BTC surges past $35k on rising optimism for SEC approval of Spot Bitcoin ETF 🤯; ChatGPT can now predict the direction of interest rates 😳; RegTech market set to surge to $45.3B by 2032 😲
You're missing out big time... Weekly Recap 🔁
👋 Hey, Linas here! Welcome back to a 🔓 weekly free edition 🔓 of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.
If you’re not a subscriber, here’s what you missed this week:
Enhanced Investors’ Rights Agreement 📃 [draft contracts while comparing terms against market benchmarks 📊]
Simple Leveraged Buyout (LBO) Model for Investors 💸 [use this to make informed decisions and maximize your returns 📈]
Worldline falls more than 50% on guidance cut. Is FinTech Growth Story over or Xmas came early? 🤔 [a deep dive]
Elon Musk wants X to replace your bank account within a year 😳
Everyone’s dream: FinTechs being PAID to acquire customers 🤑
Monzo in talks to raise £300M in a funding round valuing it above £3.5B 🤯 [what does this tell us + some deeper dives into Monzo & its brilliant growth strategies]
As for today, here are the 3 fascinating FinTech stories that were changing the world of finance as we know it. This week was just nuts in the financial technology space, so make sure to check all the above stories.
BTC surges past $35k on rising optimism for SEC approval of Spot Bitcoin ETF 🤯
The news 🗞️ Bitcoin prices briefly jumped over the $35,000 mark this week for the first time since last May, fueled by growing speculation that the SEC may soon approve the listing of a spot bitcoin exchange-traded fund (ETF).
It has dropped a bit since then and at the point of writing, BTC is changing hands at circa $33k per coin.
Nevertheless, the cryptocurrency has now erased all the losses it incurred after the collapse of Terra's stablecoin in May 2022.
Let’s take a look.
More on this 👉 Driving bitcoin's double-digit percentage gains is a shift in sentiment that SEC approval of a spot bitcoin ETF is imminent. The SEC has long resisted approving such funds, which hold actual bitcoins, arguing it cannot protect investors from potential manipulation.
However, the agency is facing mounting pressure after a court ruled it was wrong to reject an application to convert Grayscale's Bitcoin Trust into an ETF.
Major financial institutions like BlackRock BLK 0.00%↑, Ark Invest, and Fidelity have been lobbying hard for bitcoin ETFs, portraying them as safer than buying crypto directly.
Having said that, BlackRock's filing of a spot Bitcoin ETF on the Nasdaq's trade clearing firm this week and its move to assign a ticker symbol is seen as strong signals SEC approval may come very soon.
The prospect of Bitcoin ETFs has thus sparked a wave of optimism across the crypto sector. Ether, XRP, and other major cryptocurrencies also rallied on the news.
Crypto-linked equities like Coinbase COIN 0.00%↑ and MicroStrategy gained 10% or more.
✈️ THE TAKEAWAY
What’s next? 🤔 SEC blessing would represent a major regulatory stamp of approval for Bitcoin. It could unleash enormous institutional demand and be a catalyst for the next stage of growth and maturity for the cryptocurrency market. Some speculate that the impact could be similar to that when Gold ETF was introduced:
However, challenges remain such as ongoing legal troubles at major crypto firms and uncertainty around regulations. The path forward is unlikely to be smooth. Yet, the industry appears re-energized to confront these issues head-on.
ICYMI: The cryptocurrency bull market is already here 📈 [a recap of what’s happening + where to look at & some more bonus reads]
ChatGPT can now predict the direction of interest rates 😳
The news 🗞️ New research demonstrates how large language models like ChatGPT can forecast interest rate decisions by parsing the carefully coded communications of central bankers.
Let’s take a look.
More on this 👉 In a new study, economists at Sheffield Hallam University in the UK fed transcripts of Bank of England Monetary Policy Committee speeches into ChatGPT. The AI then classified each address as dovish, neutral, or hawkish based on tone and wording. This sentiment analysis proved statistically significant in predicting how members would vote at upcoming meetings.
Those who gave more neutral speeches tended to favor interest rate hikes compared to the more dovish or hawkish speakers. So while the content might appear innocuous to the layperson, ChatGPT was able to decode the subtle semantics of central banking.
Lead researcher Dr. Drew Woodhouse says this highlights the potential of AI for processing nuanced human beliefs and expectations. The technology grasped the intricacies of central bank communications and related speech patterns to eventual policy actions.
The impact 📊 The findings have major implications for forecasting decisions and modeling economic expectations going forward. The Sheffield team suggests this approach could be extended to study other aspects of central bank messaging like forward guidance.
It also illustrates how publicly available AI like ChatGPT can empower financial analysis and decision-making. Banks and investors stand to gain an edge by leveraging natural language processing to parse the coded communications of policymakers.
In fact, JPMorgan has already built a similar ChatGPT-based model to analyze statements by the Federal Reserve (see below). The bank says early applications are encouraging, with the tool now expanded to cover other major central banks as well.
