PayPal expands PYUSD to Solana, signaling growing adoption of digital assets 💸; N26 is ready for growth as BaFin lifts onboarding restrictions ✅; Ethereum ETF approval signals crypto mainstreaming 🫡
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:
The Startup Growth Toolkit: Top 5 Resources to Scale Your Business to New Heights 🚀 [unlock the secrets to startup success with these essential resources]
Klarna: a profitable FinTech giant that’s poised for sustainable growth in the AI Era 📈🤖 [why this profitable FinTech giant is poised for sustainable growth in the AI Era + more bonus reads & deep dives inside]
Banking and Telecom are converging: Nubank launches eSIM service 📞🏦 [what it’s all about, why it makes sense + a bonus deep dive into Nubank & why it’s too good to be ignored]
American Express Investor Day 2024, and the confidence in delivering sustainable growth 📈 [key takeaways & most important insights from AmEx Investor day - I read the whole 200-page presentation so you don’t have to + bonus deep dives into their key competitors]
Another one - PayPal enters the ad business 😲 [what it’s all about & why it makes sense + a bonus deep dive into PayPal & why you should be bullish]
As for today, here are the 3 awesome FinTech stories that were transforming the world of financial technology as we know it. This is one of the most interesting and intense weeks this year thus far, so make sure to check all the above stories.
PayPal expands PYUSD stablecoin to Solana, signaling growing adoption of digital assets 💸
The news 🗞️ Finance behemoth PayPal PYPL 0.00%↑ has just expanded its stablecoin, PayPal USD (PYUSD), to the Solana blockchain.
Let’s take a quick look at this.
More on this 👉 Launched initially on Ethereum in August 2023, PYUSD has now been added to Solana due to its high speed and low transaction costs. This development comes despite Solana's history of network outages, with PayPal expressing confidence in the blockchain's stability and the ability for users to switch to Ethereum if needed.
Solana's current transaction processing rate of 1,423 transactions per second (tps) was reportedly a key factor in the decision, as retail applications require the ability to sustain at least 1,000 tps. In comparison, Ethereum processes only 12 to 15 tps.
PYUSD, issued by Paxos Trust Company, currently has a market capitalization of nearly $400 million and is mainly used on crypto exchanges and in decentralized finance.
PayPal aims to expand PYUSD's use in retail payments and emerging markets in Latin America, Southeast Asia, and Africa. The company has already enabled customers of its Xoom cross-border money transfer service to send funds abroad using dollars converted from PYUSD.
✈️ THE TAKEAWAY
What’s next? 🤔 First and foremost, this move by PayPal is all about the growing adoption of digital assets by traditional payment companies. FinTechs are increasingly entering the space, with stablecoins being the product-market fit many have been waiting for. Here we can remember Stripe's recent decision to enable online stablecoin payments for merchants further reinforces this trend. Looking at the big picture, as PayPal expands PYUSD to Solana and potentially other blockchains in the future, it sets the stage for broader adoption of stablecoins and digital assets in the FinTech and finance industries. This development could thus lead to increased efficiency, lower costs, and faster transaction times for cross-border payments and retail transactions. Moreover, it may spur further innovation and competition in the space, as other payment providers and financial institutions look to integrate stablecoins and blockchain technology into their offerings. However, regulatory challenges and technical hurdles remain. As seen with PayPal's experience, companies must navigate an evolving regulatory landscape and collaborate with authorities to ensure compliance. Additionally, the stability and reliability of blockchain networks, such as Solana, will be crucial for widespread adoption and trust in stablecoin-based payment solutions.
ICYMI: Another one - PayPal enters the ad business 😲 [what it’s all about & why it makes sense + a bonus deep dive into PayPal & why you should be bullish]
N26 is ready for growth as BaFin lifts onboarding restrictions ✅📈
The (BIG?) news 🗞️ German digital bank N26 is set to resume unrestricted customer growth from June 1, 2024, as the Federal Financial Supervisory Authority (BaFin) lifts the cap on new customer onboarding.
Let’s take a quick look at this and why it matters.
More on this 👉 We can remember that the regulatory restrictions, which limited N26 to adding 50,000-60,000 new customers per month since 2021, were put in place due to concerns over the bank's anti-money laundering (AML) controls.
Over the past two years, N26 has invested heavily in compliance measures, spending more than €100 million on infrastructure and teams to combat financial crime and money laundering.
More importantly, the bank has implemented sophisticated intelligence-based models to analyze the fraud potential of customers before account opening and self-learning transaction monitoring systems to detect suspicious activity in real-time.
Growth 📈 Despite the regulatory challenges, N26 has made significant progress in reducing its losses and increasing revenue. In 2023, the company halved its losses to €100 million and expects gross revenue to have climbed 30% to €300 million.
However, co-founder Valentin Stalf estimates that the growth restrictions may have cost the bank billions of euros in lost growth and valuation. Ouch.
As N26 prepares to resume unrestricted growth, the company's priorities have shifted from rapid expansion to profitability and attracting a sustainable portfolio of clients. We can remember that the bank recently launched its stocks and ETFs trading product in Austria and Germany, and expects to reach monthly profitability in the second half of 2024.
