Opinion: Binance Says it Will Sue the Block, the Block Clarifies its Reporting

Crypto centric digital news site The Block is making some news about itself.

Last week, the Block reported on an alleged shutdown of a Binance office located in Shanghai.

As most crypto followers know, cryptocurrency trading is illegal in China – even while the Chinese government is focusing on developing its own Central Bank Digital Currency (CBDC) as well as making blockchain development a core policy item. Add to this the fact that a good amount of crypto-mining takes place in China and the country is well known for being active in the digital asset sector. It is widely assumed the OTC markets in crypto remain a vibrant reality across China.

Several days ago, the founder and CEO of Binance, “CZ,” indicated he was unhappy with the reporting and quickly pulled out the big legal guns and said Binance would be suing the Block.

As the dustup devolved, the Block has found themselves as being part of the news instead of covering it.

In a followup post, the Block provided clarity in the post by “Setting the record straight on our Binance reporting.”

The Block has made some changes to the original reporting – something it clarified in the followup report.

The crypto sector has rapidly emerged to create a dynamic sector of Fintech challenging regulators and policymakers globally. For this sector of Fintech to evolve effectively, and become a sustainable ecosystem, it is absolutely vital that an independent media emerges to cover the good, the bad and the simply ugly.

Crowdfund Insider stands by the Block’s approach and suggests that CZ reconsiders his legal challenge – something that will not help Binance’s cause and stands to undermine its image. Binance needs the Block, a publication that is known for its balanced reporting, just as much as the Block needs them. Hopefully, cooler minds will prevail.

Bitfinex Slams “Copycat Lawsuit” Filed in State of Washington

Bitfinex, a beleaguered crypto exchange, was hit by a class-action lawsuit last week filed in the U.S. District Court for the Western District of Washington.

Bitfinex is also the target of an investigation that was launched by the New York Office of the Attorney General. The AG claimed earlier this year that Bitfinex operators, who also control Tether, engaged in a cover-up to hide a loss of $850 million of “co-mingled client and corporate funds.”

In October, a separate class-action lawsuit was filed by against Bitfinex and Tether, alleged creators of “Largest Bubble in Human History.”

Bitfinex stated earlier this month that it had advised the U.S. District Court in the Southern District of New York of its intention to file a motion to dismiss the class-action lawsuit it deemed “frivolous.”

Earlier today, Bitfinex slammed the class action filing in a blog post:

“On November 22, without notice to us, a class action complaint was filed against Bitfinex and Tether in the U.S. District Court for the Western District of Washington. This copycat lawsuit suffers from the same multitude of deficiencies as the unsound complaint filed in the U.S. District Court for the Southern District of New York on October 6. The Plaintiffs’ claims here are similarly without merit, and Bitfinex strongly contests the bogus research purporting to support them.

As we predicted last month, mercenary lawyers continue to try to use Bitfinex and Tether to obtain a payday. To be clear, there will be no nuisance settlements or settlements of any kind reached. Instead, all claims raised across both actions will be vigorously contested and ultimately disposed of in due course. Once they are, Bitfinex and Tether will fully evaluate their legal options against those bringing and promoting the baseless claims.”

Bitfinex called the accusations “absurd and groundless” while stating the attack was not just directed at them but the entire digital token ecosystem.

“Our fight is the community’s fight,” stated Bitfinex.

Bitfinex also claimed that has never used Tether token issuance to manipulate cryptocurrency pricing. Multiple industry observers and participants have claimed that some crypto trading, and perhaps the price of Bitcoin, are impacted by bogus trades and manipulation.

Bitfinex called it “irresponsible” to suggest that its company had engaged in any illicit activity.

 

Decentralized Securities Depository, dba Openfinance, Raises $8.6 Million. Seeks Up to $50 Million

Decentralized Securities Depository, LLC, dba Openfinance, has raised $8.6 million from 19 different investors, according to a filing with the Securities and Exchange Commission (SEC).

Decentralized Securities Depository/Openfinance is a secondary trading market for digital securities. Simply naming the company decentralized indicates the utilization of blockchain or distributed ledger technology (DLT).

Openfinance has an alternative trading system (ATS) license and provides secondary trading for digital securities to both individual and institutional investors. Openfinance seeks to provide additional liquidity in both traditional and non-traditional markets. The company recently tokenized a hedge fund offering as well as a media firm, Current Media. Openfinance believes that the Reg A+ exemption may provide a path for future digital asset offerings.

The marketplace operates 24/7 and is providing trading services to investors both within the US as well as a growing list of international markets such as the UK, Germany and France.

Openfinance operates wholly-owned broker-dealer Sageworks Capital as well. Openfinance has partnered with the three top digital securities issuance platforms: Securitize, Harbor and Polymath.

Openfinance is part of the building block of building a full-stack digital securities ecosystem. The Form D filed with the SEC indicates that the company is hoping to raise up to $50 million.

Openfinance was founded by co-CEO Juan Hernandez who filed the document with the SEC.

The advent of digital securities is accepted as a given it is more a question of how long will it take to migrate from the traditional, more analog, operations of today to a more streamlined digital asset environment. In multiple jurisdictions around the world, the transformation to digital securities is moving forward at various speeds. At times, regulators have struggled to keep up with the transformation.

