If there has been one dominant topic in the past week, it has been the talk about new and coming cryptocurrency regulation as the bashing continues. What drives this latest development and what can we expect? This and more FinTech news today in the latest edition of the FinTechnologist Weekly:
Learning By Doing
Reigning in the Wild West
Without losing any time, let’s get straight to what everyone seems to be talking about: planned or real new laws to rule in cryptocurrency sector. Concerns have been voiced for a while, but concrete action has been sporadic, though regulators have turned it up a notch of late. Last week, we talked about the news of China and the US potentially bringing in more regulation and the UK’s FCA cracking down on Binance. While Chinese authorities are still busy with enforcement action like the latest clampdown on one of its tech giants – in this case the newly US-listed Didi, which appears only to next stop in a line of tech companies to be probed – regulators elsewhere call for urgent regulation like the Banque de France Governor or the South African authorities following a proliferation of scams with new rules due within the next six months and India possibly shifting gears, too.
Meanwhile, the European Commission’s proposed Regulation on Markets in Crypto Assets (MiCA) is going through its first readings in the Council and the European Parliament as part of the EU’s Digital Finance Strategy, a package of measures to further enable and support the potential of digital finance in terms of innovation and competition while mitigating the risks. The new regulation aims also to reign in cases of insider dealing or market manipulation, swiftly described on social media as an Elon Musk rule to make moving markets by using public statements and applying existing market abuse regulation at least in part. In any case, this certainly is one to follow.
FinTech Funding in Times of Crisis
Elsewehere in the wider FinTech universe, the International Banker looked into the numbers published in KPMG’s Pulse of FinTech. The bottom line is that investment by VC’s, Private Equity na dthrough M&A has taken a hit compared to the previous year. Global investment in financial technology was down from $168bn in 2019 to $105 in 2020 across 2,861 deals, i.e. 37.5% down, which the report quite justly calls “significantly”. This was apparently down to the lack of big-ticket M&A though the good news is that numbers have ramped up – again significantly – in the second half of the year. This could be read as having to do with the uncertainty created by the Covid pandemic early in 2020, but that’s, of course, my own personal hunch and who knows whether it really had anything to do with it.
The reports outlook for the FinTech sector is overall positive with the payments space continuing to draw a lot of interest driven by further developmens in open banking and according to the authors “there is every chance that funding for the fintech sector will remain buoyant for some time to come“. Good stuff.
Failure is the Strongest Master
FinTech loves success stories of unicorns securing large investments and achieving sky-high valuations, but personally I find stories of failure often more interesting. It isn’t because I’d consider myself an overly negative person that thrives on the despair of others. No, it’s because you can learn so much from other people’s failure, which in turn helps you to focus entirely on making your own and I could tell you a story or two on that subject. Anyway, this one is from the writers at Quartz Africa who tell the inside story of how an ambitious African cryptocurrency startup failed.
In a way, it consists of many typical elements: a bunch of young entrepreneurs giving up their jobs to build their part of the future of finance and an interesting that manages to secure some serious funding even in the early stages of its existence. Many cases share a similar narrative and other start-ups have made similar mistakes as KuBitX, an African cryptocurrency company. Following the initial success, troubles started to surface as it became clear that the founders didn’t have enough technical knowledge about Blockchain in general and trading platforms and payment systems in particular. The endeavor also showed some serious flaws in terms of how the whole project came to together and making some questionable decisions on how to run the ship further down the line. The lack of a plan or proper guidance contributed to the failure, too. And despite realizing the mistakes and making adjustments accordingly, the boat couldn’t be kept afloat anymore and the team decided to wind up the startup.
It certainly isn’t the heart-warming success story of some underdogs, but stuff like that is essential reading for aspiring startup entrepreneurs, in my opinion. Too often, we look at the examples set by massive success stories without really knowing what happened and why it succeeded while other failed and I always take the stories written by winners with a pinch of salt. After all, history is always written by the victors and that doesn’t make it necessarily always to be a true account. Without sounding too negative – ultimately these success stories inspire us to reach for the stars – though, let me finish with saying that it’s just damn useful to see how things should not be done. You can figure out the rest yourself.
And again that’s all for this week but fi you have an interesting story, please connect on Twitter. And if you would like to join me on the new FinTechnologist podcast, the same applies, of course. Have a good week!
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