In an unprecedented move, the Treasury Department’s Office of Foreign Assets Control (OFAC) recently added Tornado Cash (TC), an open source cryptocurrency mixing tool deployed onto blockchain networks such as Ethereum, to the Specially Designated Nationals And Blocked Persons (SDN) List.
This was the first time in our nation's history that interacting with a piece of software (in this case a smart contract) would be a violation of OFAC sanctions law.
The fallout from the new law started with the arrest of one of the contributing software developers of Tornado Cash, an open source tool not controlled by any one organization or entity. Centralized exchanges, such as Circle, have begun blocking TC funds from being deposited. Even Ethereum miners, who are the validators of transactions on the blockchain, are not confirming transactions originating from Tornado Cash.
The ensuing pushback from the crypto community was immediate --- and in true Web3 fashion, amusingly chaotic. Doxed celebrity, government, and custodial accounts were sent mixed ETH using Tornado Cash en masse, immediately putting into question the enforceability of this sanction. Unlike with other financial rails, one cannot stop themselves from receiving cryptocurrency from another address, ultimately putting everyone at risk of violating these laws.
How much this will truly change how we use web3 is still difficult to guess, but the lines in the sand are already being drawn. Vitalik Buterin has come out to say that once Proof of Stake goes live, if any validators filter sanctioned addresses, they will be slashed, and even Brian Armstrong, the CEO of Coinbase, tweeted that if they are forced to block transactions, they will shut down their staking service completely. It will likely be some time before we get more clarity – but suffice to say a storm is brewing, and who knows who will get caught up in it next….
A Storm Is Brewing
Adam Neumann’s new company gets a big check from Andreessen Horowitz - Flow, as Neumann’s new startup is called, will own and operate thousands of apartment rental units, marketing the housing to renters as a “branded product with consistent service and community features.” The firm’s investment in the company is about $350m, valuing the company at more than $1b before it even opens its doors. The investment is the largest individual check Andreessen Horowitz has ever written in a round of funding to a company. Read more
The reinvention of Goldman Sachs: what has David Solomon achieved? - After taking over as CEO of the bank, Solomon’s mission was to develop new income streams and “drive more durable revenue,” in the process making it easier for outside investors to understand a still enigmatic bank that had been structured as a private partnership until its initial public offering in 1999. Yet despite Solomon ploughing billions of dollars into businesses such as consumer banking, asset management and transaction services, little has changed in Goldman’s revenue mix since the days of his predecessor, Lloyd Blankfein. Trading and investment banking still make up the lion’s share. Read more
Social investment platform eToro to acquire fintech startup Gatsby for $50m - eToro, an Israel-based stock and crypto-trading platform, has agreed to acquire Gatsby, a Robinhood competitor, for $50m in cash and stock. This deal pulls eToro deeper into the U.S. market and allows the company to offer options trading — the largest source of revenue for Robinhood. Read more
LatAm's largest investment bank BTG Pactual launches Bitcoin, crypto exchange - The bank’s new trading platform is called Mynt and will enable users to have direct access to bitcoin, placing it among the first leading financial institutions in Brazil to do so. Additionally, the investment bank with over $200b in assets under custody will provide educational content for all of its users about bitcoin once users have established an account. Read more
Digital bank Revolut gets approval to offer crypto services throughout Europe - The authorization will let the firm, which was valued at $33b in a recent funding round, offer crypto services to its 17m customers in the European Economic Area out of a new crypto-asset hub in Cyprus. Revolut said its choice was down to the sophisticated regulatory regime of the island country which has also attracted the likes of Crypto.com, eToro and BitPanda. Read more
Affirm goes big on BigCommerce - Affirm has struck a partnership with BigCommerce, making it the preferred BNPL option on the e-commerce platform’s merchant checkout pages. The competition between BNPL providers is likely to be won by the company that is on as many checkout pages as possible. Affirm is taking the lead through partnerships with retailers, payment processors and e-commerce platforms. Read more
Covalto to become 1st Mexican fintech company on the US stock market - Mexican digital banking platform Covalto is planning to go public via a special purpose acquisition company (SPAC) merger, a move that would make it the first Mexican FinTech to trade on the United States markets. Read more
Crypto is taking a few small banks on a wild ride - Silvergate, Signature and Customers Bancorp gobbled up deposits from crypto companies shunned by bigger banks. Now, they are dealing with the bust. The plunge in crypto prices this year has taken the banks on a wild ride. At Silvergate, deposits swung by $5b in the second quarter, a nearly unheard of move for a bank of its size, before ending basically flat at $13.5b. Read more
