Back for good after a brief hiatus and right on for a massive fintech deal! There’s plenty more though of fintech news in this week’s edition of the FinTechnologist Weekly:
Credit, Crypto and RegTech
Buy Now Pay Later, please
The big news in fintech this week probably was Klarna’s announcement that it had raised $639m in fresh money at a $45.6bn post-money valuation. That’s about the entire revenue of Goldman Sachs last year or what BoA paid for Merrill at the height of the global financial crisis. The latest funding round or the Swedish buy now, pay later behemoth and upstart bank was led by SoftBank’s Vision Fund 2 as well as existing investors Adit Ventures, Honeycomb Asset Management and WestCap Group. Did they put their money in the right basket? Who knows? It’s a sign though that a lot of people live on credit though, isn’t it?
More Focus on Crypto Exchanges
A number of regulators have expressed their concerns about the operations of cryptocurrency exchanges in particular with a view to the use of such platforms in particular with regard to money laundering. The last in a line of authorities to take this stance is South Africa’s Intergovernmental Fintech Working Group, which consists of members of various key players from the country’s government including the revenue service, reserve bank, and competition commission. In a new position paper on crypto-assets, the group calls for the regulation of the country’s current cryptocurrency system.
It sets out 25 recommendations for a revised South African policy, legal and regulatory position on crypto assets and related activities, and essentially provides a roadmap to putting in place a framework for regulating crypto asset service providers in the country. The key areas are the implementation of AML/CFT framework, a framework for monitoring cross-border financial flows, and the application of financial sector laws.
South Africa might not be the most important player in the global crypto asset landscape, but it highlights growing trepidations among regulators and the authors’ concerns even go so far as to say that without “limiting the exposure of prudentially regulated financial institutions and financial market infrastructures to crypto assets, the risk could over time spill over and create financial stability risks“.
Withdrawal effects
Interestingly, the FCA has announced at a similar moment in time that it is going to extend the end date of the Temporary Registrations Regime (TRR) for existing cryptoasset businesses from 9 July 2021 to 31 March 2022. With everyone waking up to the very real threat of cryptoassets being used in financial crime, and even the FCA itself emphasizing in its release that cryptoassets should be considered very high risk, speculative investments. with consumers investing in cryptoassets to be prepared to lose all their money, it seems a little odd at first.
The problem is though that a significantly high number of businesses is still not meeting the required standards under the Money Laundering Regulations, which in turn has resulted in an unprecedented number of businesses withdrawing their applications. Instead of drawing a hard line in the sand, the regulator has decided to give them a bit of leeway, it seems: The extended date allows cryptoasset firms to continue to carry on business while the FCA continues with its robust assessment, according to a statement.
The future of RegTech
Talking about the FCA, if you haven’t read it yet, check out its insight article on what firms really want when it comes to regulatory technology. It is an interesting piece on the view of financial services firms buying and implementing RegTech as well as the role of the regulator.
Without spilling the beans, the regulator found that financial institutions were generally with the work to promote the adoption of RegTech among regulated firms and provided positive feedback for the work carried out so far, which is pretty much in line what we have heard before about the FCA and confirms its good work. However, the watchdog confirmed that in particular larger firms can find organisational ‘buy-in’ with the RegTech sector challenging to achieve beyond dedicated innovation functions within large firms and that there remains much more to be done despite its past efforts. Work in progress and the authors promise that the FCA will keep itself busy, lining up a number of initiatives and aspects it is focusing on, but I don’t want to give it all away here, right?!?
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That’s all for this week but ff you have an interesting story or would join me on the podcast, connect on Twitter.
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