July 26, 2022
Illustration: iStock/Getty Images Plus; Protocol
Good morning, and welcome to Protocol Fintech. This Tuesday: what fintech VC looks like in 2022, Coinbase under fire from the SEC and CFTC Commissioner Caroline Pham’s take on crypto.
We don’t need another hero. Or a super app. It’s an article of faith in fintech now that payment apps need to add shopping, social networks need payment options and digital wallets need to replicate physical ones, including room for those lengthy receipts no one asked for. What if consumers just want their apps to, I don’t know, not crash and deliver information and functionality quickly? After a steady drumbeat in 2021, I haven’t been hearing as much lately about super app ambitions, which seem to have crashed alongside valuations. Perhaps it’s another blessing of this economy.— Owen Thomas (email | twitter)
Rising interest rates and inflation continue to rock fintech and, along with it, VC investment in the sector. PitchBook shared a sneak peek of its forthcoming Q2 fintech report with us, and it shows that private-company investment hasn’t been immune to the forces savaging public-company valuations. But the data also reveals a more nuanced picture of what’s happening to fintech startups.
Think evolution, not apocalypse. If you were only reading Twitter, you might think venture capital funding was frozen over. In reality, VC firms are cutting about the same amount of checks, but with smaller dollar figures.
Fintech investment is still riding high. 2021 may have been an anomaly, with $121.6 billion raised, but 2022 investment in the sector is still historically strong.
The global game is shifting. Until 2020, most of the largest fintech venture capital deals were in China. Now deals are diversifying across Europe and Latin America.
There are other findings in PitchBook’s data, which will come out in a full report next month. Investments appear to be shifting away from consumer-facing products, after sky-high valuations for categories of businesses like “buy now, pay later” fell to surprising lows. More investment is going to business-to-business payments, by contrast. The kind of fintech that will garner investment in 2022 looks different from a successful fintech even a year ago. But there’s still plenty of money in the business of money.
— Veronica Irwin (email | twitter), with reporting contributed by AJ Caughey
They created Digital People. Now they've made celebrities available as Digital Twins: Soul Machines co-founder and CEO Greg Cross and his co-founder Mark Sagar, Ph.D., FRSNZ are leading their Auckland and San Francisco-based teams to create AI-enabled Digital People to populate the internet, at first, and soon the metaverse.
On Protocol: CFTC Commissioner Caroline Pham told Protocol’s Benjamin Pimentel that getting crypto regulation right is crucial for the U.S. and requires that the CFTC and SEC work together.
Coinbase is facing an SEC investigation over unregistered tokens. Separate from the recent insider trading case involving token listings, the exchange is reportedly fielding inquiries about its expanding range of cryptocurrencies, some of which the SEC suggests might be unregistered securities. This might explain why Coinbase has been loudly proclaiming that none of the cryptocurrencies it trades are securities.
A major U.S. stablecoin bill appears to be on hold. House lawmakers are delaying consideration of a bipartisan bill that hoped to curb potential risks posed by stablecoins for at least several weeks.
The CFTC is launching a new fintech office. The derivatives market regulator is upgrading its LabCFTC initiative into an Office of Technology Innovation that will direct fintech and digital assets oversight.
Also on Protocol: The OCC is looking for new research on the impact of fintech on banking markets.
Zipmex is looking for cash. After freezing some withdrawals last week, the Asia-focused crypto exchange is seeking to raise at least $50 million to repair its balance sheet.The crypto crash is not slowing crypto lobbying. Lobbying expenditures by crypto firms reached about $6.8 million in the second quarter, up 17% from the start of the year, according to an analysis by the Block
“[W]e have moved past the stage of digital assets as a research project,” CFTC Chair Rostin Behnam said on a webcast with the Brookings Institution Monday.Coinbase chief legal officer Paul Grewal might agree. “The U.S. does not currently have a functioning market in digital asset securities due to the lack of a clear and workable regulatory regime,” he wrote in a petition to the SEC asking it to start rule making on cryptocurrencies.
Launchpad Capital and private equity firm Castle Creek joined forces to launch a $90 million fintech VC fund serving community banks. The fund will primarily invest in mobile-first Web3 technologies.
Aptos Labs raised $150 million in a Series A round led by FTX Ventures. The ex-Novi team is reviving the Diem blockchain after the technology lost Meta’s backing in January.
Crypto corporate treasury firm Meow, which promises up to 4% yields, raised $22 million in a Series A funding round led by Tiger Global. Alex Cook, a partner at Tiger Global, says it invested in the firm because of “Meow’s prioritization of risk management.”
Blockchain security startup Halborn raised $90 million in a Series A round. The Miami-based company received funding from Summit Partners, which led the round, in addition to Castle Island Ventures, Digital Currency Group and Brevan Howard.
Italian iBuyer Casavo raised about $102 million in a Series D round along with some $307 million in debt. Exor led the equity portion, while Intesa Sanpaolo, Goldman Sachs and D.E. Shaw provided the debt funding.San Francisco-based X1 raised $25 million in a Series B funding round led by FPV Ventures. X1’s “smart” card offers distinctive benefits including the ability to shop anonymously. Investors in the round include the Chainsmokers.
They created Digital People. Now they've made celebrities available as Digital Twins: Soul Machines is at the cutting edge of AGI research with its unique Digital Brain, based on the latest neuroscience and developmental psychology research.
Thanks for reading — see you tomorrow!