WTF: Binance walks away from FTX takeover 😳🥶; Mastercard really, really loves crypto ❤️🧡; Pyypl is for the people 🧑🤝🧑
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:
Stripe's “excellent” layoffs and a warning sign for everyone 🌪 [it’s a must-read if you’re in FinTech, e-commerce, and digital biz per se]
PayPal claims the top spot in BNPL 🤯 [a deeper dive on their key growth opportunities & one huge risk + 2 bonus reads]
Coinbase loses half a billion dollars & half a million customers in 3 months. What signals does it send? 🤔 [a deeper dive with a focus on what many are missing]
Amazon shows why the future of FinTech is Embedded 🗂 [how Amazon is unbundling the bank. Again + 4 bonus reads]
Big banks are betting big on the Boring Stuff 🤑 [& so should you!]
Yet another causality of the struggling NFT market 😔 [more to come]
Alternative asset investing is no longer just for the ultra-rich 🤑 [or how FinTech is disrupting one of the least disrupted Finance verticals]
Alipay tests golden goose in Hong Kong 🇭🇰 [you’d steal this ASAP!]
As for today, here are the 3 FinTech stories that were making a massive difference this week. It was super hot this week, so definitely check out all the above stories.
WTF: Binance walks away from FTX takeover 😳🥶
That was fast… 🌪 Just slightly more than 24 hours have passed after Binance announced it’s taking over rival FTX in one of the biggest things in crypto ever. Now the biggest crypto exchange in the world says it will not go ahead with plans to buy FTX, citing the results of due diligence and reports of US regulatory investigations into its rival.
Binance also added: In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.
What a plot twist, right? But if you read yesterday’s newsletter, I wrote that the way the deal was announced implied it shouldn't surprise you if Binance just walks away. FTX crashes and Binance wins without spending a penny. And that’s exactly what happened now.
A refresh ♻️ If you’re not a premium subscriber yet (join the fam now!), here’s a brief summary of the situation that will help us to navigate this forward:
Binance and FTX acquisition was based on a non-binding letter of intent and pending due diligence process. Now I’m pretty sure this deal was never meant to happen (Binance new FTX was secretly insolvent and in massive trouble).
Following the announcement, the Securities and Exchange Commission and the Commodity Futures Trading Commission have been investigating FTX’s relationship with FTX US as well as sister entity Alameda Research for months, as per Bloomberg. Though, as noted yesterday only global entities were on the table here, so it’s really a question as to what regulators could actually do.
The key catalyst to this was Alameda's balance sheet being leaked, which showed a heavy relationship and most importantly - exposure to FTT tokens. Alameda Research is a crypto trading firm run by FTX chief Sam Bankman-Fried.
This effectively made people realize how fragile the FTX/Alameda apparatus is, people started doing withdrawals and it caused Binance to sell its FTT tokens.
This led to a bank run on FTX as a result and a bailout/sale was the only solution (given VCs weren't lending a hand).
With FTX facing a surge in withdrawals over recent days, raising concerns about its ability to survive, Bankman-Fried approached rival Changpeng Zhao aka CZ about a possible deal. They signed an LOI.
However, within hours of that process beginning, Binance found a financial back hole, according to Bloomberg, citing a source suggesting a gap between liabilities and assets at FTX that could top $6 billion. Hence, they walked away.
Important context 👉 As a reminder, these are FTX’s investors and this is how their massing funding was amassed: BlackRock, Ontario Pension Fund, Sequoia, Paradigm, Tiger Global, SoftBank, Circle, Ribbit, Alan Howard, Multicoin, VanEck, Temasek.
Lesson 1: there’s no such thing as smart money.
