Weekly Update

TFU | Jan. 27 – Feb. 2

Leading Off

California’s financial regulator established an Office of Innovation based in San Francisco; New York City became the latest city to ban cashless stores; Citi rolled out its new robo-advisory service; Wawa experienced a data breach exposing 30 million credit card records; Klarna raised $200M; and the NYT profiled the rising use of Bitcoin on the dark web.

In the News

California looks to foster fintech innovation.  California’s Department of Business Oversight plans to set up an Office of Innovation in San Francisco, which will track developments in the fintech hub. While the Office will not have rule-writing or supervisory responsibilities and will not act as a ‘sandbox’, it will influence state policies and liaise with firms and industry advocates. The office will focus initially on crypto guidance.

NYC bans cashless stores.  New York joins San Francisco and Philadelphia in banning stores and restaurants from rejecting cash payments, a blow to Visa and Mastercard who have plans for a ‘world beyond cash’ and have incentivized stores to go cashless. The city council views cashless businesses as discriminatory to low-income communities that lack access to credit, while proponents say the practice improves safety. 

Citi announces digital investing platform.  The global bank’s Wealth Builder robo-advisory service is available for free to Citi Priority customers or for a fee to non-Priority customers who maintain at least a $1,500 in their accounts. “Citi Wealth Builder makes it easy for clients to start investing [to] reach the next level of their financial journey,” said John Cummings, head of Citi’s U.S. Consumer Wealth Management unit.

Wawa breach exposes customer credit card data.  Hackers executed a malware attack against the convenience store chain (and hallowed ground for anyone from the Mid-Atlantic), exposing customer credit card information on the “dark web” site Joker’s Stash. The site claims to have “30 million debit and credit card records from U.S. customers . . . and more than 1 million global customers.”

Klarna raises $200M and launches in Australia. Klarna, the buy now and pay later Swedish fintech, officially launched in Australia on the back of a $200 million investment from the Commonwealth Bank of Australia. CBA’s CEO Matt Comyn stated that the partnership brings together CBA’s “market leading digital technology, merchant relationships and strong customer network with Klarna’s innovative payments technology and integrated shopping experience for the benefit of CBA customers.”

Bitcoin flourishes on the black market.  The New York Times writes that while Bitcoin’s value and trading volumes have fallen, the amount spent on the so-called dark net has spiked. Chainanalysis, a firm tracking bitcoin transactions, found that its use in illegal transactions grew 60%, to $601M, in the last three months of 2019. The rise complicates Bitcoin’s effort to move past its checkered reputation.  

2019 sees record level of UK fintech investment. Innovative Finance released a report showing that in 2019, the UK broke its own fintech investment records, notching $4.9 billion in capital raised, which was more than the rest of the top 10 European countries combined. While the report posits that there are plenty of reasons for optimism despite Brexit looming, the optimism for the UK to remain a world leader in fintech after the European exit is not shared by all.

Hyperledger Fabric 2.0 debuts.  The Hyperledger Foundation released version 2.0 of its open-source blockchain framework, with updates including “forcing agreement among the parties before any new data can be added to the ledger . . . [and] automated checks along the way.” Executive director Brian Behlendorf said that Fabric 2.0 “confirms the arrival of the production era for enterprise blockchain.” 

India proposes a central bank digital currency. India’s National Institute for Smart Government (NISG) has published its draft National Strategy on Blockchain [full text], proposing both a central bank digital currency (CBDC) and a national blockchain. But, NISG also outlined the existing legal challenges for the industry in India associated with lack of regulatory clarity, urging the Indian government to develop and promote regulatory clarity through official policy documents. 

BoE stablecoin decision targets stability.  The Bank of England’s recent decision to hold stablecoin payment systems to the same regulatory standards as existing systems was driven by financial stability, says BoE Executive Director Christina Segal-Knowles. Segal-Knowles noted that for payments, “it doesn’t matter what technology you are using. Same risk, same regulation.”

Texas Capital Bank launches Bask Bank. Bask Bank, a fee-free digital savings bank created and funded by Texas Capital Bank, launched earlier this week. The new digital bank earns American Airlines AAdvantage miles instead of interest. The bank explained that travel miles are part of a bigger approach geared at goals-based saving, “creating a savings program that rewards [customers] with something that most people really want, like travel, is a very powerful value proposition.”

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