May 24, 2022
Photo illustration: Al Drago/Bloomberg via Getty Images; Protocol
Good morning, and welcome to Protocol Fintech. This Tuesday: Gensler on bitcoin, Cawthorn’s crypto and PayPal’s layoffs.
Who said crypto’s worthless? At Davos, Tether was handing out free pizza slices to celebrate Bitcoin Pizza Day, the time when a poor soul exchanged 10,000 bitcoin, then worth $41 and now worth roughly $300 million, for two pies. The gathering of central bankers, the traddiest of the TradFi crowd, jostled elbows with HODLers. Even as Christine Lagarde of the ECB argued that crypto was “worth nothing,” Circle CEO Jeremy Allaire and FTC CEO Sam Bankman-Fried showed up to make the case for digital assets. One lesson: Don’t pay for pizza.— Owen Thomas (email | twitter)
SEC Chair Gary Gensler has long argued that many cryptocurrencies are subject to regulation as securities. But he recently clarified that this view wouldn’t apply to the best-known cryptocurrency, bitcoin.
Gensler told the House Appropriations Committee last week that the SEC has “jurisdiction over probably a vast number” of cryptocurrencies currently in circulation, but “maybe” not bitcoin, which as a “commodity token” would be better overseen by the CFTC.
For Gensler, those are strong words. He’s been criticized for leaving vague which cryptocurrencies would be considered securities and which ones are commodity tokens.
Crypto insiders complain that they find out the SEC’s views on their products through legal action. They call it “regulation through enforcement.”
The SEC has made a case that XRP is the former, not the latter. The agency sued Ripple for failing to register roughly $1.4 billion worth of XRP as securities.
The SEC is now in a high-risk position. The Ripple case could give it a victory or box it in.
Those laws could change, too. A new crypto bill from Sens. Kirsten Gillibrand and Cynthia Lummis, promised since March, could come as soon as this week, according to Bloomberg. The bill would split oversight of crypto between the SEC and CFTC along the lines of the SEC’s existing responsibilities for securities and the CFTC’s for commodities.
— Benjamin Pimentel (email | twitter)
A version of this story first appeared on Protocol.com. Read it here.
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On Protocol: GameStop is going full Web3 with the launch of a self-custodial crypto wallet. The games retailer is cautioning users to use the wallet, still in beta, “responsibly.”
A Fed report showed two major types of crypto users. The study showed that generally, people in higher income brackets use crypto as an investment, while people in lower income brackets use crypto in transactions.
Also on Protocol: In a pre-recorded video call, Klarna CEO Sebastian Siemiatkowski told employees that it’s laying off 10% of its workforce, a move that has come amid a sharp decline in the market value of “buy now, pay later” companies.
Madison Cawthorn is being investigated for insider trading in connection with a crypto promotion. The U.S. House Ethics Committee has opened an investigation into the Republican lawmaker’s promotion of the Let’s Go Brandon coin, on allegations that Cawthorn misrepresented how much he knew about the project.
Top crypto leaders want to stop the OECD from extending tax rules further. While the Organization for Economic Co-operation and Development wants to extend traditional international banking tax rules to DeFi and NFTs to stop secret foreign bitcoin holdings, crypto leaders are calling the move “overly broad.”
PayPal laid off 83 workers based in San Jose. The layoffs reportedly mostly affected engineers, managers and directors at its headquarters, with the company hinting at short-term cost reductions in its first-quarter earnings call with analysts.
PayPal plans to dive deeper into the crypto world and expand its offerings in the future. At Davos, executive Richard Nash said that the payments giant is “looking to work with others to embrace everything we can,” ranging from “PayPal digital wallets, private digital currencies or CBDCs in the future.”
When asked about what would happen if Binance were to ever go bankrupt, CEO Changpeng Zhao said in an AMA Reddit thread that “funds would be refunded to users first, BEFORE any shareholders,” and if an investor has a problem with that, Zhao says, “Bye.”
Even with a general economic downturn and fears of a recession brewing, JPMorgan Chase Chief Financial Officer Jeremy Barnum thinks that U.S. consumers don’t need to worry yet. “Big picture, the near-term credit outlook, especially for the U.S. consumer, remains strong,” Barnum said at the bank’s investor day.
Secretive crypto startup TipTop raised $23 million in a series A funding round led by Andreessen Horowitz. Postmates founder Bastian Lehmann first teased the startup a few weeks ago, and is keeping his descriptions of the “consumer finance solutions” company vague.
San Francisco-based credit building service Altro raised $18 million in series A funding. Pendulum led the round, while Jay-Z’s Marcy Ventures and Black Capital Fund also participated.
Banking-as-a-service startup Unit reached a $1.2 billion valuation. A $100 million series C round led by Insight Partners boosted it to almost five times its previous $255 million valuation.
Xendit, an Indonesian payments company, raised $300 million in a series D round. The startup closed a $150 million series C round about nine months ago. The company’s new valuation was not disclosed.
Keep Financial, which offers vesting cash compensation plans for employees, announced a $9 million seed round led by a16z. The company was created by Kabbage founders Rob Frohwein and Kathryn Petralia.Crypto savings app Pebble announced a $6.2 million seed round. Y Combinator joined the round, in addition to Lightshed Ventures, Cadenza Capital and Orange DAO.
On the Stellar network, cross-border business payments can be sent and received in minutes for a fraction of a penny – redefining how funds move around the world. Learn more about how others have built real-world blockchain solutions on Stellar.
Thanks for reading — see you tomorrow!