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The fintech bust, reconsidered

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Monday: New York’s mining moratorium, the wait for the big crypto bill, and India’s go-slow approach to digital assets.

Off the chain

The cuts keep coming. 2TM, the parent of Brazil’s Mercado Bitcoin, laid off 12% of its staff last week. The next step seems inevitable: consolidation. How many crypto exchanges does the world need? How many “buy now, pay later” providers? The music has started, and the dance has just begun. It will be a while, but the scramble for a chair will be intense when it comes.

— Owen Thomas (email | twitter)

Don't panic (much)

Just scrolling fintech Twitter is enough to give you whiplash. Crypto’s gloom is casting a pall on the broader fintech world, along with the shaky economy, crashing stocks and rising layoffs. But is the apocalyptic mood overblown?

VCs agree that founders should tighten their belts, but they’re unhelpfully vague on whether that’s for a few months or a few years. Talk to startup CEOs, and they’ll blame the economy or, discreetly, acknowledge that some IPOs were frothily overpriced.

When there’s so much chatter, I find it useful to talk to someone whose job it is to just crunch the numbers, not place bets. So I called Robert Le, a fintech analyst at PitchBook, to extract some signal from the noise.

Le said fintech valuations are falling because public markets see the companies as more “fin” than “tech.” The industry is coming to terms with the fact that the broader public doesn’t see these companies as worth the kind of multiples software companies get.

  • Before last year, there weren’t many public fintechs, period. $329.4 billion more was made in 2021 fintech exits than in 2020, and the vast majority of that money was made in IPOs, according to PitchBook.
  • That was a nice haul while it lasted. The valuations of most fintech companies that went public in 2021 have fallen by double digits.
  • Le likes to look at the F-Prime Fintech Index, which tracks fintech companies against cloud services, the Nasdaq and the S&P 500. Fintechs are doing a lot worse than cloud companies, which supports his point about “fin” versus “tech.”

An increase in M&A looms on the horizon. Private fintechs will need more money soon, and if they can’t get it from VCs, Le said their only options are to “go out of business or sell.”

  • Le said the report that Klarna was raising money at a 33% haircut was a big indicator that fintechs are struggling to raise.
  • Who’s up for sale? Private companies’ cash flows aren’t widely available. But one proxy Le looks at is whether a company that’s post-series has raised since mid-2020. Venture funding rounds are typically meant to give 18 to 24 months of runway. If that’s running out, a sale is all but inevitable.
  • Who are the buyers? Public companies with a lot of capital, or private ones that raked in big late-stage rounds. Le named Stripe as an example of the latter. Le also thinks traditional financial services companies will be looking to make acquisitions now that targets are more affordable. I saw some banks on the prowl at Finovate last month.

Not to go all “Battlestar Galactica” on you, but all of this has happened before, and all of this will happen again. VCs were giving very similar advice to tech companies in the spring of 2020 as they are now — and 2020 turned out to be nothing like 2008.

  • Sequoia’s Black Swan memo was the most memorable false alarm. Initialized was warning founders, too. There’s another boom in bearish advice now.
  • Running the numbers, Le pointed out that there’s one big difference between now and the last real recession: There’s a lot more dry powder than there was 14 years ago. In Pitchbook’s Q1 VC valuations report, the firm pointed out that of $230 billion available at the end of 2021, only $74 billion was invested in the first quarter of 2022. Even with Tiger and SoftBank getting cold feet, there’s lots of cash ready to invest in private equity, too.

Le warns that there are still a lot of unknowns. Another quarter of earnings reports will give a far better read on how the economy is affecting fintechs’ core businesses. At the risk of sounding like a vague VC: Founders should plan for the worst, and hope for the best.

— Veronica Irwin (email | twitter)


A resounding 96% of respondents claimed that there is work to do in digitizing their AR departments, yet 60% agreed that their AR departments haven’t been prioritized as much as other departments for digitization. At a time when the importance of securing cash flow is higher than ever, many businesses are not putting enough focus on it.