Bigger is Better: Digital Brokerage Charles Schwab Buys TD Ameritrade for $26 Billion

As predicted last week, online broker Charles Schwab (NYSE:SCHW) has announced the purchase of TD Ameritrade (NASDAQ:AMTD) in a deal worth $26 billion.

According to Schwab, the all-stock transaction represents a 17% premium of TD Ameritrade’s average share price as of November 20, 2019. Shares in TD moved little in pre-market trading as much of the gain had already taken place when word of the acquisition became news last week. Shares in Schwab held steady in the pre-market too. TD Ameritrade stockholders will receive 1.0837 Schwab shares for each TD Ameritrade share.

The combined entity will handle 24 million client accounts with more than $5 trillion in client assets. Schwab + TD Ameritrade will generate a total annualized revenue of $17 billion and pre-tax profits of approximately $8 billion.

Schwab President and CEO Walt Bettinger issued the following statement:

“We have long respected TD Ameritrade since our early days pioneering the discount brokerage industry, and as a fellow advocate for investors and independent investment advisors. Together, we share a passion for breaking down barriers for investors and advisors through a combination of low cost, great service, and technology. With this transaction, we will capitalize on the unique opportunity to build a firm with the soul of a challenger and the resources of a large financial services institution that will be uniquely positioned to serve the investment, trading and wealth management needs of investors across every phase of their financial journeys.”

TD Ameritrade EVP and CFO Stephen Boyle said that partnering with Schwab on this transformative opportunity makes the right strategic and financial sense for TD Ameritrade:

“We share a common history—a journey since 1975 that has made Wall Street more accessible and financial dreams more attainable for millions of Americans. Our associates are fiercely proud of that legacy and all that we have accomplished to make TD Ameritrade one of the premier firms in financial services. Now we look to join forces with a respected firm like Schwab that shares our relentless focus, and to do more than we could do apart. Together, we can deliver the ultimate client experience for retail investors and independent registered investment advisors. We can continue to challenge the status quo, pooling our resources and expertise to transform lives—and investing—and deliver sustainable, long-term value to our many stakeholders.”

The deal is expected to close in the second half of 2020. “Integration,” a term that may also be construed as workforce reduction, will begin soon after. Schwab stated that “reductions in staff are a necessary part of achieving overall expense synergies.”

Synergies generated by the deal are expected to be 10-15% accretive to GAAP EPS and 15-20% accretive to Operating Cash EPS in year three, post-close. Expense reductions are predicted to be approximately $1.8 to $2 billion. Overlapping services will be rationalized along with the extensive real-estate holdings of the two firms. Schwab currently has over 365 physical branches. TD Ameritrade operates over 275 branches nationwide. These need to go as the cost to operate them is high.

Schwab stated that the transaction is squarely in line with Schwab’s long-term strategy – part of which is the sheer economies of scale accomplished by an instant doubling of their client base.

“It allows Schwab to continue to add scale on top of its organic growth, with the addition of approximately 12 million client accounts, $1.3 trillion in client assets and $5 billion in annual revenue. We expect this added scale to lead to lower operating expenses as a percentage of client assets (EOCA), which helps fund enhanced client experience capabilities, improve the company’s competitive position and further its financial success. This is our Virtuous Cycle at work.”

While both Schwab and TD Ameritrade are far bigger than many of the Fintech upstarts nipping at their heels, the digital brokerages have shifted from being the disruptors to becoming disrupted by these more agile Fintechs.

In recent weeks, emerging Fintech competitors to traditional online brokerages had worried the sector with their no-commission approach to trading along with their asset-light operations. Both Schwab and TD Ameritrade had announced the removal of trading commissions following the lead of Fintechs like Robinhood – an investment platform that has been hoovering up customers at a rapid rate. The elimination of commissions gave rise to the question if the competition was becoming a race to the bottom.

Earlier this year, Robinhood raised $323 million in financing at a $7.6 billion valuation. Robinhood prominently promotes zero fees on trading in stocks, funds, and options while also providing crypto trading. In October, Robinhood announced FDIC insured savings accounts with a high promotional interest rate to encourage more account creation (2.05% APY at the time of the announcement).

Schwab and TD Ameritrade provide trading and wealth management platforms, custody platforms, retirement services, banking, and asset management.

Of note, Schwab operates Charles Schwab Bank an entity that provides banking and lending services and products – a service TD Ameritrade clients will now find as part of the basket of product offerings.

So is bigger better or will this be another merger that suffers from hubris and a clash of cultures? The jury is out on its verdict.

Technology is at it is best when it is ubiquitous but not obtrusive. We want access to it when we need it otherwise don’t be a bother.  This holds true for Fintechs as well. While Fintechs like Robinhood have caught the wave of digital innovation boosted by its ethos of democratizing financial services, Schwab+TD are positioned to challenge Robinhood head-on – if corporate strategy allows it to make the right decisions. We live in a world where brokerage (and bank) branches are not necessary at all. Between Schwab and TD the two companies have over 640 offices.

