BIS | Raihan Zamil and Aidan Lawson | Jan 20, 2022
Over the past decade, big techs and fintechs began to provide a range of financial services to consumers, initially outside the confines of the highly regulated banking industry. These services started with payments, but expanded to encompass consumer lending, insurance and wealth management.
In their provision of financial services, some big techs and fintechs compete directly with banks, while others work in partnership with them through various arrangements, to fulfil their customers’ banking needs. From the perspective of big techs and fintechs, the main benefit of providing bank-like financial services without a banking licence is the limited regulatory oversight, which allows them to focus on enhancing their technology, improving product offerings and enriching the customer experience.
More recently, several big techs and fintechs have obtained a banking licence in various jurisdictions.
Despite the regulatory scrutiny that accompanies a banking licence, a number of big techs and fintechs see the value proposition that it confers. Asia, and in particular China, is home to the largest number of big techs that operate with a banking licence. Numerous fintechs have also been granted bank charters in the United Kingdom and to a lesser extent in the European Union (EU) and the United States.
Access to low-cost deposits that complement their product offerings, the cost savings associated with eliminating the need for partner banks, the perceived trust and legitimacy that a banking licence bestows and the possibility that investors may reward such firms through higher market valuations more than offset the costs associated with operating as a bank.
These developments have been facilitated by an enabling regulatory environment
This paper assesses the benefits and risks of extending banking licences to big techs and fintechs.
The perceived benefits of allowing tech firms to operate with a banking licence are compelling, but require scrutiny.
The inherent risks, however, differ markedly across tech firms, with big techs posing the greatest challenges.
Authorities impose a range of financial and non-financial requirements as a precondition for tech firms to operate a licensed bank.
In devising licensing requirements, authorities should consider the inherent risks posed by tech firms.
The question of whether to allow tech firms to operate with a banking licence has the potential to permanently alter the landscape of national banking systems.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
The Fed's long-awaited report on central bank digital currencies is finally out. Although the report makes it clear that the Fed has no immediate plans to issue a digital currency, it does point to the approach the Fed would be inclined to take were it to do so.
That approach would have the Fed supply a retail digital currency to the general public indirectly, using private-sector financial intermediaries, including but not limited to commercial banks, as its agents. Those private intermediaries would then be responsible for managing customers' central bank digital currency (CBDC) holdings and payments.
Intermediated versus "Synthetic" Central Bank Digital Currency
Superficially, the Fed's preferred approach seems identical to the "synthetic" central bank digital currency (sCBDC) approach first recommended by Tobias Adrian back in 2019. In that approach, both bank and nonbank private-sector payment service providers can have accounts with their central banks and hold those central banks' digital liabilities.
Retail digital currency ("eMoney") is supplied exclusively by these private-sector payment service providers, but is fully backed by central bank reserves that are ring-fenced from those providers' other creditors. The result, Adrian says, is one in which the public may be said to hold and transact in central bank money "by proxy."
Adrian refers to his sCBDC plan as "a public-private partnership." It remains the case, nonetheless, that the central bank itself only supplies "wholesale" digital currency. Another article summarizing the sCBDC plan makes this especially clear. In a sCBDC arrangement, it says,
the central bank is not offering accounts to the general public but instead to private EMIs, who then use the sCBDC as a 100% backup for their e-money. This is an important difference between CBDC and sCBDC. … Similar to current e-money, [sCBDC] constitutes a claim against one specific e-money institute.
After nearly a year, the Federal Reserve has finally released its discussion paper on central bank digital currencies (CBDCs). For a 40‐page document, the findings were actually rather thin. It seems the Fed is still undecided, but it is leaning towards launching a CBDC that would protect privacy without permitting anonymous use, be intermediated (or hosted) by private banks, and be easily transferable. In other words, it would be much like what already exists.
The U.S. payments system––one that does resemble that of a developing nation––is long overdue for an upgrade, but that is not to say that upgrades are not underway.
Financial inclusion is a worthy goal as well, but one that similarly falls flat. The discussion paper devotes just two paragraphs to the “possible benefit of financial inclusion,” and it ultimately concludes with a request for research that would confirm the possibility. However, research already shows that the number of unbanked individuals has been declining every year. So, again, it’s possible that this is one problem that will be fixed before a CBDC is launched. Second, 75% of the unbanked say that they are simply uninterested in having a bank account. And third, two of the key reasons for being unbanked are concerns about privacy and trust. Considering the public’s trust in the government is at historic lows, it’s unlikely a CBDC will be winning any hearts. Thus, it is again unclear how much of a benefit a CBDC will be here.
Maybe it shouldn’t be such a surprise that the discussion paper was finally released considering CBDC legislation is also underway. However, it’s still unclear what the Fed has been doing since May 2021. What started as a “summer publication” soon became “expected in the fall” and then “in the coming weeks.” Now that it is finally here, it seems that the Fed and Congress have a long road ahead if they wish to justify such a program to the public. The first place they should start is in identifying how a CBDC can be anything more than a solution in search of a problem.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
Last year set a new record for public exits, with more than 844 U.S. companies going public via an initial public offering (IPO), a direct listing, or through a special purpose acquisition company (SPAC). That’s 105% higher than 2020, which saw 410 similar companies go public, according to PitchBook.
