A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.
The Bitcoin ETF Might Finally, Actually Happen
What happened: Long a hope of both institutions looking to profit from crypto and individuals looking to justify their bet on a new kind of financial tool, the Bitcoin ETF has gone from long shot to real possibility thanks to the backing of a handful of massive firms.
Why it matters: The “white whale of the mutual fund industry” isn’t just about boosting Bitcoin’s price, though it has and likely will. Invesco and WisdomTree refiling applications with the SEC, and BlackRock filing its own, while Grayscale fights a court case that could legitimize its own attempt, has created enough momentum that insiders now talk about an ETF that can hold Bitcoin as a “when” not an “if”.
What’s next: Waiting, obviously. But more importantly, waiting to see if BlackRock’s unique provisions allowing Nasdaq visibility on its trading platform will be the argument that pushes this concept over the edge. (By Joe Light, Barron’s)
Another Private FinTech Gets Revalued and the Numbers Aren’t Pretty
What happened: A second venture capital firm has revalued its investment in U.K. fintech Revolut. The result: a 40% reduction in value.
Why it matters: Public investors can see the damage wrought to payment startups and other fintechs. Those companies that remained private during the SPAC boom, most especially, Stripe, had to wait until a capital raise or a revaluing for anyone to truly know what the burst bubble had done to their valuation. Affirm lost 85% of its value and subsequently laid off 20% of its staff. Revolut, and other private fintechs like Klarna, may have to follow suit soon.
What’s next: More uncertainty. You could argue Revolut is a special case: part of its revaluation is a result of its continued wait for a banking license in its home country. But even with that license, clear skies aren’t guaranteed, as evidenced by its competitors’ struggles. (By Siddharth Venkataramakrishnan, The Financial Times)
The Kids Are Alright (With Having Way More Financial Apps Than Anyone Ever)
What happened: Nearly every popular finance or banking app that exists for adults now has an option for teens. Teens want freedom, parents want security, and the companies want to lock in customers as early as possible.
Why it matters: Brand loyalty stickiness is a well-known concept. What’s less well understood is what happens when brands start collecting customers before they’re even eligible for their driver’s license. Which means relatively obscure start-ups like Greenlight ($400 million saved by teens) can suddenly compete for assets under management with stalwarts like Fidelity (numbers thus far undisclosed but allegedly growing).
What’s next: A whole lot of worry. Savings accounts are one thing, but teens making trades introduces a whole new set of concerns for parents. As it should. (By Oyin Adedoyin, The Wall Street Journal)
Did a Court Ruling Just Kill the Dream of Decentralized Finance?
What happened: Decentralized finance, DeFi, was one of the biggest buzzwords to come out of the last crypto rally. But a federal judge just issued a ruling identifying a DAO, or decentralized autonomous organization, as a “person”. That could be bad news for proponents.
Why it matters: Part of the appeal of DAOs and DeFi in general was anonymity and autonomy. This is the second straight court ruling that sticks a fork in both concepts. Recently, one judge said anonymous DAO members could be served for a lawsuit by, no lie, a chatbot. That put a curb on anonymity, since it forced those members to respond to the court. Now comes this ruling, which suggests that if something goes wrong in a DAO (which happens often) then someone will be held accountable.
What’s next: Uncertainty. Markets hate uncertainty. “Other organizations that purport to be decentralized, and that challenge mainstream financial institutions with promises of fairer and lower-cost options, could be subject to the same regulation going forward, potentially disincentivizing investment in the defi space.” (By Charles Gorrivan, American Banker)
Are We Due for a New Round of FinTech IPOs?
What happened: The IPO window has been frozen shut for the past year or so. Morgan Stanley thinks it could be thawing, but only for a very specific type of company.
Why it matters: As private FinTechs see their valuations cut in half, or worse, the public markets, as brutal as they can be, become more attractive. But they won’t just accept anyone. “The data tells you that for tech companies, investors are going to want a company that has, call it, $200 million or $250 million plus of actual revenue — not annual revenue run rate. Compare that to during COVID, when you had companies that were sub-$100 million ARR going public.”
What’s next: “I’m an optimist — so I’m bullish that you probably see something this year. If somebody had said at the beginning of this year you’re going to have a new $1 trillion market cap company, everyone would’ve said no. Now there’s Nvidia.” (By Lucinda Shen, Axios)
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