New services by the traditional brokerage must be part of the package. This includes access to alternative investments like crypto, real estate and non-traditional funds. Schwab recently announced a partnership with iCapital that enables wealthier clients to access alternatives. Sophisticated services need to filter down to the regular guy.

The Charles Schwab Bank is key to the success of the merger. The digital bank offers unlimited ATM fees and 0% foreign transaction fees for consumers – a big deal. Unfortunately, savings rates have lagged the competition but this can be easily addressed. Schwab needs to bring its banking services out of the shadows and promote it more effectively. The Charles Schwab Bank is also in desperate need of a digital makeover.

The combination of the two brokerages will take some time. It is not clear how the two cultures will mix. Meanwhile, Fintechs will continue to iterate, adapt, add new services and expand, unhindered by a long legacy of financial service tradition.

 

Bitcoin Store: UK Citizen and Fraudster Renwick Haddow Barred by SEC

Renwick Haddow, a UK citizen who allegedly perpetrated multiple frauds, has received additional sanctions from the Securities and Exchange Commission (SEC). Haddow apparently also adopted the alias “Jonathan Black.”

Haddow was previously disqualified as a director of any United Kingdom company for eight years, and was sued by the UK Financial Conduct Authority for operating investment schemes that lost investors substantially all of their money.

According to a filing from last week, Haddow has been barred by the SEC from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and barred from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer.

In 2017, the SEC filed fraud charges against Haddow, who was living in New York, alleging he as the “clandestine founder” and creator of a Bitcoin platform and a chain of co-working spaces located in former bars and restaurants. The SEC said that Haddow fleeced investors while hiding his checkered past in the UK. There were several allegedly fake companies; Bar Works Inc., 7th Avenue. and the Bitcoin Store Inc. The SEC said that between January 2015 and June 2017, Haddow, through Bar Works, 7th Avenue, and Bitcoin Store, collectively raised over $37 million from investors. Haddow also founded and controlled the unregistered broker-dealer, InCrowd Equity, Inc. which he used along with other marketing platforms to promote and sell securities. The Bitcoin Store as apparently a platform for users to trade and hold Bitcoin.

In 2018, Haddow was extradited to the United States from Morocco by the US Department of Justice. Haddow has been the target of a concurrent criminal prosecution by the US Department of Justice.

On May 8, 2019, Haddow pled guilty to two counts of conspiracy to commit wire fraud and two counts of wire fraud. On September 10, 2019, a final judgment was entered by consent against Haddow.

According to a report by World Policy posted in 2015, Haddow allegedly ran a scam in the UK where he “siphoned a conservative estimate of $180 million using a number of fabricated alternative investments.”

Legaltech: Bootstrap Legal and Sosnow & Associates Merge

Legaltech platform Bootstrap legal has merged with Sosnow & Associates, the law firm launched by Robin Sosnow.

Bootstrap Legal is a Legaltech platform that streamlines the process of drafting legal documents for real estate offerings. Bootstrap Legal is the creation of its affiliate, the Law Office of Amy Wan who is Founder and CEO of Bootstrap. Wan will be joining Sosnow & Associates PLLC as Partner.

Sosnow & Associates is a boutique corporate and securities law firm well versed in the JOBS Act exemptions.

Both Wan and Sosnow are well known in the Fintech sector having both been engaged with the early days of online capital formation.

According to a note from Bootstrap, the merger is intended to facilitate the rapid growth of the Bootstrap Legal business,

“I’m thrilled to join forces with Robin Sosnow, who is an excellent real estate and securities attorney, whom I’ve known since our days counseling real estate crowdfunding portals back in 2014. Our teams’ joint efforts will enable Bootstrap Legal to continue to grow while providing personalized attention and responsive drafting and counseling to clients, which is what we’ve always strived for with the Bootstrap Legal product,” said Wan.

Sosnow added:

“Our firm is delighted to have joined forces with Amy Wan and the Bootstrap Legal Team. Amy has proven to be a respected and successful innovator in her business and legal endeavors, and we’re thrilled to have her as Partner within our growing firm. Now, together, we are able to offer our clients bi-coastal legal services from our offices in Orange County, CA and New York City, NY.”

Since 2017, Bootstrap Legal has helped real estate syndicators craft legal documents quickly and affordably. The software platform combines AI and attorney services to assist the compliance process while providing attorney-grade documentation for real estate syndication clients at flat-fee pricing.

Bootstrap Legal claims to offer the fastest document turnaround time in the industry, with attorney-reviewed drafts within three days.

This Season, Give the Gift of Immutability by Gifting Bitcoin

While not exactly a stocking stuffer, GiveBitcoin, launched this week, wants to provide an easy way for people to gift Bitcoin this holiday season. Part of the goal, according to the company, is to turn recipients into “real Bitcoiners” by the time their gift unlocks.

The LA-based startup was founded in 2019 by tech investor and entrepreneur Cory Klippsten, who wanted to solve problems he experienced with the cryptocurrency.

“I was given some Bitcoin at a tech conference in 2014, but didn’t understand how to use it or why it was important. I missed out on the opportunity to start learning about Bitcoin and I also lost the private key so my gift was lost forever. Only later did I realize the magnitude of my loss. On the plus side, I realized there was an opportunity there too. We started GiveBitcoin to dramatically increase the chance that someone will receive a Bitcoin gift safely and get a clear path to understanding it.”