✈️ THE TAKEAWAY
Looking ahead 👀 As AI grows more sophisticated at decoding human language, institutions will race to take advantage across the financial sector. Fund managers could automate sentiment tracking of corporate executives to anticipate business outlooks. Regulators may also apply speech analysis to detect early warnings of excessive risk-taking. And economists can generate more accurate forecasts by feeding the latest rhetorical trends into predictive models. But risks exist around over-reliance on AI for divining meaning from speech patterns. The technology may miss nuances or mistakenly infer causality from spurious correlations in language data. Careful human oversight is still essential. The research nonetheless indicates central banks may need to further refine their communications as AI permeates markets. Delivering forward guidance could become an arms race of coded semantics. For now, it appears models like ChatGPT have cracked the cryptic lexicon of monetary policymakers. Tech-savvy investors are already parsing the latest speeches for any slight change in tone or terminology that could signal shifts in the interest rate outlook.
ICYMI:
Bonus: The insurance sector is more and more exploring the benefits of AI 🤖
Generative AI will completely transform FinTech and Banking over the next 3 years 🤖🏦
JPMorgan is developing a ChatGPT-like AI service for investors 😳 [+6 more reads]
RegTech market set to surge to $45.3 billion by 2032 😳
New data 📊 The global regulatory technology (RegTech) market is primed for robust growth in the coming decade, with revenues projected to surge from $8.2 billion in 2021 to $45.3 billion by 2032. This represents a compound annual growth rate of 16.2%, according to a new report by Future Market Insights.
The growth is being fueled by the massive disruption of the COVID-19 pandemic, which shone a spotlight on the need for more automated and digitized regulatory compliance solutions.
More on this 👉 The pandemic led to a surge in online financial transactions and remote work for compliance staff. This created unprecedented demand for RegTech to facilitate automated monitoring for money laundering and other suspicious activities.
For example, suspicious activity reports (SARs) skyrocketed 263% for fintech companies in the UK in 2020 compared to the previous year. The crisis exposed vulnerabilities in existing compliance workflows, forcing companies to realize the imperative of adopting RegTech.
Going forward, cloud-based RegTech deployments are projected to see particularly rapid adoption, growing at 22.6% CAGR from 2015 to 2021. The US and Japan will be dominant markets, with an absolute dollar opportunity of $12 billion and 14.6% CAGR respectively.
Key players in this space are now focused on R&D and acquisitions to gain a competitive edge. For example, GBG recently acquired biometrics providers Acuant and IDology to create the largest digital ID verification network in the Americas.
✈️ THE TAKEAWAY
Looking ahead 👀 Overall, the pandemic has necessitated upgrading legacy approaches to regulatory compliance. Automation and digitization will only accelerate to prevent financial crimes like money laundering and fraud. Zooming out, RegTech provides the solutions needed to rapidly analyze big data and ensure security without compromising efficiency. While regulators play catch up, RegTech innovation will continue leading the way. Companies that fail to adopt modern solutions do so at their own peril.
🔎 What else I’m watching
Unions vs. Klarna 👀 BNPL giant Klarna is facing a possible strike by employees at its Swedish headquarters next month. The Unionen and Swedish Engineering unions say that their members will strike on 7 November if they do not secure a collective agreement. Unionen says that work to reach a collective agreement - which would affect employment, working hours, vacations, and job security - has been ongoing for several years, with negotiations taking place since March.
Piloting stablecoins & CBDCs 🪙 Deutsche Bank and Standard Chartered have carried out the first digital currency transfer and swap on the new Universal Digital Payments Network (UDPN). Unveiled earlier this year, the UDPN is a DLT-underpinned messaging backbone that promises to provide interoperability between stablecoins and CBDCs to enable connectivity between any business IT system and regulated digital currencies. The network - set up by GFT Group and Red Date Technology - describes itself as a "gateway for businesses and financial institutions to use regulated digital currencies in cross-border transactions". In this respect, it could be seen as a competitor to bank-to-bank messaging network Swift, which has been conducting its own research into blockchain interoperability. In the first proof-of-concept for the network, Deutsche and Standard Chartered's SC Ventures executed a real-time on-chain transfer and swap test transactions between USDC and EURS stablecoins on the infrastructure.
💸 Following the Money
Finland-based e-invoicing company Basware has announced the completion of its acquisition of cloud-based finance solutions provider Glantus.
Singapore-based digital currency payment institution Triple-A has raised $10M in a Series A funding round led by Peak XV Partners.
US-based payments processor Shift4 FOUR 0.00%↑ has completed the acquisition of Finaro to accelerate its European expansion and improve its e-commerce capabilities. ICYMI: Another FinTech M&A: Shift4 acquires SpotOn unit for $100M 💸 [+more reads & M&A resrouces]
👋 That’s it for today! Thank you for reading and have a relaxing Sunday! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:
Hi LInas,
I went to the Future Market Insights webside, but couldn't find this report? would you have the link to it?
This represents a compound annual growth rate of 16.2%, according to a new report by Future Market Insights.
Thank you