Robinhood learns to nab interest income - Though customer trading remains the bulk of Robinhood’s revenue, the upswing in interest rates is helping show some progress on what the firm can do while many small traders are on the sidelines. Interest earned on corporate cash and investments and segregated customer cash and securities went from $2m in the first quarter to $16m. Margin interest revenue also rose sequentially, even as balances dipped lower. Read more
Federal Reserve finalizes guidelines for access to its payment systems - The Fed issued final guidelines this week for its 12 regional branches to use when evaluating applications for so-called master accounts with the central bank. Such accounts allow financial institutions—primarily banks—to move trillions of dollars a day on the Fed’s payment systems. Cryptocurrency companies would be subject to a higher level of review. Read more
University student makes $110m trading meme stock favorite Bed Bath & Beyond - Jake Freeman, an applied mathematics and economics major at the University of Southern California, acquired nearly 5m shares in Bed Bath & Beyond in July, after dismal earnings and the ousting of its chief executive sent its stock price plummeting. Freeman’s initial stake cost about $25m, which he said was mostly raised from friends and family. Read more
Galaxy Digital commits to Nasdaq listing after ending BitGo deal - Galaxy Digital is to press on with a planned listing on Nasdaq even as it called off plans to buy crypto custody platform BitGo for $1.2b. The Canadian-listed group said it was pulling out of the cash and shares deal, alleging BitGo had failed to provide audited financial results for the year to December 2021. BitGo disputed Galaxy’s statement and said it intended to hold Galaxy Digital legally responsible for its “improper decision” to terminate the deal. Read more
Wait, when did everyone start using Apple Pay? - The percentage of iPhones with Apple Pay activated was 10% in 2016 and 20% in 2017. Adoption nearly doubled again in 2018. It hit 50% by 2020. Now it’s around 75% and inching closer to ubiquity. Read more
Fidelity and BlackRock cut fintech giant Ant’s valuation lower - Global investors who bought private shares ahead of its suspended initial public offering ,including Boston-based Fidelity Investments, cut its estimate for Ant to $70b at the end of May. That’s down from $78b in June last year, and $235b just before Ant’s IPO was torpedoed by regulators in November 2020. Read more
Lloyds completes UK's first digital promissory note purchase - Promissory notes have been around for millennia, enabling transactions to be completed in lieu of cash by letting sellers get paid based on the creditworthiness of the purchaser. However, under the UK's Bills of Exchange Act, notes need to be a physical entity, meaning it can take a week or more for businesses to be paid. Lloyds says it has managed to address this. Read more
Agora - New York based real estate investment management platform raised $20m in Series A funding led by Insight Partners. Read more
Arc - San Francisco based SaaS startup focused bank raised $20m in Series A funding led by Left Lane. Read more
AtoB - San Francisco based startup with a payment system designed for truckers raised $75m in Series B funding led by Elad Gil and General Catalyst. Read more
BankiFi - UK based provider of embedded banking solutions for small and medium businesses raised $4.8m in new funding led by Praetura Ventures. Read more
Central Payments - San Diego based fintech solutions provider raised $30m in new funding led by Castle Creek Capital. Read more
Closinglock - Austin based real estate transaction platform raised $4m in Seed funding led by LiveOak Venture Partners. Read more
Highbeam - New York based neobank focused on small e-commerce brands raised $7m in Seed funding led by FirstMark and Mayfield. Read more
Jar - India based micro saving app raised $22.6m in Series B funding led by Tiger Global. Read more
Klavi - Brazil based open finance API and data aggregation company raised $15m in Series A funding led by GSR Ventures. Read more
Ledgebrook - Boston based insurtech raised $4.2m in Seed funding led by Brand Foundry Ventures. Read more
Pastel - Nigeria based bookkeeping startup raised $5.5m in Seed funding led by TLcom Capital. Read more
Penfold - UK based digital pensions platform raised $8.5m in Series A funding led by Bridford Group. Read more
Pomelo - San Francisco based international money transfer company raised $20m in Seed funding led by Founders Fund and A* Capital. Read more
QuotaBook - Seoul based equity management platform raised $11m in Series A funding led by Elefund. Read more
Rebill - Argentina based payments and subscription management startup raised $3.6m in Seed funding led by Tiger Global. Read more
Super Payments - UK based fintech company founded by Funding Circle's founder raised £22.5m in new funding led by Accel. Read more
Tessera - New York based NFT trading platform raised $20m in Series A funding led by Paradigm. Read more
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