GiveBitcoin’s has enlisted a group of high profile investors and advisors including: Dr. Saifedean Ammous, economist and author of The Bitcoin Standard; Matt Odell, co-host of podcast Tales from the Crypt; Yan Pritzker, author of Inventing Bitcoin; Stephan Livera, host of Stephan Livera Podcast; Meltem Demirors of CoinShares; Michael “The Bitcoin Rabbi” Caras, author of Bitcoin Money; Murad Mahmudov of Adaptive Capital, and the aforementioned Thomas Lee of Fundstrat, and Jor Law, founder of VerifyInvestor and active venture investor.

Klippsten explains that Bitcoiners love to spread the word but it can be challenging;

“GiveBitcoin gives them an easy, safe way to bring friends and family into the fold. It’s the perfect gift for the holidays.”

Fundstrat co-founder Thomas Lee, adds:

“GiveBitcoin is a brilliant idea, providing a way for someone to gift Bitcoin while also providing a pathway to educate the recipient over the course of the timelock.”

According to the company, it takes just a few minutes to gift the world’s most popular crypto – no need for a special wallet. GiveBitcoin handles all of the paperwork and works with Prime Trust, a regulated trust company that provides a custody solution, to make certain that all Bitcoin gifts are secure and 100% owned and controlled by the recipient.

The Bitcoin gift is time-locked, meaning the giver decides how long the gift is locked before the recipient can access it, thus the recipient has some time to learn about Bitcoin and make thoughtful decisions (instead of throwing it away).

A 12-part guide helps recipients learn all about Bitcoin so they understand the nuances of the money they’ve received.

Pritzker says, “GiveBitcoin takes good care of the recipient and makes sure a giver doesn’t have to be their Bitcoin IT guy forever.”

Klippsten says the company’s goal is to create 21 million new Bitcoin holders. They want to make Bitcoin “the cool gift of 2020.”

So perhaps it is time to consider giving the gift of immutability with the world’s most popular digital currency. A shame this did not exist a decade or so ago.

House Artificial Intelligence Task Force Schedules Meeting to Discuss Capital Markets and Impact of AI

The House Financial Services Committee, Task Force on Artificial Intelligence, has scheduled a hearing for December 6th. The hearing is entitled,  “Robots on Wall Street: The Impact of AI on Capital Markets and Jobs in the Financial Services Industry.”

The AI Task Force is relatively new, created by House Financial Services Committee Chairwomen Maxine Waters and announced in May of this year.

The AI Task Force is expected to research and review the following issues:

  • Applications of machine learning in financial services and regulation
  • Algorithms and Big Data: emerging risk management perspectives
  • AI, Digital Identification Technologies and Combatting Fraud
  • Automation and its impact on jobs in financial services and the overall economy

This specific hearing has yet to publish an agenda nor panelists testifying before the Task Force.

The importance of AI, machine learning and automation of financial services is growing rapidly. The emergence of AI not only brings with it important ethical questions but affiliated automation may also impact the jobs required within the financial services industry.

Shade: CEO of WeOwn Says London Stock Exchange Arrangement with PrimaryBid is “Too Little, Too Late”

Earlier this week, Crowdfund Insider covered the new partnership announced by the London Stock Exchange (LSE) and PrimaryBid.

The LSE is, of course, one of the largest traditional stock exchanges in the world with a history that dates back to 1571.

Just this past week, PrimaryBid was recognized by AltFi as the “Crowdfunding Platform of the Year.”

PrimaryBid is not your typical crowdfunding platform as it connects retail investors to new share issuance on the same terms as institutional investors. Typically, institutional investors get the first and best cut of any securities offering. PrimaryBid’s internet-based platform gives individual investors exclusive access to new share issues and issuers on the LSE can access a broader pool of investors to augment capital formation and trading liquidity. Part of the democratization of finance as technology seeks to level the playing field for the little guy.

Lipstick on a Pig?

But not everyone was convinced that the deal was really that good.

WeOwn CEO Sascha Ragtschaa sent over a comment on the LSE/PrimaryBid hookup saying it was simply too little, too late. To quote Ragtschaa:

Levelling the playing field for retail and institutional investors is a step in the right direction, but it’s too little, too late in terms of engendering real change. Investing in new interface technology without addressing fundamental issues with the stock exchange model is really just putting lipstick on a pig. The London Stock Exchange is still utilising the same antiquated legacy environment, and the investment model is still reliant on intermediaries – PrimaryBid is just another neo broker – so it’s not actually widening access to IPOs. This partnership doesn’t address fundamental problems such as cost and risk.

“Rather than big players making attempts to appear innovative, we need a new model for the stock exchange – one focused on providing a fairer, balanced marketplace for all types of investor. And one that uses technology to cut out middlemen and create a better working model, rather than focussing on a shiny user experience.”

