Category Archives: NCFA Blog

Fintech Investor Interview: Peggy Van De Plassche, Founding Partner, Roar VC

Roar Ventures | Peggy Van De Plassche | June 28, 2019

roar ventures - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCIntro:  NCFA Fintech Confidential spoke with some of Canada’s experienced fintech investors, on their background, how Canada has evolved, what we should be doing, advice to fintech founders and what keeps them awake at night.  This is part 2 of a 4 part series.

 

What is your background, and how did you come to found Roar Ventures?

Peggy:  I studied in Finance in France, graduating in 2001. Not the best year to join the VC world 🙂 I worked in finance for a credit union, then joined a PE-back firm, managing amongst other things their value creation program, which I absolutely loved! Then I moved to Montreal and shortly after joined CGI, this is where I learnt my software. It was a new group aiming at allocating capital among the different LPs that have been acquired through multiple acquisitions. We had solutions mainly in the US and Canada with the biggest sectors being Financial services and Government. It was awesome! I really loved the organization, my boss, my colleagues, the role, simply amazing.

I moved to Toronto & joined BMO. Also, great learning opportunities, my boss, Joanna Rotenberg, was a fantastic role model. I was also allocating capital to tech projects. My goal was always to go to VC/PE and I was building my skill set and network. We were hearing more about Fintech in the US & in the UK and I thought that it was where I wanted to go and be early on the trend that I saw as disruptive. I joined a wealthy software entrepreneur to start Fintech companies for him and also invest in the space. It was a wild ride, definitely invaluable learnings and a great way to reposition my career.

See:  FINTECH FRIDAY$ (EP.3-Aug 3): Investing in Canadian Diversity with Peggy Van De Plassche, Founding Partner at Roar Ventures

Being early in Canada on the trend I advised large organizations with their digital banking strategies. I ended up joining CIBC as VP, Innovation. Great opportunity to cement my network and understand the challenges and opportunities large FIs have. After CIBC, I advised Portag3 VC for ~1 year and decided to launch Roar VC following the announcement of the VCCI. I applied, interviewed ... and was not selected for funding! The whole process went from February to November, during this time I lined up investors but when the allocation didn’t come through the dominos fell on the wrong side and was back at the drawing board. It was a great opportunity to rethink my thesis, especially in fintech, as many funds had launched in one year in Canada.

I took some time to reassess my best options and decided to pivot...like any entrepreneur would do when getting a curve ball. I am now working with a business partner who is also a dear friend, focusing on later stage opportunities through an independent sponsor model and I am still doing angel investments in the early stage Fintech space and get involved with the companies I invested in.

 

How have you seen the Canadian fintech ecosystem change in the past 5 years? How has the Canadian fintech ecosystem evolved?

Peggy:  Overall our Fintech entrepreneurs are getting more savvy:

  • More and more entrepreneurs are starting their go-to-market (GTM) strategy with selling in the US or the UK which I believe is a winning strategy.
  • B2C in financial services in Canada being extremely difficult, many fintechs pivoted to B2B as their main source of revenues and growth.
  • Entrepreneurs are taking more US money as more US investors are coming north to find great entrepreneurs at good valuations.
  • Many startups entrepreneurs got burned badly through banks partnerships and are approaching these opportunities with more circumspection.

See:  Fintech Investor Interview: Karim Gillani, General Partner, Luge Capital

How can we strengthen and grow the Canadian fintech ecosystem?

Peggy:  To strengthen the ecosystem we need to have more Fintechs scaling, creating growth along the way and successful employees who will themselves start Fintech companies.  Meaning, we need more sales!  Sales and marketing are usually where we are falling short versus US companies both in terms of expertise and in terms of use of proceeds.  Focusing more on GTM and growing the top line is primordial to have Canadian champions.  US allocates a way higher use of proceeds to sales and marketing both in percentage and value.  Oftentimes that S&M expertise is not available in Canada and should be brought from the US.

What advise would you give to Canadian fintechs competing globally?

