With a spot Bitcoin ETF expected in 2024, crypto investors, traders, and enthusiasts are likely feeling as optimistic about digital assets as they have in awhile.

As the trauma of Sam Bankman-Fried and FTX fades further into the background, the digital asset community has been able to refocus its energies on a number of positive developments in the space – from the surging price of crypto assets like bitcoin to the increasing interest in cryptocurrencies from major financial institutions.

So with the year drawing to a close, here are a few recent crypto- and blockchain-oriented headlines that you might have missed.

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BlackRock, Nasdaq, SEC Meet Again on Bitcoin ETF

This week, according to reporting in Coindesk, representatives from BlackRock, Nasdaq, and the U.S. Securities and Exchange Commission met for the second time to discuss the possibility of a Bitcoin-based exchange-traded fund (ETF).

Coindesk’s reporting is based on a published memo from the SEC’s Office of Market Supervision, Division of Trading and Markets. The memo notes the subject of the meeting as “Meeting with BlackRock re: iShares Bitcoin Trust”, lists the meeting participants, and indicates that the conversation “concerned The NASDAQ Stock Market’s proposed rule change to list and trade shares of the iShares Bitcoin Trust under NASDAQ Rule 5711(d).”

What does this mean for a Bitcoin ETF in 2024? Rule 5711(d) refers to a variety of specific criteria required for listing and trading shares on the Nasdaq exchange. But especially noteworthy are aspects of this rule has to do with market integrity and protections against potentially fraudulent activity. We’ve covered the “surveillance-sharing” issue before in 5 Tales from the Crypto, so it is no surprise to find that the SEC is still looking to dot “i’s” and cross “t’s” as we move closer to a potential new ETF product for crypto investors and traders.

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Saylor on Bitcoin: “Biggest Wall Street Development in 30 Years”

Michael Saylor, former CEO and current Executive Chairman of MicroStrategy, was interviewed on Bloomberg TV earlier this week. Asked about the potential of a Bitcoin ETF in 2024, Saylor said that the launch of a Bitcoin ETF next year could be “the biggest Wall Street development in 30 years.” He went on to say that he thought that the launch of an institutionally supported Bitcoin ETF could ignite a major bull market in crypto assets as a new surge in demand confronts current (inadequate) supply.

In his comments Saylor compared the emergence of a Bitcoin ETF to the launch of the S&P 500 ETF, popularly known as the SPY, more than 30 years ago.

Headquartered in Tysons Corner, Virginia, and founded in 1989, MicroStrategy is a long-time Finovate alum. The company made its Finovate debut in 2013 at FinovateSpring in San Francisco. MicroStrategy is a public company, trading on the Nasdaq under the ticker MSTR. The firm has a market capitalization of $8 billion.

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Blockchain-based micropayments company raises seed funding

Swiss-fintech Centi, which offers blockchain-based micropayment solutions, announced the completion of a seed funding round this week. The amount of the investment was not disclosed. The round was led by Archblock and Bloomhaus Ventures, with current shareholders and founders also participating. The company will use the funds to help fuel global expansion.

Centi leverages blockchain technology to address two significant challenges in the payments industry: the inefficiency of micropayments and the issue of financial inclusion. Centi responds to these problems with its proprietary stablecoin technology that facilitates transactions as small as a cent. This creates new opportunities in digital content monetization for merchants, creatives, and others.

The Swiss firm also offers a direct-to-consumer stablecoin that can be purchased with fiat currency. This technology supports financial inclusion by giving unbanked consumers a pathway to digital payments.

“We founded Centi driven by the potential of blockchain for micropayments and financial inclusion,” Centi co-founder Bernhard Müller said. “The name ‘Centi’ itself, derived from our capability to process transactions as small as one cent, encapsulates this focus.”