“Tokenisation and blockchain technology have shown real capacity to reduce counter-party risks and enable real-time settlement, both of which are tangible benefits to both listing companies and participating investors. This is where real change will come from. We need to look towards a blockchain-based exchange model that will address underlying efficiency gaps and major systemic risks within the equity space, providing the true innovation we need to give retail investors a better deal.”

WeOwn has developed an investment platform, run on a bespoke blockchain, that digitizes assets – to simplify capital raising in a cost effective process. WeOwn takes care of the complete fundraising lifecycle, from issuance to investor management.

WeOwn is not the only platform seeking to leverage the benefits of a distributed ledger to remove existing friction in the issuance-transfer-custody-management process of traditional securities. I have yet to meet someone who does not believe digital securities are the future.

That being said, LSE has dabbled a bit in the tokenization sector but it is not clear if they are planning a transition similar to what the Australian Stock Exchange has been working on. The ASX is on track to deliver the current decades old CHESS system with a blockchain-based replacement system by March-April of 2021.

Whether LSE’s partnership with PrimaryBid is too late or not, the digitization of securities is inevitable.

Draft House Legislation Calls for Tokenization of Consumer Financial Data

Yesterday, the House Financial Services Committee Fintech Taskforce met to discuss big data and its impact on consumers regarding the financial services industry. The hearing by the Fintech Taskforce was entitled “Banking on Your Data: The Role of Big Data in Financial Services.” Much of what was discussed is already being address in Europe via Open Bank rules and GDPR. In the US, the debate is ongoing about who, what and when, data should be controlled.

There were several pieces of legislation on the docket affiliated with the hearing and one in particular, the Financial Information Data Modernization Act, had some interesting language.

Buried within the draft legislation was a requirement that:

The data security practices required under subsection (a) shall include, at a minimum—

… (4) tokenizing all information related to account information;” …

Typically, tokenization is euphemistic for using blockchain or distributed ledger technology.

Data security and control are paramount within the blockchain industry. Multiple DLT focused firms are creating platforms where data can be confirmed without being revealed. If something like this ever became law it would be a huge shift for the financial services industry.

Now take all of this with a grain of salt. The bill is still a draft and even it ends up in Committee things do, and will, change. But it is interesting that someone on Hill may be thinking about mandating the tokenization of consumer financial data.

The draft bill is embedded below.


[pdf-embedder url=”https://staging-crowdfundinsider.kinsta.cloud/wp-content/uploads/2019/11/Financial-Information-Data-Modernization-Act-Draft-bills-116pih-fidma.pdf” title=”Financial Information Data Modernization Act Draft bills-116pih-fidma”]


Singapore: Blockshow Asia Top 5 Takeaways on Blockchain & Crypto

Recently, Blockshow Asia took place in Singapore. While Crowdfund Insider was not able to attend this year’s event, organizers have forward some of the top takeaway items for this year and the following year.

Below is a selection of commentary generated by speakers at the event which (obviously) focused on blockchain/DLT and crypto industry events.

See below.

#1 China’s Digital Currency or Central Bank Digital Currency (CBDC)

China wants to be the first country to launch a digitized domestic currency.

“The Chinese government wants to push renminbi’s influence globally. They want the renminbi to be competitive with the US dollar. In order to do that they really need to push this currency to have more freedom.”

Zhao Changpeng, CEO of Binance

He expects the system to be a blockchain-based version of the renminbi that will help expand the currency’s economic influence.

[easy-tweet tweet=”The Chinese government wants to push renminbi’s influence globally. They want the renminbi to be competitive with the US dollar – Zhao Changpeng” template=”light”]

#2 A Trustless Digital World

“I hope to build a better world for our new generation, but what is [the] new generation? It’s blockchain.”

Sopnendu Mohanty, Chief Fintech Officer at the Monetary Authority of Singapore

He addressed the future of the digital world. It will be faceless, presence-less, and paperless, and counterintuitive of this world is that it is trustless. The only way to build trust is through blockchain.

#3 On the State of the Decentralized Web

“These standards should be transparent and decentralized. Data ownership should be given back to the users.”

Da Hongfei, the founder of smart contract-supporting blockchain platform NEO

The NEO founder highlighted the problems deriving from monopoly, centralization abuse and single points of failure, proposing decentralization as the solution.

#4 Blockchain and Artificial Intelligence

A presentation titled “Stimulating Massive Network Effects in Decentralised AI Networks” and the merging of blockchain and AI.

“By definition, a blockchain is a distributed, decentralised, immutable ledger used to store encrypted data. On the other hand, AI is the engine or the ‘brain’ that will enable analytics and decision making from the data collected. But both AI and blockchain are in situations where they can benefit from each other and help one another.”

Ben Goertzel, SingularityNet’s CEO

[easy-tweet tweet=”Both #AI and #blockchain are in situations where they can benefit from each other and help one another” template=”light”]

#5 Bitcoin Predictions for 2020

36K or 3.6K? Boom or bust?

“Bitcoin likely to see new all-time highs in 2020. There are many Bitcoin bullish analysts that believe that the digital currency will be experiencing a price increase in 2020 as well.”