Peggy:  Focus on your sales and GTM strategy early.  CEO’s should not delegate the sales process prior to $1m ARR.  Sell in the US very early on, have a multi-layer sales strategy: small deals, medium deals and large deals to manage sales cycle and cash flow.  Get these clients logos as soon as you can on your pitch deck :-)…In 3 words: sell, sell, sell!

 

What keeps you awake at night?

Peggy:  My cat!  Ethics in Fintech, with the progress of AI I am worried that we will exclude a part of the population by pricing them out of the market.  Lending and insurance are areas where things can degenerate very quickly.  FMP, expansion of financial exclusion versus financial inclusion is real, especially as there is no global or even national framework.  Dying from a thousand cuts...

Is there anything else you’d like to add?

Peggy:  Think Global!!   Canada is amazing...and the world is a big place where we have what it takes to thrive.

We need these Canadian champions!!

 

Peggy VanDePlassche photo - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCPeggy Van De Plassche, Founding Partner, Roar VC (LinkedIn)

Peggy Van De Plassche is an experienced technology, operations, strategy and finance executive with expertise in new venture development, business management and restructuring, investment management, strategic planning and financial analysis.  A finance professional by trade, Peggy started working in technology 15 years ago, before fintech was a word. She is a founding partner at Roar VC, which invests in Canadian Data AI startups catering to the financial services industry. Prior to launching Roar VC, she was senior advisor at Portag3 Ventures as well as VP Innovation at CIBC. Peggy has also worked at CGI and BMO, founded 113 Ventures, invested in tech companies, and consulted for large organizations and startups.

 


NCFA Jan 2018 resize - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC 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

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Fintech Investor Interview: Karim Gillani, General Partner, Luge Capital

Luge Capital | Karim Gillani | June 2019

luge capital - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCIntro:  NCFA Fintech Confidential spoke with some of Canada’s experienced fintech investors, on their background, how Canada has evolved, what we should be doing, advice to fintech founders and what keeps them awake at night.  This is part 1 of a 4 part series.

 

What is your background, and how did you come to co-found Luge Capital?

Karim:  My background is in fintech, mobile tech, engineering, finance and strategy. Prior to Luge, I was at PayPal, leading M&A activities in Canada. I joined PayPal through its $890M acquisition of Xoom, a renowned cross-border remittance company, where I started the Corporate Development practice. I have an Engineering degree from the University of Waterloo, a Master of Finance degree from the University of London and a Master of Laws from the University of Toronto.

Luge Capital was the byproduct of highly motivated LPs, and a recognition that fintech venture capital needed a kickstart at the early stages. David Nault and I co-founded Luge in early 2018 with a new model to seek out entrepreneurs in the US and Canada that not only had a drive to take over the world, but also built their product to reflect that inevitability. We spend a lot of time with our companies because we believe our experience as former operators can be valuable, and we've architected a fund that is collaborative with our LPs.

How have you seen the Canadian fintech ecosystem change in the past 5 years? How has the Canadian fintech ecosystem evolved?

Karim:

  • In the last five years, we’ve seen the emergence of fintech companies expand. Since 2013, between 70 and 100 new fintech companies are founded in Canada every year. Prior to 2011, it was about 20 per year. Payments continues to lead all other categories, but we’ve seen meaningful emergence of crypto-focused companies in the last two years.
  • We’ve also seen systematic maturing of entrepreneurs in financial services. There is a greater understanding for the nuances of specific industries, and bigger ambitions to tackle problems that are global in nature.
  • The big banks have set up formal structures internally to talk to fintech companies, engage in pilots, become customers and invest directly.
  • There is more capital available now than 5 years ago for talented founders at almost all stages. With the entrance of Luge as a fintech-focused investor, there is even more money for early stage companies that need support to see their products take off. We’ve also seen capital inflow from America VCs who are realizing the tremendous calibre of our Canadian founders.

 

How can we strengthen and grow the Canadian fintech ecosystem?

