will the fund become a significant holder of US debt, how much government debt versus currencies, why share the interest of this cash cow by accepting new members, how to deploy the profits of the reserve?
Once the LIBRA reserve scales to $100billion (Ant Financial`s money market fund is currently $168billion down from a high of $250billion), the interest will be in the order of $1.5billion (assuming an average 1.5% interest rate). That is huge for an association with no reporting requirements.
We live in very interesting times.
Monetary policy issues need to be understood better.
Moral hazards are lurking everywhere.
Those that have been working on financial inclusion, self-sovereign identity, P2P protocols are feeling looted.
Back to the native people, Lisa Nestor from the Stellar foundation, shared a great overview of the global P2P network that can be used by banks to work directly with each other, without the need for correspondent banks. Stellar is decentralized and open with 28 nodes currently. Their aim is to optimize cross-border payments and work with all currencies. They launched in 2014. In 2016 they had 9,000 accounts and today they have 3.2million. Their daily volume has reached $350k with a total cost of processing of $1.50! During the conference, they reported that the first Swiss node was launched.
Bitcoin Suisse announced that they are seeking a banking license and they will be expanding in Europe. Ficas, a Swiss crypto asset management group for HNW, was a platinum sponsor. They are based in Zug with presence in Turkey, Greece, Spain, and Australia. Flovtec and Ovrium shared the award of the best Swiss Blockchain company at the SICTIC investor event during the conference. Orvium is a decentralized scientific collaboration platform for deploying blockchain and artificial intelligence technology. Flovtec is a liquidity provider for tokenized assets.
My opinion is that we will be seeing an explosion of stable coin issuance. CNNmoney Switzerland was at the Cryptovalley conference taking a pulse on LIBRA (watch here).
The GOSCI – Global Open Source Currency Index- is a novel independent volatility benchmark for Stablecoins. Launched by Bernard Lunn the same day the LIBRA white paper hit the market. Become part of it.
The Stablecoin.foundation was launched in October 2018 with 25 Stablecoin issuers from 16 countries. Its mission is to represent the collective interests of Stablecoin issuers to unify the industry.
Closing remarks
The narrative is now, about financial stability with privately issued coins. Several factors are forcing everyone to the table. These conversations are hard and consensus is not given.
Stable coins are creating a very collateral hungry market situation.
[1] INATBA is the new International Association for Trusted Blockchain Applications, offers developers and users of DLT a global forum to interact with regulators and policy makers and bring blockchain technology to the next stage.
[2] “That’s very world domination-ish of them,” said Kaliya Young, a co-author of “A Comprehensive Guide to Self Sovereign Identity” and co-founder of the Internet Identity Workshop. “Some of us have been working on that problem for a really long time. You already have a set of open standards for verifiable credentials that are basically done and working.” From the article `Buried in Facebook`s LIBRA paper, a Digital Identity Bombshell`
Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.
I have a commercial relationship with Flovtec. I have no positions or commercial relationships with any other company or the people mentioned. I am not receiving compensation for this post.
Subscribe by email to join Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).