Learn more

On the money

On Protocol: Crypto scammers have tricked consumers out of at least $1 billion since 2020, according to the FTC. The problem is accelerating, with people getting scammed out of $329 million in the first three months of 2022.

Bolt is cutting more than just jobs. Following layoffs of 250 employees, the online-checkout startup is trimming costs and paring back revenue projections, according to the Information.

Also on Protocol: The Lummis-Gillibrand bill draft could be a win for crypto taxes, with leaked language touching on some of the main concerns the crypto industry has voiced, including the definition of “brokers,” crypto lending and the de minimis exception.

Japan introduced a legal framework for stablecoins. Japan is the first major economy to do so, defining stablecoins as “digital money” tied to the yen or other legal tender, which can only be issued by licensed banks, registered money transfer agents and trust companies.

India’s taking a go-slow approach to crypto. As the world’s largest democracy, India hasn’t yet introduced crypto legislation, which could mean it’s missing its crypto moment. It could also mean avoiding the blockchain’s growing pains.

A 401(k) provider is suing the U.S. Labor Department for its crypto guidance. The California-based provider, ForUsAll, alleges that the agency did not go through proper procedures when issuing the guidance, including a time-consuming notice and comment period.


The New York state legislature passed a two-year moratorium on mining that uses proof of work on Thursday, effectively banning new bitcoin mining facilities from opening if signed into law by Gov. Kathy Hochul. But the passage isn’t without plenty of passion from groups both opposing and favoring the bill.

Climate advocates are seeing this as a win, and the right step toward meeting the state’s climate goals. “This is Gov. Hochul and the administration’s new fracking moment,” Liz Moran, Earthjustice’s New York public advocate said, referring to former Gov. Andrew Cuomo’s ban on fracking.

But blockchain advocacy groups think that it’s only stifling innovation and driving jobs out of the state. “This is a significant setback for the state and will stifle its future as a leader in technology and global financial services,”Perianne Boring, founder of the Chamber of Digital Commerce, said.

Some think that the simple solution is for miners to do business where they’re actually wanted. If you’re going to ignore that, then you have to deal with the consequences of conducting business in a region that doesn’t want your business,” bitcoin mining firm Core Scientific co-founder Darin Feinstein said.

Coming up

Money 20/20 Europe starts Tuesday. The three-day conference held in Amsterdam will feature speakers from Stripe, Binance, Visa and more, and will cover topics ranging from cryptocurrencies to consumer trends.

The Lummis-Gillibrand crypto bill is expected Tuesday. Sens. Cynthia Lummis and Kirsten Gillibrand will unveil their bill to regulate digital assets, which promises the clarity many in the industry have asked for.

Want to hear more? “The Evolution of Money: Cryptocurrency Regulation” is on Wednesday. Hosted by The Washington Post, the event will feature Sens. Gillibrand and Lummis, CFTC chair Rostin Behnam, Circle Chief Strategy Officer Dante Disparte and Haun Ventures Global Chief Policy Officer Tomicah Tillemann. (We’re wondering if Gary Gensler’s invite got lost in the mail.)

The Banking Transformation Forum 2022 is on Thursday. The conference will be held in New York City, and will feature speakers from Citibank, Wells Fargo, JPMorgan Chase and others.

Consensus 2022 starts on Thursday. The four-day conference hosted by CoinDesk will be held in Austin, Texas, featuring speakers like FTX CEO Sam Bankman-Fried, PayPal CEO Dan Schulman, Binance CEO Changpeng Zhao and others.

American Banker’s Digital Banking event follows that on Monday, June 13. The three-day conference will also take place in Austin, Texas, featuring speakers from Remitly, Mastercard and Citi.


A resounding 96% of respondents claimed that there is work to do in digitizing their AR departments, yet 60% agreed that their AR departments haven’t been prioritized as much as other departments for digitization. At a time when the importance of securing cash flow is higher than ever, many businesses are not putting enough focus on it.

Learn more

Thanks for reading — see you tomorrow!

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