Karim:  Financial services accounts for approximately 20% of the Canadian economy, if you include real estate. It’s the single biggest sector in our country. And most of it still relies on old, archaic infrastructure. When you open a new bank account, an RESP account, or buy life insurance, the process is still driven by pen and paper. We need motivated entrepreneurs who have a deep understanding of the inefficiencies within financial services to overhaul how we interact with money and data. And we need those entrepreneurs to not only solve for Canada, but also for other geographies that suffer from the same (or worse) inefficiencies.

See: 

What advice would you give to Canadian fintechs competing globally?

Karim:  Solve the big problems and do it well. Strive to be the best in the world at what you do, otherwise someone else will push you out. Some founders don’t realize that with limited financial resources, you still have meaningful assets that can be leveraged to create value: passion, enthusiasm, time and industry experience. Never doubt that a small group of talented people can make a huge difference in the world.

 

What keeps you awake at night?

Karim:  Three things:

  1. The huge amounts of debt (especially student debt) that exists across North America. The US alone has $1.56 trillion of student debt across 44.7 million people, and $1.03 trillion of credit card debt across 197 million people.
  2. Approximately 1.7 billion people still don’t have access to a bank account, which would not only keep them safe from storing value in cash but would connect them to the formal financial system.
  3. Millennials are entering (or have recently entered) adulthood and are not able to save enough to become financially independent. Millennials are only saving 5.3% of their income on average, and 53% of the population between 21 and 37 still rely on their parents for financial assistance.

 

Karim yellow background low rez 200 - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCKarim Gillani, General Partner, Luge Capital

Karim has an extensive background in fintech, mobile tech, engineering, finance and strategy. Prior to Luge, Karim led Corporate Development for Xoom, a leading cross-border remittance company that was acquired by PayPal in 2015 for USD $890 million. Before that, Karim managed M&A and investment activities for BlackBerry in Silicon Valley. He developed the company’s overall strategy for mobile payments and commerce, including NFC payments, P2P and App World. Karim spent several years working for Redknee Solutions in the UK where he designed network infrastructure, including mobile money solutions, for carriers in East Africa and Western Europe.


NCFA Jan 2018 resize - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC 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

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There’s no doubting these Toronto Raptors anymore

CBC Sports | Devin Heroux | June 14, 2019

raptors 2019 nba champions - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCLed by the stoic Kawhi Leonard, team sheds years of disappointment with 1st NBA championship

There's no more wondering what might have been.

No more talking about missed shots or missed opportunities. No more heartbreak.

Not this time. Not this team.

The Toronto Raptors are on top of the basketball world, 24 years in the making. For the first time in the team's history, the Toronto Raptors are NBA champions.

Led by the King of the North, Kawhi Leonard, the Raptors defeated the Golden State Warriors 114-110 and silenced the hostile Oracle Arena crowd to take the basketball crown away from the back-to-back defending champions.

It was Toronto's 106th playoff game in team history. It was Toronto's 106th game of the season. They won the Finals in six games. Now the Larry O'Brien championship trophy is heading to "The 6ix."

"I can't really think right now, this is crazy. This is awesome man," said Toronto guard Kyle Lowry. "Toronto! Canada! We brought it home baby! We brought it home!"

Leonard became just the third player in NBA history to be named Finals MVP with two different teams – joining Kareem Abdul-Jabbar and Lebron James.

"This is what I play basketball for," Leonard said. "This is what I work out for."

Raptors president Masai Ujiri risked it all for this moment. He fired the NBA coach of the year, Dwane Casey, after another playoff failure a year ago. He traded away the franchise's most popular player, DeMar DeRozan, for Leonard. He certainly wasn't popular with the fans a year ago at this time.

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In fact, it was one year and a day ago Nick Nurse, an assistant on Casey's staff, was promoted to head coach, and he rewarded Ujiri by guiding the Raptors to an NBA title in his first season at the helm.

Winning has a way of making people forget and forgive. Ujiri has never been more popular.

But long before the brilliant championship moment Thursday night at Oracle Arena when the bright lights of the basketball world shone down on the Toronto Raptors, there was darkness.