✈️ THE TAKEAWAY
What’s next? 🤔 First and foremost, the BaFin & N26 saga beautifully demonstrates the importance of robust compliance measures and strong relationships with regulators for digital banks seeking to scale their operations. If this wasn’t clear enough before, now it’s obvious - FinTech companies need to balance innovation with adherence to regulatory requirements to ensure long-term success. Compliance-first mindset is the key to success. N26 knows this better than anyone else 🫡
ICYMI: N26 fined €9.2M by German regulator over AML lapses, signaling increased scrutiny of FinTechs 😳 [what it’s all about & why it matters + some bonus dives into N26 & their strategy]
Ethereum ETF approval signals crypto mainstreaming 🫡
The news 🗞️ In a stunning turn of events, the U.S. Securities and Exchange Commission (SEC) has recently approved spot Ethereum ETFs, catching many in the crypto industry off guard.
While the final deadline for VanEck's ETF application was May 23rd, most expected a denial. However, Bloomberg ETF analysts dramatically raised the odds of approval to 75% just days before, as crypto has become a hot political issue.
Let’s take a quick look at this.
More on this 👉 The shift may reflect an attempt by the Biden administration to be less hostile to crypto, especially after Donald Trump signaled he would be the "pro-crypto" presidential candidate. The White House also refrained from vetoing the Financial Innovation and Technology for the 21st Century Act (FIT21), expressing eagerness to work with Congress on a balanced regulatory framework for digital assets.
Unlike spot Bitcoin ETFs, spot Ethereum ETFs likely won't begin trading for months due to unfinished paperwork. Staking rewards also appear to be off the table given the SEC's stance. Still, the news significantly impacted the market, with the discount of Grayscale's ETHE shares narrowing, Ethereum futures ETF volumes spiking, and implied volatility shooting up, especially for short-dated options.
Ethereum, which had been underperforming Bitcoin and other crypto assets this year, got a much-needed boost. The BTC/ETH ratio, measuring Bitcoin's price in Ether, dropped sharply after rising for months.
Ethereum's spot trading volume also climbed to 87% of Bitcoin's, the highest relative share ever, as the ETF news catalyzed Ether-centric trading.
✈️ THE TAKEAWAY
What’s next? 🤔 Looking ahead, we must once again stress that SEC approval of spot Ethereum ETFs is a landmark event that could open the floodgates for more crypto-based investment vehicles. It may pressure the SEC to level the playing field and approve spot Bitcoin ETFs as well. More importantly, increased institutional participation via ETFs could bring greater liquidity and stability to crypto markets. And that’s huge! However, it also raises questions about the SEC's evolving stance on crypto and which assets might be deemed acceptable. As Ethereum benefits from its new status, other blockchain platforms may feel compelled to pursue similar recognition.
🔎 What else I’m watching
Starling's Engine SaaS Platform Could Boost Valuation to £10B 💼📈 Starling's API-based, cloud-native SaaS platform, Engine, could generate hundreds of millions of pounds annually and push the UK digital bank's valuation to £10 billion, according to investor Chrysalis. Initially built by Starling's in-house tech team, Engine has been offered to other lenders since 2022 to help them launch new digital services or replace legacy systems. With only two clients so far, Chrysalis, Starling's second-largest shareholder, expects Engine to have 40-50 clients in a few years, creating a significant revenue opportunity. Starling has been focusing on Engine for international expansion after abandoning plans to move into Europe through an Irish banking license. In December, it signed a deal with PwC to offer Engine to clients worldwide.
Nubank Ultravioleta Introduces NuViagens Platform for Trip Planning 🛫🏨Nubank NU 0.00%↑ Ultravioleta has launched the NuViagens platform, offering customers a complete solution for trip planning. The platform enables users to purchase air tickets and book hotels directly through the Nubank app, with competitive prices and flexible payment options. NuViagens features a price guarantee, refunding the difference if a lower price is found within 24 hours. The platform also monitors flight prices and suggests the best time to buy, with up to BRL 500 (USD 96) in reimbursement if the price drops. Users can make purchases in up to eight interest-free installments via NuPay and earn 1% cashback. NuViagens is a result of a partnership with Hopper Technology Solutions and will be accessible in the Nubank Ultravioleta app. ICYMI: Banking and Telecom are converging: Nubank launches eSIM service 📞🏦 [what it’s all about, why it makes sense + a bonus deep dive into Nubank & why it’s too good to be ignored]
Former FTX Executive Ryan Salame Sentenced to 7.5 Years in Prison 🦹🏻 Ryan Salame, a former executive at the collapsed crypto firm FTX, has been sentenced to seven and a half years in prison. Salame pled guilty in September to conspiracy charges related to unlawful political contributions, defrauding the Federal Election Commission, and operating an unlicensed money-transmitting business. He was a close ally to FTX founder Sam Bankman-Fried, who was sentenced to 25 years in prison for stealing $8 billion from customers. Salame held high-ranking positions at Bankman-Fried's trading firm Alameda Research and became co-CEO of FTX Digital Markets in 2021. In addition to his prison sentence, Salame faces 3 years of supervised release and has been ordered to pay over $6M in forfeiture and $5M in restitution.
💸 Following the Money
Australia-based financial wellness platform WeMoney has announced the completion of a $3M fundraising round, aiming to solidify its presence in the region.
Finout has announced the raise of $26M in Series B funding round, to improve cloud expenditure and allocate costs across cloud services.
The web3 payments firm Coinflow Labs raised $2.25M in seed funding led by the venture firm CMT Digital.
👋 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:
Super interesting as always - thanks again!