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Protocol | Fintech
The people, power and politics of fintech, every Tuesday and Friday.
Photo: Vadim Artyukhin/Unsplash

Binance’s British battering

Binance app on phone

Hello and welcome to Protocol | Fintech! This Tuesday: the U.K. cracks down on Binance, Payoneer goes public, and Elon Musk gets a statue.

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The Big Story

Binance backlash

The Financial Conduct Authority, the U.K.'s financial regulatory body, moved to restrict access to Binance, the world's biggest cryptocurrency exchange by volume.

The authority said Saturday that Binance is "not permitted to undertake any regulated activity in the U.K." It also warned consumers against doing business with Cayman Islands-based Binance Holdings and London-based Binance Markets Limited.

Crypto regulation is still evolving, so Binance, like many other crypto firms, operates in a gray area. Binance's current crypto exchange isn't based in the U.K., so U.K. residents can still buy and sell crypto.

  • Here's where it gets complicated: Binance acquired a FCA-regulated company last year and was planning to launch a U.K. exchange. But it withdrew its application to register with the FCA in May, according to CNBC. A number of other crypto companies also withdrew their applications, according to the FT.
  • Binance, founded in 2017, has exploded in growth, now offering a range of services, including trading of cryptocurrencies, futures, stock tokens and options, as well as lending and a Binance Visa debit card.
  • Binance noted that Binance Markets Limited was a "separate legal entity" and that it hadn't launched its U.K. business yet.

Regulators worldwide are cracking down on crypto. But Britain's move is a significant escalation in moves by regulators — particularly in Western countries — to crack down on the crypto industry.

  • New SEC Chair Gary Gensler has already said that the SEC is looking at how to protect against fraud or manipulation in crypto markets.
  • China has been aggressive in banning crypto trading and mining.

But regulators are especially focused on Binance.

  • In the U.S., Binance is being investigated by the Justice Department and IRS, Bloomberg reported last month.
  • Japan's Financial Services Agency on Friday released a warning that Binance isn't authorized in Japan.
  • In April, Germany's financial regulator BaFin warned investors that Binance had probably violated securities rules with its stock tokens.

There's likely a reason for the special attention. An analysis by crypto firm Chainalysis found that more funds tied to criminal activity went through Binance than any other crypto exchange.

— Tomio Geron

From Protocol | Fintech

Andreessen Horowitz hires a Goldman exec as its newest fintech partner. David Haber had founded a fintech startup whose team joined Goldman, where he served as a vice president for strategy.

Protocol talked to Ripple's top lawyer. He said the company is fighting for the crypto industry in its battle with the SEC.

A MESSAGE FROM MICRON

Recently, Micron announced new memory and storage innovations across its portfolio based on its industry-leading 176-layer NAND and 1α (1-alpha) DRAM technology. But what does "1α" mean, and just how amazing is it?

Learn more

Overheard

  • "Maybe you love him. Maybe you think he should tweet less. Either way, you can enter to win a 14-inch bronze statue to commemorate his 50th birthday."Online brokerage Public, in a tribute to Elon Musk which included installing a life-sized statue of the Tesla founder in New York City.
  • "Cryptocurrencies are a wonderful gift to scammers. They're something you can't see, and the man in the street doesn't fully understand it — yet he's scared of missing out. It's the perfect scam." —Martin Salter, senior fraud manager, Nationwide Building Society, in Finextra's "The Future of Payments 2021" report.
  • "When our concerns have been addressed, we should be saying 'yes' to these products, rather than straining to find ways to say no." Federal Reserve Vice Chair Randal Quarles on why the U.S. should find ways to accept stablecoins.
  • "It's hard to say where cool comes from — period. But I will tell you this: It's not the blockchain. Blockchain technology is transformative, it's subversive, it's surprising — but it is not cool." Coindesk reporter Brady Dale on crypto social networks.

Need to Know

  • More delays for Robinhood IPO? The trading app's public trading debut may be delayed a few months due to intense scrutiny of its prospectus by the SEC, according to Bloomberg.
  • Coinbase is expanding to Germany. The crypto marketplace has been granted a license for crypto custody and trading by the German Federal Financial Supervisory Authority. Coinbase Germany is set to launch in the coming weeks, the company said.
  • Payoneer went public via a SPAC. The payments company began trading on the Nasdaq on Monday after a SPAC merger with investor Betsy Cohen's FTAC Olympus Acquisition Corp.
  • Splitit formed a partnership with Tabby. The "buy now, pay later" company said the Middle East provider would use Splitit technology to let shoppers split payments on existing credit cards.

Making Moves

Deal Flow

3 Questions With...

Nathaniel Harley, CEO, Mantl

What fintech trend are you most excited about?

Fintech innovations around real-time payments, "buy now, pay later" and lending have proved very beneficial to helping small businesses through the pandemic, but I think that was just the tip of the iceberg. As the economy reopens, there will continue to be an opportunity to help small businesses with better financial solutions and experiences, especially as many of these businesses — and their customers — embrace technology in ways that weren't as prevalent before the pandemic.

What fintech trend is most troubling for you?

Across the board, 2020 was a huge year of growth for fintechs and we've seen that continue into 2021. We're continuing to see a lot of direct-to-consumer or direct-to-business companies being funded at extremely high valuations, but the fact is that not all of these companies will succeed and I'm skeptical about their long-term business models. This feels especially true for neobanks, which are seeing much of the growth and funding. In reality, neobanks are just community banks with poor business models.

What fintech company have you been most impressed with this past year?

Helping banks and customers get access to cryptocurrencies and making it more mainstream through rewards-based programs is a growing area of interest. Our friend Patrick Sells is doing just that over at NYDIG. Until now, bitcoin adopters have relied on apps from a new generation of fintech players like Robinhood, PayPal, Square or Coinbase. But banks are realizing that there's a huge opportunity for them to allow customers to wager on crypto within their existing bank relationship rather than sending dollars to Coinbase and other crypto exchanges, and I think this is a pretty exciting space to watch.

A MESSAGE FROM MICRON

Recently, Micron announced new memory and storage innovations across its portfolio based on its industry-leading 176-layer NAND and 1α (1-alpha) DRAM technology. But what does "1α" mean, and just how amazing is it?

Learn more

Data Point

More than $250 trillion

The projected value of cross-border payments globally by 2027, according to Finextra's "The Future of Payments 2021."

Thanks for reading — see you Friday!

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