The path to this title for this cast of characters on the Raptors roster has been paved with heartaches and setbacks. Fred VanVleet was five when his father was shot to death. Kawhi Leonard was 16 when his father was killed. Serge Ibaka's mother died when he was just eight. And Pascal Siakam's dad was killed in a car crash when Pascal was 20.

And then there's Lowry, the longest-serving Raptor, who grew up in the rough and tough neighbourhoods of North Philly. He was raised by a single mother and his grandmother, and they did everything they could to make sure he could play basketball.

"Going to work, getting up at five in the morning and going to work and making me cereal, having a bowl of cereal sitting in the refrigerator with some milk and being able to provide for me and my brother and my family. That's pressure," Lowry said earlier in the week.

"Just being willing to do whatever it takes to make sure that your kid will see better than what you've ever seen."

All championship teams resonate with fans to some degree because people love a winner. And all championship teams have stories of adversity, stories of triumph against all odds.

But at the heart of this Raptors team is resiliency, a foundation of unshakable poise built up through a lifetime of hard knocks. And perhaps that's what's made the nation fall in love with this team in particular.

See:  [Report] A New North Star: Canadian Competitiveness in an Intangibles Economy

Competitive spirit

Despite being elite basketball players and being paid millions of dollars, there's a relatability with the players because there are many in this country who know what it means to be heartbroken, only to rise above.

That's why, in the face of doubters and haters and people who said this team could never win, the Raptors rose above.

Continue to the full article --> here


NCFA Jan 2018 resize - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC 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

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SmartHalo crowdfunds an additional $1 million for smart biking device

Betakit | | June 13, 2019

smart halo 300x198 - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCMontreal-based SmartHalo, a smart biking device developer, has successfully crowdfunded $1 million for the second generation of its product on Kickstarter.

“It made sense to return to Kickstarter after the success of the first SmartHalo campaign,” the company wrote on its Kickstarter page. “It’s a great platform for us to share our vision and receive the support needed to bring it to life. Crowdfunding allows us to give back to our community by giving our fans the opportunity to get the new SmartHalo first and at a discounted price. It’s a winning solution for everyone.”

SmartHalo2 is a connective device that allows riders to track cycling metrics, sync that data with fitness apps, and find new routes with navigation signals. It is water-resistant and comes fitted with an anti-theft alarm and a front light. Arguably its most recognizable new feature is PeekDisplay, which complements the product’s Halo display to provide more visible information to the rider.
“We see a huge opportunity in cycling. Not necessarily for sports, but for mobility,” said Xavier Peich, CEO and co-founder of SmartHalo. “Cities are investing in better infrastructure, while increasingly limiting car access and parking to downtown cores. This is a huge trend that is coming to Canada sooner than we think.”

CS2016 Throwback:  Smart Halo CEO and Co-Founder, Xavier Peich, wins NCFA live pitching session 1

smart halo wins NCFA live pitching session - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC

SmartHalo, formerly known as CycleLabs Solutions Inc, was founded in 2014 by Peich, Gabriel Alberola, Maxime Couturier, and Olivier Bourbonnais. In 2015, the company launched its first Kickstarter campaign, resulting in over 3,000 community pledges and raising half a million dollars. In 2016, the company raised a $328,000 angel round, and has been backed by Fonds Innovexport since 2017, a Quebec-based fund that also backs the likes of cloud software company, AlayaCare.

In the second half of 2017, the company struck a deal with Apple, distributing the SmartHalo device in Apple stores across North America and Europe. Peich said SmartHalo is both the first Kickstarter project and the first Canadian hardware company to launch at Apple. Since then, the company has delivered 25,000 units to cyclists in over 70 countries. Peich told BetaKit the company expects to raise a Series A sometime this year.

The company participated in The Next36’s 2016 Venture Day, where Peich was recognized as a Next Founders Valedictorian. The company also advanced to the finals of the Startup Community Awards in 2017, placing in the top three in the Startup Champion of the Year category.

