TFU | Dec. 16 – 22

Final Update for 2019, returning 1/6/2020

Dear readers, this will be our final edition of the year decade! Thank you, as always, for your continued interest and support of this newsletter, and we look forward to another great year ahead. Warmest wishes to all for a happy and healthy holiday season—and see you again in 2020! :-0

Best, The Fintech Update Team

Leading Off

FRB Governor Lael Brainard spoke to the ECB about the legal and regulatory challenges facing Libra; the American Banker discusses how online lenders are changing their acceptable risk appetite for new loans; Circle sold its OTC exchange platform and will reorganize its business around stablecoins in 2020; the ECB published a new report outlining how CBDCs could be established while respecting user privacy and AML rules; and Ripple raised $200M in new funding, giving it a $10B valuation.

In the News

Brainard outlines key challenges to Libra.  In a speech at the European Central Bank [full text], Federal Reserve Governor Lael Brainard highlighted a “core set of legal and regulatory challenges” facing Libra, including fraud, lack of transparency, and uncertain consumer rights. Her speech underscores (again) how far Libra remains from gaining central bank approval ahead of its planned launch in 2020.

Fintech lenders tighten standards.  The American Banker explores the changing business of online lending: after years of offering cheap personal loans, fintech lenders are tightening standards and targeting individuals with high credit scores and high incomes, looking much more like the banks they set out to disrupt. The changes call into question the claim that fintechs are better judges of risk than their traditional rivals.

FRB announces innovation office hours.  The Federal Reserve Board (FRB) will begin holding “fintech innovation office hours” at locations around the country, allowing “banks and fintech firms to meet one-on-one with Federal Reserve staff members . . . to discuss fintech developments and ask questions.” The FRB also rolled out a new, fintech innovation-focused section of its website.

Circle sells OTC platform, will focus on stablecoin business.  The DLT payments firm, which  sold its Poloniex exchange platform in October, is selling its Circle Trade unit to Kraken and “approaching 2020 with a deep focus on stablecoins” [full text]. Circle’s CFO and Chief Legal Officer are both stepping down as part of the reorganization, following last month’s resignation of co-CEO Sean Neville. 

ECB publishes on CBDC and AML compliance.  New research from the European Central Bank (ECB) demonstrated that “it is possible to build a simplified payment system for central bank digital currencies [CBDC]” that both protects user privacy and complies with AML rules. While the ECB highlights that “there is no immediate need” for a CBDC, the new paper shows how one could work.

Ripple raises $200M in Series C funding.  The global, blockchain-based payments firm brought in $200 million in fresh funding, valuing the firm at $10 billion. Ripple has grown the institutional user base of its RippleNet cross-border payments platform, which uses its proprietary XRP token, to 300 customers, helping it “[grow] momentum and industry leadership throughout 2019,” said CEO Brad Garlinghouse.

EU Parliament gives provisional approval for new crowdfunding rules.  The EU legislature is considering a new regulatory framework aimed at harmonizing the rules for “investment-based and lending-based crowdfunding platforms operating in the European Union.” The plan would allow such platforms to operate throughout the EU on a single license and increase investor protections.

ICBC, Alibaba, and Ant partner on digital payments.  The world’s largest bank in terms of assets will work with the Chinese tech and financial services giants to “promote the wider use of . . . technology in financial services.” Alibaba Group chairman Daniel Zhang commented that “[we] and Ant Financial highly value our . . . relationship with ICBC” and to building “the broader digital economy in China.”

Klarna targets expansion in 2020.  The Swedish payments fintech, which achieved a $5.5B valuation in August, is planning to launch in Australia and other markets after a successful rollout of its ‘buy now, pay later’ service in the US. Klarna says its adding six million users to its shopping app annually, driving its valuation as Europe’s largest fintech at the time of its latest funding round.

Curve introduce P2P payments across 25 currencies.  Curve, the card consolidation platform, launched a new feature that allows users to send money from any of their bank accounts to contacts and friends in more than 25 currencies. Curve will essentially operate as an exchange, bringing Visa and Mastercard together, charging no fees and additionally handling FX. It aims to make the P2P process simpler for its users.

If you missed our first Big Idea on stablecoins, be sure to check it out on our website!

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