Thomas Lee, Managing Partner and Head of Research at Fundstrat Global Advisors and Bitcoin bull 

[easy-tweet tweet=”Bitcoin likely to see new all-time highs in 2020 – Bitcoin Bull, Thomas Lee” template=”light”]

North Dakota is the Only State Not to Have Had an Issuer Raise Capital Under Reg CF

Reg CF or “Regulation Crowdfunding” as it was officially named, was created in 2012 under the JOBS Act but became actionable in May of 2016 as the Securities and Exchange Commission took a bit of extra time in completed their side of the task.  Since that day in May, about $300 million has been raised for many different types of early stage, and some later stage, firms. Reg CF is the smallest crowdfunding exemption as issuers may only raise up to $1.07 million while under Reg A+ issuers may raise up to $50 million and Reg D 506c, a company may raise an unlimited amount of money.

But Crowdfund Capital Advisors points out an interesting factoid. North Dakota is the ONLY state to yet produce a company that uses the security exemption to raise capital.

In a Tweet, Sherwood “Woodie” Neiss calls out the Rough Rider state for its lack of participation in online capital formation:

 

North Dakota is a smaller state when it comes to population ranked at 47th in the country, but still…. Sure, agriculture is its biggest source of economic activity – a sector that is more focused on big Ag firms than early-stage ventures. Perhaps that, and the fact, that the state’s unemployment rate is one of the lowest in the nation standing at just 2.7% – but eventually an issuer will utilize Reg CF. We are certain.

European Union Plans to Invest €100 Million in Blockchain & Artificial Intelligence Startups During 2020

The EU Artificial Intelligence and Blockchain Investment Fund is planning to invest €100 Million in European startups next year. This is according to note from the European Commission.

The new EU investment fund seeks to boost innovation in these two key technologies. The Fund was launched earlier this year and will finance the development of AI and blockchain companies as part of a wider move to create a dynamic EU-wide innovation ecosystem.

The Fund will be managed by the European Investment Fund. The first phase of the AI and blockchain fund will make available €100 million in 2020 to support companies working in this sector.

The European Commission notes that investment levels in Europe have traditionally lagged those in the US and Asia, however, and the aim of the fund is to narrow this investment gap and support the development of innovation in this field.

Additionally, an investment support program will also be set up to complement the fund, leveraging further financial support from EU Member States.

The European Union seeks to make Europe more attractive for start-ups to stay and grow in Europe.

Research indicates that the lack of access to finance causes nearly half of start-ups in the central, eastern and south-eastern Europe choose to leave.  The European Commission, along with the European Investment Fund, has launched a pilot investment program that leverages EU resources under the InnovFin Equity program.

The European Digital Innovation and Scale-Up Initiative (DISC) provides finance for highly innovative high-risk digital start-ups across this region of Europe and as well as carrying out market consultations with investors and tech companies.

Crypto Miner Cannan Raises $90 Million in NASDAQ IPO, Shares Decline

Canaan AvalonMinerYesterday, Canaan Inc. (Nasdaq: CAN) a Chines crypto mining company,  completed an initial public offering (IPO) of 10,000,000 American Depositary Shares (ADSs), each representing 15 Class A ordinary shares. Shares were issued at US $9.0 per share for a total offering of US $90 million.  assuming the underwriters do not exercise their option to purchase additional ADSs.

Shares in Canaan initially popped but have since dropped below the IPO price and now trade around $8.30 a share.

The underwriters have been granted an option, exercisable within 30 days from the date of the final prospectus, to purchase up to an additional 1,500,000 ADSs at the IPO price less the underwriting discounts and commissions.

Citigroup Global Markets Inc., China Renaissance Securities (Hong Kong) Ltd., CMB International Capital Ltd. are the active joint book-runners of the offering.

According to a filing with the SEC, initial lead underwriter Credit Suisse Group AG, exited the deal before the IPO.

Canaan was launched in 2013 and benefited from the crypto-boom. Canaan’s products include various iterations of its AvalonMiner machines designed to effectively mint various proof of work cryptocurrencies.

During the past year or so, the shine has come off some of the crypto mining businesses as prices of various cryptocurrencies have declined. Bitcoin, the most popular crypto, is well off its all time high of around $20,000 but BTC has traded higher during 2019. Currently, Bitcoin trades around $7000.

Fintech Unicorn Transferwise Adds Malaysia to its Growing List of Countries Where its Service is Available


Transferwise, a breakout Fintech hit, has added Malaysia to its list of countries where it offers its currency transfer services. According to a blog post, last year, Malaysia’s international money transfers grew 23.3%, to RM 41 billion (USD $9.9 billion). But most of these transfers are using traditional banks which tend to gouge customers by charging hidden fees and not using the “real exchange rate.”

This is Transferwise’s fourth Asian country where it has launched it services. Alongside Malaysia, Transferwise is available in Hong Kong, Japan and Singapore.

Transferwise reports:

TransferWise is the building the best way to move money around the world. 6 million people are already transferring over RM 20 billion every month. That’s a saving of over RM 6 billion every year compared to if they used a bank.

Transferwise claims to be four times less expensive than a traditional bank.