Continue to the full article --> here


NCFA Jan 2018 resize - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC 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

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Early-stage Investing – The Public gets a Seat at the Table

FrontFundr | Peter-Paul Van Hoeken | June 12, 2019

public seat at table 300x172 - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCTraditionally, only a small group of investors, angel investors and other venture capitalists, have had access to investment opportunities in startups and growth companies. The public has been locked out from investing in startups.

Investments in early-stage companies are typically high-risk. That is why early-stage investors typically invest in a portfolio of at least 10-20 companies.  Those companies that are successful will realize exponential - ‘hockeystick’- growth and deliver huge returns for investors. The success of these companies can usually be attributed to the general public buying products and services from these companies. The same public that has had no access to investing in these companies and share in their success.

The public has been locked out from investing in startups.

Digital technology has been a significant enabler in creating online market places, such as Amazon and Shopify. These market places have dramatically increased access to products and services for every consumer and aggregated demand and supply supporting efficient price discovery that benefits all market participants.

See:  [Report] A New North Star: Canadian Competitiveness in an Intangibles Economy

Why not apply the same digital technologies to connect private companies with the wider potential investor community supporting the entire process from discovery of investment opportunities to completion of investment transactions?

Welcome to the new venture capital market – The democratization of investing in early-stage companies where everyone, regardless of how deep their pockets are, can invest in companies they believe in. Investing online in private companies a.k.a. investment crowdfunding or equity crowdfunding. Anyone could become a shareholder of a company for minimum investment as low as $500, enabling the wider investor community to make multiple investments and diversify risk even with a relatively smaller sized investment portfolio.

Investment crowdfunding offers early-stage companies the opportunity to raise capital from the public - The same public that may be the early (and future) customers of these emerging companies. With investment crowdfunding, the public has taken a seat at the early-stage investing table and brought a large pool of available capital.

Investment Crowdfunding could unlock $2.5 billion per year in Canada for in early-stage companies

We estimate that in Canada $2.5 billion per annum of total financial assets held by Canadians could be directed towards investments in early stage companies. This figure is based on a conservative assumption that 1.8% of total financial assets would be directed towards investment in the private markets. $2.5 billion is a significant pool of capital in comparison to $162 million invested in Canadian startups by angel investor and $3.4 billion investments in Canadian startups and growth companies by venture capital and private equity firms in 2017.[1]

Investment crowdfunding can also help address the challenge for early stage companies to attract capital. Startup Genome published its Global Startup Ecosystem Report 2019[2] on May 9th, ranking the top startup ecosystems in the world. No surprise Silicon Valley takes the first place. Toronto-Waterloo ranked 13th, up three spots from last year.

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Vancouver tumbled nine places from last year and ranked 24th. The report mentions that Vancouver as one of the top global ecosystems is hindered by a gap in early-stage funding, $320 million million in the period 2016 to first half 2018 compared to the worldwide average of $1.1 billion.

Investment Crowdfunding is democratizing the venture capital market

Montreal in 49th spot (down 15 places) $600 million went towards early-stage funding. However, even in the Toronto-Waterloo corridor, early-stage funding in startups is relatively low in comparison to its 13th place ranking with US$1.1 billion in 2016 to H1 2018.

Startup Genome ranked London (U.K.) as the 4th global ecosystem for early-stage funding with $4.3 billion in 2016 to H1 2018. EU-Startups highlights London’s exceptional access to venture capital funds, angel investors, crowdfunding platforms, banks and other financial possibilities.[3]

In the U.K., where investment crowdfunding has been around for nearly ten years, it has gone mainstream and is now an integral part of the startup funding ecosystem.

High growth entrepreneurship is key to Canada’s future economic success. Early stage companies drive innovation, economic growth, jobs and wealth creation. We need to help get these startups and growth companies to access the finance they need to grow and thrive. As we have seen in other countries like the U.K., investment crowdfunding can help expand the early-stage capital pool. Moreover, it goes further than helping early-stage companies get funding, investment crowdfunding also enables the public to share the risks and returns on venture capital investments jointly.

