September 1, 2022
Photo illustration: powerofforever/DigitalVision Vectors/Getty Images; Protocol
Good morning, and welcome to Protocol Fintech. This Thursday: lessons from the BitLicense, Klarna’s losses and Pinterest’s hunt for a payments guru.
In a sign that the NFT world may be maturing past the fantasy that minting on a blockchain somehow grants any kind of intellectual property rights, a16z Crypto has introduced a set of NFT licenses modeled after Creative Commons. The “Can’t Be Evil” licenses cover a range of scenarios, and even consider the question of theft, forbidding the exploitation of a stolen NFT. The licenses will be stored on-chain and are referenced through smart contracts. But the biggest hole in them, at least from a crypto purist perspective, is that they’re only enforceable through the existing legal framework (and only the U.S. courts, at that). Smart contracts can only do so much: If someone violates these “Can’t Be Evil” licenses, you’ll have to sue.— Owen Thomas (email | twitter)
California is turning the heat up on crypto. And the industry is warning the Golden State about what happened in the Empire State.
A bill awaiting Gov. Gavin Newsom’s signature would impose licensing requirements on businesses dealing in digital assets. Proponents say the proposal would protect consumers in a fast-growing market. The crypto industry warns it could trigger an exodus of crypto companies in California — just like what happened in New York.
Crypto could face more restrictions in California. The Digital Financial Assets Law would require businesses offering services for investing in, lending or trading digital assets to get a license from the state’s Department of Financial Protection and Innovation.
The California bill “mirrors the flawed approach of New York,” Chamber of Progress CEO Adam Kovacevich said in a statement. In 2014, New York’s Wall Street watchdog, the Department of Financial Services, unveiled the BitLicense credential required for facilitating most crypto transactions, issuing its first one the next year.
Crypto licensing is a “modest, reasonable and inevitable next step,” Herrell said. But that’s not entirely clear based on New York’s experience. Even a top California regulator who will be in charge of implementing the law has suggested that setting a crypto licensing program will be a tough process.
Regulating crypto at the state and local level “can backfire,” Malekan said. Crypto is a global industry, and companies can have users all over the world. “If local compliance is too hard,” he said, “then it might be best to just avoid it.” Regulators are in a tough spot, though: The coming federal crypto bill from Sens. Cynthia Lummis and Kirsten Gillibrand envisions some level of local regulation for exchanges and other businesses. And customers, facing a rising level of scams, are clamoring for better protections. Striking a balance will be a tricky challenge.— Benjamin Pimentel (email | twitter) and Ryan Deffenbaugh (email | twitter)
How cybercrime is going small time: Cybercrime is often thought of on a relatively large scale. Massive breaches lead to painful financial losses, bankrupting companies and causing untold embarrassment, splashed across the front pages of news websites worldwide.
On Protocol: The time of the Merge is nigh: Here's what it means for climate change.
Klarna is racking up big losses as it expands internationally. The Stockholm-based “buy now, pay later” firm reported an operating loss before tax of 6.2 billion Swedish kronor ($581 million) for the first six months of the year, up from 1.8 billion kronor in the same period a year ago.
A law group says insider trading in NFTs is not a crime. The New York Council of Defense Lawyers says insider trading charges against a former OpenSea employee should be tossed, arguing that prosecutors are contorting the law to turn workplace misconduct into a felony.
Crypto.com is suing to retrieve millions it accidentally sent a customer. The exchange sent an Australian customer 10.5 million AUD (about $7.2 million) instead of a 100 AUD refund. Seven months later it discovered the error, and is asking a court to get the money back from the customer, who reportedly bought a house with some of the mistaken payment.
Michael Saylor was accused of evading $25 million in D.C. taxes. D.C. Attorney General Karl Racine said that Saylor, the chairman of MicroStrategy and a prominent bitcoin maxi, claimed to reside in Virginia or Florida while living in several different homes around the district.
Honestly, Cornell law professor Dan Awrey had us at “payments wonk,” even before he got into his beef with the forthcoming FedNow real-time payments system: “The fact that it’s not even going to be interoperable with RTP suggests to me that it’s going to be out of date the moment it’s launched.”
"The Real World,” but in the metaverse, with Alexis Ohanian’s Bored Ape? Get ready for “The R3al Metaverse,” a show from Invisible Universe. “We think that the next Woody and Buzz will be introduced to you on TikTok instead of on the big screen,” CEO Tricia Biggio told Decrypt.
Open-finance technology startup MX has landed another PayPal veteran. Former PayPal VP Wes Hummel will serve as CTO at MX, which recently named PayPal's omni-payments solutions lead Jim Magats as CEO.
Fintech-focused Flourish Ventures has made two senior hires for a new San Francisco office. Tyler Mann, formerly of Greenoaks Capital, is Flourish's head of global legal, and John Onwualu, formerly of the U.S. International Development Finance Corporation and SoFi, joins as a principal on the U.S. investment team.
Pinterest is looking for a head of payment and fraud operations. The company wants to hire someone to innovate on its "end-to-end payments processing capabilities, including new ways to exchange money with payments partners." The image-sharing network recently named payments veteran Bill Ready as CEO.
Payments company NMI has hired Robert Hoblit as chief revenue officer. Hoblit most recently served as CRO of DigiCert.
How cybercrime is going small time: People have been swindled since before man created monetary systems. These aren’t new crimes; just new ways to commit them. But as cybercrime increasingly goes small-time, those on the front lines will need new and more effective ways to fight it.
Thanks for reading — see you tomorrow!