Now, onto some irony…
The fact that this was said in from of the lawmakers is just next level…
✈️ THE TAKEAWAY
Trying to make sense 2.0 🤷♂️ It’s now clear that FTX was secretly insolvent with a massive hole in its balance sheet. FTX Token FTT is now in free-fall after Binance walked away from the bailout. FTX investors are told that without more capital, bankruptcy is likely (what a surprise, right?). As an effect, FTX CEO SBF’s net worth is now reportedly a negative $200M (he reportedly owes over $650M to lenders while all he has is Robinhood’s stake worth around $450M). This is down from over $16B just yesterday. Wow 😳 So what can we learn from this? A ton of things, actually. In addition to what I said yesterday, here’s something to think about: (1) There’s no such thing as smart money. They are no smarter than you; (2) Always question everything. There are no dumb questions in this world; (3) Don't use tokens that you create as collateral; (4) Keep large treasuries; (5) Don't use your treasury to make extra money. Use your business to make money; (6) Banks run on fractional reserves. Crypto exchanges should not; (7) Everything in crypto is fragile. And most importantly - (8) don’t lose faith and keep building 🚀
Mastercard really, really loves crypto ❤️🧡
The news 🗞 Payments giant Mastercard MA 0.00%↑ continues supporting cryptocurrency and blockchain startups as part of its FinTech accelerator, the Mastercard Start Path program.
More on this 👉 Mastercard has chosen another 7 industry startups for its Start Path program in order to promote the adoption of crypto and blockchain technology.
The new cohort of startups includes the crypto gateway provider Fasset, Singapore’s crypto payments platform Digital Treasures Center, and the Colombian stablecoin-focused firm Stable. Mastercard previously partnered with Fasset in July to jointly work on digital solutions to drive financial inclusion in Indonesia.
The latest Mastercard Start Path program also includes the Web3-focused social payments system provider Loot Bolt, privacy starup Quadrata, the blockchain-based media FinTech project Take Back the Mic, and the brand-oriented platform Uptop.
✈️ THE TAKEAWAY
It’s mutual ❤️🧡 It’s yet another proof that the payments heavyweight really loves cryptocurrency. As a reminder, last year alone, the credit card giant partnered with firms across the Asia Pacific, including Amber Group and Bitkub to offer crypto-linked payment cards. This April, Mastercard partnered with crypto lender Nexo for a similar offering, though that card was linked to a crypto-backed credit line, allowing investors to spend as much as 90% of the fiat value of their crypto assets. Furthermore, a few weeks, the company introduced a new program with Paxos to enable financial institutions to bring crypto trading capabilities and services to their customers. Having said that, it’s becoming more and more clear that the real winner of the crypto space is emerging… And it could be Mastercard.
Bonus: The real winner of the Crypto Wars is… Mastercard? 🤔
Pyypl is for the people 🧑🤝🧑
The money 💸 FinTech Pyypl closed a $20M Series B raise from “a diverse group of international investors and ten existing investors,” as per Financial IT.
The USP 🥊 Pyypl offers key financial services in one app for the 800M financially underserved smartphone users in Africa and the Middle East via internationally accepted virtual and physical prepaid cards, domestic and international user-to-user transfers, as well as remittances to 38 currency destinations.
✈️ THE TAKEAWAY
Focus on the people 👉 The Middle East contains two of the world’s three largest remittance corridors with the UAE and Saudi Arabia, handling a combined $78B in payments in 2020. The region has also experienced a rapid transition to digital in the last year making it a market that is primed for fintech innovation. Pyypl is trying to address this market. Despite a tough name, the company has already established key partnerships including with Visa, Ripple, and Binance. If they continue building and delivering for the people, it’s definitely a company to watch.
🔎 What else I’m watching
Binance to buy a bank? 👀 Binance founder and CEO Changpeng Zhao expressed his potential interest to buy banks as a way of bridging the gap between the worlds of traditional finance and crypto. Zhao did not name any specific targets, and also said he's open to either minority investments or a full acquisition. It’s not surprising since banks are becoming crypto companies while crypto companies are becoming banks ₿🏦
More FinTechs layoffs 😞 Expense management solution provider Pleo has laid off 150 employees — 15% of its workforce — as it shifts its target from growth to efficiency. The 7-year-old company recently experienced “a chapter of hyper-growth” in which it launched in a new country and added 100 employees each month, CEO Jeppe Rindom said in a letter posted on the company’s website. Growing headcount ≠ growing productivity. Few understand that.
💸 Following the Money
Solana-based DeFi yield platform Texture raised $5M and is now live in private beta testing. Texture aims to launch fully by the end of the year.
Yassir, the Africa-based super app, offering ride-hailing, food, and grocery delivery and payments, grabbed $150M.
Web3 gaming infrastructure startup Xternity raised $4.5M in a pre-seed funding round from NFX, Jibe Ventures, and Flori Ventures.
👋 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: