September 6, 2022
Illustration: Christopher T. Fong/Protocol
Good morning, and welcome to Protocol Fintech. This Tuesday: blockchain skeptics gather, the Merge promises more change and Poolin feels a chill.
Poolin is the latest crypto entity to freeze withdrawals from its wallet service, citing the need for “stabilizing liquidity.” Customers of the crypto mining pool had reportedly been experiencing problems with withdrawals in August. “Please be assured, all user assets are safe and the company's net worth is positive,” the company wrote. It’s also announcing a zero-fee promotion for mining, which is not exactly reassuring.— Owen Thomas (email | twitter)
Ethereum is expecting to make its biggest change ever this month, transforming how transactions are processed and secured on the blockchain. But the Merge, as the switch from proof of work to proof of stake is known, is more than just technical. It’s expected to bring major changes to the security and economics of the network, and ultimately its structure of control.
The most visible and popular aspect of the upgrade is reducing Ethereum’s environmental impact, with the Merge cutting energy consumption by about 99%. But proof of stake, advocates believe, will also make the network more resistant to a hostile takeover or government interference.
It’s far from the only change coming to Ethereum, which is facing increasing competition from other blockchains.
Ethereum’s money machine is changing. Instead of miners, the new network will have stakers as validators for transactions.
Ethereum faces upstart blockchains, many of which already use proof of stake. These top-level blockchains are known as Layer 1 chains, while blockchains built on top of them are known as Layer 2. Both categories could be affected.
First, though, Ethereum has to finish the Merge. Software clients will need to be updated Tuesday, setting a clock for the changeover. Any hitches in the transition could spook developers and Ethereum holders, but the core group working on the Merge seems confident it can pull it off. And though the Merge is a big milestone, it’s only one of many changes to come as crypto keeps evolving.
— Tomio Geron (email | twitter)
A version of this story first appeared on Protocol.com. Read it here.
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The OCC has ordered Blue Ridge Bank to improve its oversight over fintech partnerships. The bank also must bolster its anti-money laundering risk management, suspicious activity reporting and information technology controls after the Office of the Comptroller of the Currency “found unsafe or unsound practice(s)." The agreement provides a road map for banks and fintechs to stay on the right side of regulators, writes Fintech Business Weekly.
Binance is planning to convert users’ USDC into its own stablecoin. The exchange will start converting any existing user balances and new deposits of USD Coin, Pax Dollar and TrueUSD into the company’s own stablecoin starting Sept. 29, a move intended “to enhance liquidity and capital efficiency for users.”
New York and California’s AGs want credit card companies to track gun sales. The companies could flag suspicious purchases to law enforcement, similar to how financial institutions look out for money laundering, California Attorney General Rob Bonta and New York Attorney General Letitia James said in a letter sent to the companies. Mayor Eric Adams and other city officials made a similar appeal earlier in the week.
Big banks are working together on boosting credit access. Citigroup is joining JPMorgan Chase, Wells Fargo and U.S. Bancorp on a government-sponsored project sharing bank account data to help approve a wider swath of borrowers for credit cards.
The Crypto Policy Symposium is underway, and blockchain skeptics are getting some zingers in already. “An Oscar should go to whomever first coined ‘regulatory clarity,’” said Stephen Diamond, an associate law professor at Santa Clara University. For more on the movement to introduce alternate views into the debate over crypto regulation, see Ben Pimentel’s interview on Protocol with former SEC official John Reed Stark.
Y Combinator’s Demo Day takes place Wednesday and Thursday. More than a fifth of the current batch are fintech startups.
The Western States Acquirers Association also meets Wednesday and Thursday. Session topics include cryptocurrency and private equity.
GameStop reports earnings Wednesday. The meme stock turned NFT marketplace is expected to report a loss of 38 cents per share, against a 19-cent loss in the same quarter a year ago.
Don’t miss Protocol Fintech’s virtual event Thursday on modernizing payments. On Sept. 8 at 10 a.m. PT/1 p.m. ET, tune in to hear from Tomio Geron and industry experts about the big changes in America’s payments infrastructure and the challenge of catching up with innovation overseas. Reserve a spot now.
SEC chair Gary Gensler is speaking at the NYC Summit at the Metropolitan Pavilion. He’ll be joined in a fireside chat by former Commerce Secretary Penny Pritzker.
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Thanks for reading — see you tomorrow!