Transferwise is also preparing its multi-currency account and debit card for Malaysia as well. In reality, Transferwise is a stealth bank providing bank-like services without calling themselves a bank. The one missing piece of the puzzle is an interest-bearing account. Prediction: Transferwise will start rolling out savings accounts in 2020. Another nail in the coffin of traditional banks.

[easy-tweet tweet=”In reality, Transferwise is a stealth bank providing bank-like services without calling themselves a bank. The one missing piece of the puzzle is an interest bearing account #Fintech” template=”light”]

Sharedrop! Republic Enables First Ever Private Equity Incentive Program: by Banking App Linen

Republic, an investment marketplace offering both traditional securities or more esoteric digital offerings, is powering the “first-ever legally compliant free private equity incentive program or “Sharedrop,” as it is being called. Obviously, the name takes a cue from the widely utilized airdrop feature during the ICO heyday.

Banking Fintech Linen App is offering $300,000 worth of investment in the company using a Simple Agreement for Future Equity (SAFE) to prospective users for downloading and signing up for the app.

Linen is planning to offer a whopping 4.65% APY on assets held via its platform.

To quote the website:

“We launched Linen App because we identified a gap between the tech and finance savvy who are able to earn high yield on their cash and stablecoins, and the rest who don’t have easy onramps to blockchain-based lending. We saw an opportunity to create new products such as Linen Cash, which is a high-yield cash management service powered by lending liquidity pools on the Compound protocol, and the Linen Card, a debit card to spend Linen Cash.”

Republic has earned a reputation for thinking outside the securities box while adhering to existing securities law. Republic has created a compliant and easy-to-use Sharedrop tool to provide companies, like Linen, the opportunity to give away private securities to customers and fans for free or in exchange for their contribution to a project.

Previously, Republic hosted the first security Airdrop to retail investors in the U.S.

“Equity can now be used as a flexible engagement and marketing tool like no other,” explained Jed Halfon, a Partner at Republic. “Giving away a piece of the pie and getting fans and users to share in the success of a company is one of the best ways to bootstrap a community and grow the user base.”

Something for Nothing?

Not really. Linen is basically giving you equity in exchange for your time and service. The first task, it seems, is registering for their forthcoming offering and then perhaps downloading the app. I will predict they will put shareholders to work to generate some serious social love.

Republic is the only platform capable of launching these compliant Sharedrops. The thesis is equity and stock options are the most powerful incentive tool in a startup’s toolkit, Republic now lets companies take this tool and face it outwards by giving away incentives to early adopters, key customers, and supporters. Previously, product users and early adopters missed out on the potential upside from their early support.

“Acquiring early users and building trust in consumer fintech is no small task,” said Vitaly Bahachuk, CEO of Linen App. “Just as startups grant early employees stock options, we want to reward our early members with equity and build Linen App together with our community. Imagine being an early user of some of the biggest tech companies and receiving equity – it’s an exclusive opportunity.”

The waitlist for the Linen App Sharedrop is open now.

The European Fifth Anti-Money Laundering Directive Kicks in On January 10th

In the European Union, the fifth Anti-Money Laundering Directive (5AMLD) entered into force on 9 July 2018 but impacted firms have until January 10, 2020, to become compliant.

Crypto companies, or virtual asset service providers (VASPs), will be expected to step things up and adhere to rules that set a high level of due diligence and the need to submit suspicious activity reports (SARs) while monitoring all transactions. Recent FATF guidance is part of this too.

This past October, the Financial Intelligence Analysis Unit published a consultation document on the Prevention of Money Laundering and Funding of Terrorism Regulations (or PMLFTR). Feedback regarding the consultation was due November 5, 2019 and thus the regulations should be hardening now.

If you are a VASP, there are some things you simply must due.

Elliptic, a crypto compliance and forensic firm, has put together a high-level overview of the compliance demands. You can read the whole thing here. If you are a crypto exchange most certainly you have already engaged with counsel to ensure you do not get tripped up.

Here is Elliptic’s summary of requirements:

  •  Secure all necessary registration and licensing: Europe is a single market but member states still have regional rules. You will need to be in compliance with every member state where you provide services
  • Conduct a risk assessment of your business: “If you are unable to demonstrate to your regulator that you have the systems and policies in place needed to ensure preparedness in mitigating risks you face, you could find yourself facing a visit from the regulator,” says Elliptic.
  • Implement a robust blockchain monitoring solution for AML: This is probably the best one of all. You have to know who is selling and know who is buying for most of your crypto transactions.

Of course, Elliptic would like to to have your business but there are multiple good options alongside Elliptic.

While some VASPs have complained about the stringent requirements being foisted upon them, if they ever want to establish the industry as a respected segment of the financial services industry – this is the designated path.

First-Ever Digital Currency Investment Product? Grayscale Bitcoin Trust Files with SEC

Grayscale Bitcoin Trust (OTC:GBTC) became the first-ever publicly traded Bitcoin investment vehicle in the US in 2013. It has grown to become the largest Bitcoin investment product in the world. In October, GBTC announced its largest quarterly inflow of capital.

The Trust started as a private placement available only to accredited and institutional investors. In 2015,  Digital Currency Group (DCG) received approval for the Trust to trade publicly on OTC Markets.