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Investment crowdfunding has the potential to unlock a large pool of capital from the public and empowers everyone to invest in companies they believe in and share risks plus returns. Also in Canada, investment crowdfunding is poised to become integral to the venture capital market. Together we can make that happen.

Peter Paul van hoeken - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCPeter-Paul Van Hoeken is founder and CEO of FrontFundr, a Canadian investment crowdfunding platform. He is a director of the Private Capital Markets Association Canada (PCMA), Advisor to the National Crowdfunding and Fintech Association Canada (NCFA) and member of the Ontario Securities Commission Launchpad Fintech Advisory Committee.

[1] Statistics Canada (2019), Canadian Venture Capital Association, CVCA (2019), National Angel and Capital Organization Canada, NACO (2017), FrontFundr Team Analysis (2019)

[2] Startup Genome (2019), Global Startup Ecosystem Report 2019

[3] EU-Startups (2018), London’s startup ecosystem at a glance (November 20, 2018)

 


NCFA Jan 2018 resize - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC 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

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FCA confirms new rules for P2P platforms

FCA | June 7, 2019

FCA - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCFollowing consultation, the Financial Conduct Authority (FCA) is introducing rules designed to prevent harm to investors, without stifling innovation in the peer-to-peer (P2P) sector. When the FCA set its first rules for P2P, it committed to keep these under review as the sector evolved. These new rules are designed to help better protect investors and allow firms and fundraisers to operate in a long-term, sustainable manner.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA said:

'These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities. For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.'

The FCA has refined its proposals to ensure the new rules protect consumers and support the P2P market. In particular, additional guidance has been provided to make it clear that platforms will not be prevented from including information about specific investments in their marketing materials.

As originally proposed, the FCA is placing a limit on investments in P2P agreements for retail customers new to the sector of 10 per cent of investable assets. This is an important means of ensuring that they do not over-expose themselves to risk. The investment restriction will not apply to new retail customers who have received regulated financial advice.

See:  FCA publishes update on wide-ranging review of retail banking sector

In addition to these restrictions, the new rules cover:

  • More explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise, with a particular focus on credit risk assessment, risk management and fair valuation practices.
  • Strengthening rules on plans for the wind-down of P2P platforms if they fail.
  • Introducing a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.
  • Setting out the minimum information that P2P platforms need to provide to investors.
  • Applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other Handbook requirements to P2P platforms that offer home finance products, where at least one of the investors is not an authorised home finance provider.

P2P platforms need to implement these changes by 9 December 2019, except for the application of MCOB, which applies with immediate effect.

The FCA will continue to closely monitor the P2P market as it develops further.

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NCFA Jan 2018 resize - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC 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

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NCFA Comments: CSA/IIROC Joint Consultation Paper 21-402: Proposed Framework for Crypto-Asset Trading Platforms

NCFA | Regulatory Committee | May 2019

OSC and IIROC consultation crypto assets trading platforms - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VCCanadian Securities Administrators/Investment Industry Regulatory Organization of Canada

Joint Consultation Paper 21-402: Proposed Framework for Crypto-Asset Trading Platforms

Comments from the National Crowdfunding & Fintech Association of Canada (NCFA)

 

Introduction

The NCFA welcomes this consultation.  We are in favour of the regulation of crypto asset platforms as long regulation is:

  • principles based and outcomes focused,
  • proportionate,
  • risk based,
  • not unduly limiting of innovation and competition,
  • consistent with global regulation and international best practices,
  • fully harmonized across Canada, and
  • technology neutral to the extent reasonably possible.

 

Whether Platforms are trading securities or not, they should be covered by KYC/AML/CFT legislation. Apart from that, regulators should be nimble yet cautious as global approaches remain unclear and the landscape remains unsettled. We also know that overly prescriptive regulation can severely limit innovation and competition. At this stage, less is more.