The 20 largest U.S. IPOs generated an estimated $41 billion in pre-tax value for employees who held stock options in those companies.
Record public exit activity is good news for founders and investors, but what about the employees who were granted stock options in those companies?
We dove into our proprietary data as well as publicly available data filed with the U.S. Securities and Exchange Commission to uncover defining trends for employees from late-stage unicorns in 2021.
Employees could have paid less in taxes by exercising their stock options before their company went public.
In 2021, startup employees paid an estimated $11 billion in avoidable taxes by exercising their stock options post-exit, rather than pre-exit.
On average, Secfi clients paid $543,254 in 2021 to exercise their pre-exit stock options (roughly double their annual household income), with taxes accounting for 73% of the cost.
Employees at companies that went public in 2021 saved nearly $415,000, on average, by exercising before an IPO.
Pre-exit stock option exercise rates vary widely from company to company, from as little as 2.4% on the low end to more than 77% on the high end, which could represent an indication of employee confidence in their company.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
When raising capital, a business may not offer or sell securities unless the offering has been registered with the SEC or falls within an exemption from registration. Each exemption has specific requirements that a company must meet.
This interactive tool can help you navigate the many regulatory pathways to raise capital, based on the criteria that matter most to you. While this tool does not provide legal advice, it can help you better understand your options so that you make informed decisions. Let’s get started!
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
Cato Institute | Jennifer J. Schulp and Nicholas Anthony | Jan 14, 2022
Gary Gensler, the Chair of the Securities and Exchange Commission (SEC), has set an ambitious agenda for the agency. Whatever one thinks about that agenda, it’s a lot to get done, even for a hard‐charging, get‐things‐done guy like Gensler. Rulemaking is not a quick process, but Gensler seems to have found a way to shepherd his agenda through a bit faster: decreasing the time allotted for the public to comment on proposed rules. But failing to provide adequate time for public comment can diminish the voices of investors and market participants in the rule‐making process. More so, it may hamstring the SEC in identifying the consequences of the proposed rules.
The extent of the short‐comment‐period trend came to light when Senator Patrick Toomey (R‑PA) and Representative Patrick McHenry (R‑NC) pointed out that the SEC proposals under Gensler’s leadership have given the public less than 60 days to comment. This trend is a break from the norm, where executive orders, including under the Obama Administration, have recognized that 60 days is typically considered the minimum time frame for comments to be submitted. Where multiple rulemakings are pending, or the comment period includes holidays, agencies may consider longer timeframes for public comment.
But under Gensler, the SEC has consistently provided public comment periods that are shorter than the standard 60 days: two proposals had 60‐day periods, three proposals had 45‐day periods, and seven proposals had 30‐day periods. Worse yet, most of the comment periods under Gensler have also overlapped with major holidays.
Letters from the public keep unelected regulators accountable to the world outside their doors. Even if a comment letter does not ultimately change the direction of pending legislation, it serves as a record of review that can be important for debates in the future. More so, welcoming the public to share their expertise can help to limit the likelihood of unintended consequences.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
The largest private offerings listed on Seedrs include:
Lick – £15 million – most funded
Ziglu – £7.326 million or 724% as the highest percentage funded
Chapel Down – £6.95 million involving 4172 investors – the most investors of any securities offering
Seedrs not only facilitates capital formation in the UK but is active in continental Europe having funded 33 EU businesses during 2021. Investors harken from 74 different countries.
A key feature of the Seedrs platform is its successful secondary market – a service that has been years in the making as private securities trading is a challenging task. Seedrs reports that during 2021 trading increased by 60% versus 2020 with £8 million in securities traded.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
McKinsey Digital | Matteo Biondi, Anna Heid, Nicolaus Henke, Niko Mohr, Lorenzo Pautasso, Ivan Ostojic, Linde Wester, and Rodney Zemmel | Dec 14, 2021
A burgeoning quantum-computing ecosystem and emerging business use cases promise to create significant value for industries—if executives prepare now.
Accelerating advances in quantum computing are serving as powerful reminders that the technology is rapidly advancing toward commercial viability. In just the past few months, for example, a research center in Japan announced a breakthrough in entangling qubits (the basic unit of information in quantum, akin to bits in conventional computers) that could improve error correction in quantum systems and potentially make large-scale quantum computers possible. And one company in Australia has developed software that has shown in experiments to improve the performance of any quantum-computing hardware.
Of course, all this activity does not necessarily translate into commercial results. While quantum computing promises to help businesses solve problems that are beyond the reach and speed of conventional high-performance computers, use cases are largely experimental and hypothetical at this early stage. Indeed, experts are still debating the most foundational topics for the field (for more on these open questions, see sidebar, “Debates in quantum computing”).
Still, the activity suggests that chief information officers and other leaders who have been keeping an eye out for quantum-computing news can no longer be mere bystanders.
A Growing Ecosystem
China and European union lead significantly for public funding on quantum computing
Startup activity and investments have sky rocketed since 2015
Hardware is a significant bottleneck in the ecosystem - Multiple quantum-computing hardware platforms are under development.
Most known use cases fit into four archetypes: quantum simulation, quantum linear algebra for AI and machine learning, quantum optimization and search, and quantum factorization. Industry use cases in pharmaceuticals, chemicals, automotive and finance.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 
The Fed's long-awaited 
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 
Last year set
Seedrs