This week, DCG filed a Registration Statement on Form 10 with the Securities and Exchange Commission (SEC) on behalf of Grayscale Bitcoin Trust.

This is a voluntary filing that, if deemed effective, would designate the Trust as an SEC reporting company and register its shares pursuant to Section 12(g) of the Securities Exchange Act of 1934.

If the SEC gives the Trust a green light, it will designate the Trust as the first digital currency investment vehicle to attain the status of a reporting company by the SEC. (Not to be confused with an exchange traded fund or ETF).

According to the company, this is what would change, if deemed effective:

  • It would designate the Trust as an SEC reporting company and register its shares pursuant to the Exchange Act, the first digital currency investment vehicle to do so.
  • Accredited investors who have previously purchased shares in the Trust’s private placement would have an earlier liquidity opportunity, as the statutory holding period of their private placement shares would be reduced from 12 to 6 months.
  • As many institutions restrict investments in instruments that are not registered with the SEC, a broader set of investors may begin to consider the Trust accordingly.
  • While the Trust currently publishes quarterly and annual reports as well as audited financial statements pursuant to the OTC Markets Alternative Reporting Standard (ARS), the Trust would instead file its quarterly and annual reports as well as audited financial statements as 10-Qs and 10-Ks with the SEC, along with current reports on Form 8-K, in addition to complying with all other obligations under the Exchange Act.

Grayscale sees this filing is the “latest step on the road to regulatory maturity for digital currencies.”

Fintech Raisin Adds Naqoda’s Tax Engine Solution to Provide Tax Calculations

Fast-growing Fintech Raisin has integrated Naqoda’s tax engine solution.

Raisin is a Fintech that provides access to higher interest savings accounts in multiple countries. Naqoda provides a multi-country software solution for the calculation and reporting of interest income tax and capital gains tax.

Raisin states that it will now have all the compliance requirements of German withholding tax (or Abgeltungssteuer). Raisin did not clarify if the service will be offered to other European countries or the US.

The German flat-rate withholding tax, or Abgeltungssteuer, is a tax on private income from capital and capital gains. This flat rate withholding tax came into effect on the 1st of January 2009.

Raisin COO and co-founder Michael Stephan explained the new service:

“By integrating Naqoda’s engine, we can offer Raisin customers in Germany an improved service. Those who select fiduciary deposit products now have a streamlined and transparent way to calculate and report the withholding tax on the income they earn from their Raisin-brokered savings.”

Raisin’s marketplace offers simple access to guaranteed deposit products from all over Europe, as well as globally diversified, ETF portfolios and pension products (currently available in Germany).

Since launch in 2013, Raisin has brokered €17.5 billion for more than 215,000 customers.

Insurtech Vouch Raises $45 Million, Seeks to Help Startups with Insurance Coverage

Insurtech Vouch has raised $45 million in a Series B funding round according to a release. The funding was led by Y Combinator Continuity. To date, Vouch has raised $70 million capturing the backing of many prominent VCs including Ribbit Capital, SVB Financial Group, Y Combinator, Index Ventures, and 500 Startups. The additional funding should provide a good amount of runway for the startup as today, it is only providing insurance in several states including California.

Vouch seeks to address a serious pain point for early-stage ventures – finding appropriate insurance to cover the operations of their businesses. Thus, providing insurance in California is a good place to start as it is host to one of the most robust startup ecosystems in the world.

Vouch was co-founded by one of the founders of FundingCircle, Sam Hodges. FundingCircle is a publicly-traded peer to peer/marketplace lending platform that operates in both Europe and in the US. Hodges, who co-founded Vouch with Travis Hedge, said he experienced firsthand the value of insurance coverage tailored to a startup’s needs.

“Vouch helps founders manage the risks associated with starting up a new company, so they can focus on creating and growing businesses that change the world. We believe that’s a purpose worth pursuing,” said Sam Hodges. “As an entrepreneur, I’ve spent most of my career building companies at the intersection of technology and financial services. I know first-hand that along the journey of building and growing a business, teams will face numerous high-stakes challenges. Vouch is here to support entrepreneurs and mitigate those challenges from the beginning, leaving more room for growth.”

Vouch is currently providing insurance services in a handful of markets but it plans to offer coverage nationwide by the end of 2020.

The company reports that less than eight weeks after launching in Utah, Vouch crossed a 5% market share, with an overall Net Promoter Score of 80. That’s not too bad.

Anu Hariharan, Partner at Y Combinator Continuity, explained that his company and Vouch share a common goal – providing support to early-stage companies.

“Vouch is built specifically for startups, so founders have the peace of mind that their business is covered. This platform is fundamental to the startup community, as it enables founders to focus on growing their companies — which is why we were bullish on leading the Series B.”

Vouch currently provides coverage ranging from Business Property and General Liability and Employment Practice Liability to Cyber Coverage. All Vouch coverages are via a single application that takes less than 10 minutes to complete, coverage starts as soon as the next day.

Vouch’s policies are backed by Munich Re, one of the largest A-rated reinsurers in the world. Vouch notes that it is also a preferred insurance provider for Silicon Valley Bank’s client base – a bank that is affiliated with 50% of VC backed tech firms in the country.