 

Questions:

  1. Are there factors in addition to those noted in Part 2 that we should consider?

- We have nothing to add to the remarks of other commenters.

 

  1. What best practices exist for Platforms to mitigate the risks outlined in Part 3? Are there any other significant risks which we have not identified?

 

- ASIFMA Best Practices for Digital Asset Exchanges June 2018 (https://www.lw.com/thoughtLeadership/ASIFMA-best-practices-digital-asset-exchanges)

- Cryptocurrency security standard (https://cryptoconsortium.github.io/CCSS/Details/)

- https://www.bitcoinmarketjournal.com/ico-investment-best-practices/

- ISDA CDM on representing derivatives trade events and processes (https://www.isda.org/2019/03/20/isda-publishes-cdm-2-0-for-deployment-and-opens-access-to-entire-market/)

 

The risks have been highlighted in the CP, but we think that regulators should give equal status to the opportunities (as well as the threats) – for example: democratisation of investment opportunities, the advantages that come from dis-intermediation, more product/services innovation and efficiencies, access to wider sources of capital, more liquidity, and so on.

 

  1. Are there any global approaches to regulating Platforms that are appropriate to be considered in Canada?

- We prefer the less restrictive and prescriptive (and more supportive and collaborative) approaches in the United Kingdom and Germany, which are clearly working.

See: Canada's regulatory system for fintech is complex, costly and chaotic and is stifling innovation

 

  1. What standards should a Platform adopt to mitigate the risks related to safeguarding investors’ assets? Please explain and provide examples both for Platforms that have their own custody systems and for Platforms that use third-party custodians to safeguard their participants’ assets.

 

- Market participants have responded to this question.  Standards should vary depending on the size, functions, risks, etc of each Platform. Each platform should have a duty to protect the digital assets, security of its users, and their data; however following regulatory standards through on-boarding should remain the responsibility of the custodian(s) of capital.

 

- We note that for permissioned/centralized issues, there is lower custody risk as the issuer can freeze when potential threats occur, burn and reissue if the threat is confirmed.

 

  1. Other than issuance of Type I and Type II SOC 2 Reports, are there alternative ways in which auditors or other parties can provide assurance to regulators that a Platform has controls in place to ensure that investors’ crypto-assets exist and are appropriately segregated and protected, and that transactions with respect to those assets are verifiable?

 

- For a period of time, finding enough competent internal and external auditors or other sources of assurance may be tough. We assume that CSA is collaborating with the relevant accounting and auditing bodies in Canada and internationally on education and standards. It may be that auditors will need to retain the support of skilled persons to provide them with the necessary confidence to sign off on the Reports, or should perhaps be able to rely on an ISR. The comments of the CPA in this consultation are helpful. Auditors may also collect a list of “best practices” to understand what common virtual checklists may include throughout the vetting/assurance of a Platform.

 

- Having said that, we understand that some auditors are today offering these services in Canada and are competent to do so.

 

  1. Are there challenges associated with a Platform being structured so as to make actual delivery of crypto assets to a participant’s wallet? What are the benefits to participants, if any, of the Platforms holding or storing crypto assets on their behalf?

 

- These questions are better answered by market participants, but one obvious benefit is that holding or storing crypto (safely) should reduce the costs (and risks) of moving the assets on and off the Platform.

 

  1. What factors should be considered in determining a fair price for crypto assets?

- We suggest that regulators should usually leave this question to the market, subject to full disclosure and regulatory and audit oversight.

 

  1. Are there reliable pricing sources that could be used by Platforms to determine a fair price, and for regulators to assess whether Platforms have complied with fair pricing requirements? What factors should be used to determine whether a pricing source is reliable?

- Market participants have responded to this question in this consultation.

 

  1. Is it appropriate for Platforms to set rules and monitor trading activities on their own marketplace? If so, under which circumstances should this be permitted?

- Yes, subject to regulatory access and oversight, where the activities are relatively straightforward, and the Platforms are relatively small and low risk. As the risks increase, so will the regulatory requirements and oversight. Platforms that have a built in trust systems (eg, smart contracts) or hashes of transactions, or any other type of verifiable audit trail will require less oversight as their process will be more transparent.

