March 9, 2022
Photo: Andrey Rudakov/Bloomberg via Getty Images
Good morning, and welcome to Protocol Fintech. This Wednesday: cutting Russia’s cards, a crypto fraud arrest, and a fine for Deutsche Bank.
International Women’s Day was definitely not the best timing for Bain Capital Crypto to roll out an all-male team. After deleting a tweet with a photo of his partners, managing partner Stefan Cohen promised (in a since-deleted tweet) the firm had a “few more exciting hires to announce.” (He might want to get to know his new colleagues better: He apparently managed to tag the wrong Chris Hofmann on Twitter.) Cohen later apologized and said his firm’s “mess up” was a reflection of what happens when you don’t have a diverse team. At least he’s learning fast.
— Owen Thomas (email | twitter)
Sometimes it takes geopolitics to upend business as usual. That could be the case with the war in Ukraine, which has the potential to upset the established order of payment cards.
Visa and Mastercard both announced over the weekend that they’re stopping operations in Russia. That means Visa cards issued in Russia won’t work outside of Russia, and Visa cards issued outside of Russia won’t work inside Russia. Japan’s JCB followed suit Tuesday.
The effects of the moves by Visa, Mastercard and JCB have been softened by Russia’s development of the sanction-resistant MIR system, which processes all domestic card transactions inside the country, including those issued under foreign network brands. But buying products abroad will be difficult for Russian consumers. To keep their international business flowing, Russian banks have responded by seeking out other payment networks — with China’s UnionPay the chief option left.
UnionPay is much larger than you think. It’s already the largest network by number of cards in circulation due to the sheer size of the Chinese economy, said David Robertson, publisher of The Nilson Report. While best known and mostly used inside China, where it has about 90% market share, it is growing outside China as well.
Strategically, UnionPay needs to diversify. Historically, the pitch for UnionPay acceptance outside China has been volume from Chinese tourists and business travelers using their cards abroad.
Is it worth it to move to UnionPay? Russian banks can make the switch, Robertson said. “It’s completely possible. It then becomes a political question.”
There’s more uncertainty, of course. Merchant acquirers — which can be payments companies or banks in the U.S. — may not be willing or able to accept transactions from UnionPay, particularly with cards issued by Russian banks. That could defeat the purpose of moving to UnionPay. “It depends on how their lawyers view the sanctions,” Robertson said. So this crisis might be an opportunity for UnionPay — but one it should view with great caution.— Tomio Geron (email | twitter)
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On Protocol: Crypto lobbying is sweeping Washington, with a record 320 lobbyists attracting a record $9 million in spending in 2021. Groups with the biggest budgets included Coinbase, Ripple and the Blockchain Association.
Thailand is loosening tax regulations for crypto traders. The new policy exempts crypto traders from a mandatory 7% value-added tax on authorized exchanges. It also offered tax exemptions of up to 10 years for crypto startup investors.
Santander will offer loans backed by tokens tied to agricultural commodities in Argentina. In a partnership with startup Agrotoken, the financial services company will offer loans for the agricultural sector, backed by tokens pegged to the price of grain commodities in U.S. dollars.
Sen. Elizabeth Warren says she’s drafting a bill to make using crypto to evade sanctions harder. The move comes after Warren and other top Democrats wrote a letter to the Treasury Department asking what it’s done to ensure crypto isn’t used to bypass Russian sanctions.
Visa and Mastercard are preparing to raise credit card fees. Many large merchants will see an interchange fee increase next month when accepting consumers’ credit cards. The expected fee hike had been delayed because of the pandemic.
Goldman Sachs is offering clients a Galaxy Digital ETH fund. SEC filings show the bank plans to offer interested clients access to the ether fund. The bank will receive an introduction fee.
FINRA fined Deutsche Bank $2 million over order pricing. The Financial Industry Regulatory Authority said the investment banking firm routed customer orders through SuperX, an alternative trading system the firm owned, without considering whether other exchanges might deliver better prices.
On Tuesday, the SEC accused John and Tina Barksdale of defrauding thousands of retail investors who bought or invested in the Ormeus Coin cryptocurrency. The Justice Department announced John Barksdale has been arrested overseas and faces conspiracy and fraud charges for selling and promoting a cryptocurrency “through false representations.”
John Barksdale “operated like a traveling salesman and peddled lies, overstatements and misrepresentations” of the cryptocurrency, DOJ Special Agent Ricky Patel said in a statement.
Patel said John Barksdale misled investors by telling them the crypto company was secured by a $250 million crypto mining operation “which would have been one of the largest such operations in the world.” The company even ran an ad on a Jumbotron in Times Square making that claim, according to the DOJ.— Ben Pimentel (email | twitter)
Before joining Gemini, Abner wrote “The ETF Handbook” and consulted with the World Bank on encouraging the use of ETFs in developing capital markets.
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Our investors are all regulated. Our client base is generally regulated in the institutional space. And they want a regulated counterpart because they want clarity around who we are and what we do. We've done everything that we can so far on the regulatory front. We always use an “ask permission first” approach to everything. We don't do things and then ask for forgiveness.
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