August 15, 2022
Illustration: lvcandy/DigitalVision Vectors/Getty Images; Protocol
Good morning, and welcome to Protocol Fintech. This Monday: the Tornado Cash fallout, Mastercard’s controversial “buy now, pay later” move and the profits in Brazil’s Pix payments.
Crypto consolidation is here. Huobi is reportedly looking to sell a majority stake in the crypto exchange, which could fetch a value of as much as $3 billion. The rebound in everything from bitcoin to Coinbase’s market cap has given some confidence that the crypto market found its bottom earlier this year. But there are still swirling questions about what makes a crypto exchange valuable: the number of wallets, the breadth of its product offering, the pricing on trades? With some air taken out of the market, we might be able to pin down more answers.
The sanctioning of cryptocurrency mixer Tornado Cash last week sent cryptoland spinning into a tizzy. Mixers are not only for criminals, many were quick to point out: Ethereum does not inherently protect users’ privacy, so many ether holders use mixers to provide themselves anonymity for legitimate transactions. Ethereum co-founder Vitalik Buterin, for example, “outed” himself on Twitter as someone who used Tornado Cash for donations to Ukraine to illustrate that point. But then Dutch authorities arrested a 29-year-old man who allegedly helped build Tornado Cash. And that, for some, brought the fallout even closer to home, raising concerns for a wide range of blockchain developers.
Dutch authorities say there may be more arrests. The Netherlands’ Financial Advanced Cyber Team, part of the country’s Fiscal Information and Investigation Service, began investigating Tornado Cash in June.
Pertsev is not an employee of a company, but a developer who contributed code to a decentralized protocol. In many circumstances, this is merely a technical distinction but in this case his role may be critical.
Liability for contributing code is a complex question. Much depends on the specifics of a country’s law.
No matter what happens to Pertsev, the damage may already be done. Material consequences are sometimes less important than perception — and the lack of clarity around developers who contribute to the open-source code that runs much of the blockchain world could cause a chilling effect, some fear. “This arrest, if as alleged [by Dutch authorities], opens up many projects to scrutiny by various law enforcement agencies,” Tacen co-founder Jae Yang told Protocol.
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: Andreessen Horowitz is backing Adam Neumann’s Flow, a residential real estate startup.
Skynet Labs is shutting down. The company behind siacoin was trying to build a decentralized storage and app-hosting system.
Why are credit cards so profitable? The Consumer Financial Protection Bureau took a deep dive into the factors driving the industry’s “outsized profits.”
Mastercard’s “buy now, pay later” product is already generating a backlash. Some retailers aren’t happy with getting automatically enrolled in the program, the Financial Post reports.
The CFTC charged an Ohio man with engaging in a crypto Ponzi scheme. The commodities agency said Rathnakishore Giri had cheated at least 150 people out of more than $12 million.
Ripple is eyeing bankrupt Celsius’ assets. The company is “actively looking for M&A opportunities” to build up its business.
Patrick Pihana Branco, a crypto-backed candidate for a House seat in Hawaii, lost in the Democratic primary. Two industry-linked PACs had spent almost $300,000 backing his campaign.
Is Ethereum going to get forked by proof-of-work diehards? Vitalik Buterin doesn’t think so. The pre-Merge split is backed by a “couple of outsiders that basically have exchanges, and mostly just want to make a quick buck,” he said at ETHSeoul Friday.
Brazil’s real-time Pix payments aren’t costing banks money, central bank chief Roberto Campos Neto said, since it boosts transaction volumes and reduces cash costs. Other bankers are asking him how he got the industry to agree to it, he added. "In Brazil, they collaborated and that's why we have Pix,” he told bankers at an event hosted by lobbying group Febraban. “Banks understood that, in the end, it's a win-win model."
The Vencent Fintech Summit is Monday through Wednesday. The three-day conference features over 70 demos in Little Rock, Arkansas.
LA Tech Week runs Monday through Sunday. The VC-centric tech summit is taking place in a variety of West Los Angeles settings, including the beach.
Sunlight Financial reports earnings Monday. The consensus EPS forecast for SUNL is $0.05 this quarter, against $0 for the same quarter last year.
Compass will also have its earnings call Monday. The consensus EPS forecast for COMP is $-0.17 this quarter, where it was $-0.02 after the second quarter last year.
OneConnect Financial Technology is expected to report earnings on Tuesday. Zacks didn’t report a consensus earnings forecast; the company lost $0.14 a share in the second quarter last year.
Jack Henry & Associates will also have an earnings call Tuesday. The consensus EPS forecast for the quarter is $1, where it was $1.04 for the same quarter last year.
Bill.com will report earnings Thursday. The consensus EPS forecast for BILL is $-0.68 this quarter, where it was $-0.44 for the same quarter last year.
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!