 

  1. Which market integrity requirements should apply to trading on Platforms? Please provide specific examples.

- This question is best answered by market participants.

 

  1. Are there best practices or effective surveillance tools for conducting crypto asset market surveillance? Specifically, are there any skills, tools or special regulatory powers needed to effectively conduct surveillance of crypto asset trading?

- This question is best answered by market participants.

 

  1. Are there other risks specific to trading of crypto assets that require different forms of surveillance than those used for marketplaces trading traditional securities?

 

- Yes (dis-intermediation, global reach, speed, highly technical nature of the business, security issues, anonymity of wallets – FATF guidance on a risk-based approach for the regulation of virtual asset service providers is coming, and FinCEN is here – https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf. Recent FINTRAC Guidance on the Interpretation of Money Services Business is also broadly helpful.

 

  1. Under which circumstances should an exemption from the requirement to provide an ISR by the Platform be appropriate? What services should be included/excluded from the scope of the ISR? Please explain.

- Once again, it depends on the risks to the regulatory objectives. Each situation must be evaluated on its own facts.

 

  1. Is there disclosure specific to trades between a Platform and its participants that Platforms should make to their participants?

- As above, question 13.

 

  1. Are there particular conflicts of interest that Platforms may not be able to manage appropriately given current business models? If so, how can business models be changed to manage such conflicts appropriately?

- None that we are aware of.

 

  1. What type of insurance coverage (e.g. theft, hot-wallet, cold-wallet) should a Platform be required to obtain? Please explain.

 

- Platforms should obtain insurance that is adequate/ appropriate. The appropriate nature and extent of the insurance will vary with the circumstances, taking into account the nature of the risks, other forms of risk transfer and risk mitigation mechanisms used, whether an insured custodian is involved, etc.

 

  1. Are there specific difficulties with obtaining insurance coverage? Please explain.

 

- Yes. Most insurers and brokers have inadequate experience with crypto assets, cyber security, DLT, etc, so insurance cover (if available at all) is unlikely to be wholly adequate at this time and may cost too much. CSA guidance might be helpful here, drawing on global sources. (We note the more positive comments in the submission of the Wall Street Blockchain Alliance.)

 

- One option is to start with eg D&O insurance and add to that as the insurers become more confident.

 

  1. Are there alternative measures that address investor protection that could be considered that are equivalent to insurance coverage?

 

- Yes. EG, security bonds, guarantees, letters of credit, catastrophe bonds (being used in an ever widening variety of situations), ring-fenced capital, investor’s own insurance, an industry fund.

 

  1. Are there other models of clearing and settling crypto assets that are traded on Platforms? What risks are introduced as a result of these models?

- We agree with what CSA/IIROC propose in this section.

 

- We understand that in a permissioned/centralized Platform, which will be standard for all regulated securities exchanges, clearing and settlement will be instant, enabled by initial security token programming (assuming that the AML/KYC requirements are met by both the seller and the buyer).

 

  1. What, if any, significant differences in risks exist between the traditional model of clearing and settlement and the decentralized model? Please explain how these different risks could be mitigated.

 

- There are increased risks in a decentralized model, but it appears that these can be mitigated. It is crucial that the programming of the securities ensures that CFT/AML/KYC requirements will be met.

 

  1. What other risks could be associated with clearing and settlement models that are not identified here?

- Best answered by market participants.

 

  1. What regulatory requirements (summarized at Appendices B, C, and D), both at the CSA and IIROC level, should apply to Platforms or should be modified for Platforms? Please provide specific examples and the rationale.

 

- This would be an enormous (but valuable) exercise which the NCFA is not resourced to perform. We support calls for a collaborative ongoing discussion about this (and regulation generally) among regulators and market participants.

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NCFA Jan 2018 resize - Fintech Investor Interview:  Peggy Van De Plassche, Founding Partner, Roar VC 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

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