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Connecting crypto and banking pays for Fiat Republic

Europe continues to be the source of crypto funding news this week as Fiat Republic announced a seed extension round of $7 million (€6.4 million). The investors include first-timers Kraken Ventures, Fabric Ventures, Arca, and Inovo Ventures. Existing investors Speedinvest, Credo Ventures, and Seedcamp also participated in the funding. Fiat Republic will use the capital to support growth and expansion, as well as make strategic hires and fortify banking partnerships.

London-based Fiat Republic helps crypto platforms connect with crypto-friendly banks. The company’s platform allows crypto firms to create accounts in multiple currencies and access local payment rails and FX via a single API.

Fiat Republic’s funding announcement comes as the company reports that it has been granted a full electronic money institution (EMI) license by the Netherlands’ De Nederlandsche Bank (DNB). This license will enable Fiat Republic to offer regulated financial services throughout the European Economic Area (EEA). These services include the ability to offer payment services and issue e-money to EEA crypto platforms courtesy of its API. The Dutch license is the second earned by the company; Fiat Republic has held an EMI license in the U.K. for more than a year.

Fiat Republic CEO and co-founder Adam Bialy said that the addition of the Dutch license was a major step for the two-and-a-half year old startup. “Passporting from the reputable and credible jurisdiction of the Netherlands not only boosts our legitimacy in the traditional finance world, but also highlights our commitment to high compliance standards, security, and close collaboration with regulators.”

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Crypto Comeback? Looking back and leaping forward

There’s a lot for crypto investors, traders, and observers to be excited about as 2024 draws near: renewed bullishness in assets like Bitcoin and Ethereum, continued interest in crypto from institutional players and financial services incumbents … But before we go, here are a few last looks at crypto in 2023.

• Bitcoin: The Year in Review – Forbes
• Under the Hood, 2023 Was a Highly Constructive Year for Crypto – CoinDesk
• Cryptoverse: Bitcoin defies its doubters in 2023 – Reuters
• 2023 Year Review & 2024 Year Ahead – Crypto.com
• Reflecting on the Transformative Year of Crypto in 2023 – VanEck

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Photo by RDNE Stock project

Enabling technologies continue to fuel innovation in fintech and financial services. But what are regulatory bodies doing to ensure safety for consumers and fair competition for businesses?

Here are some of the areas where regulators could make themselves felt by the fintech industry in 2024.

AI: From the EU’s AI Act to Executive Orders in the U.S.

Whether its the boardrooms of Silicon Valley or the halls of Congress, the call for regulating AI technology is only getting louder. As we enter 2024, the focus on AI-based regulations in the U.S. will come from the Executive Order signed by President Biden in October. This order, called the Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, builds on the administration’s Blueprint for an AI Bill of Rights from last year. The order lists eight guiding principles for the responsible development and use of AI – including the importance of U.S. leadership in this field as well as both support for American workers and protections for American consumers.

The order also set out a series of regulatory requirements that range from establishing AI safety and security standards to the importance of fostering innovation to concerns about human rights and equity. In their review of the executive order, Foley & Lardner analysts Millendorf, Allen, Moore, Barrett, and Zhang note that while it could set the stage for “potentially rigorous regulation,” the order also makes it clear that “the administration is not shy about their desire to promote competition.”

Meanwhile in Europe, we soon will have the chance to see the implementation of the European Union’s enactment of the AI Act. Unlike policy in the U.S., the EU’s AI Act is set to become law early next year. The AI Act comes two years after the EU first proposed a regulatory framework for AI and will mandate new restrictions on the use of the technology. This will include greater transparency on how data is used. The Act also categorizes AI technologies in terms of risk, recognizing everything from “unacceptable risk” systems that involve cognitive behavioral manipulation or social scoring, to limited risk systems such as image generating or manipulating technologies.

There has been some criticism of the EU’s AI Act – for example, French President Emmanuel Macron expressed concern that the legislation could stifle innovation. But with final details hammered out this week, a new comprehensive framework for regulating artificial intelligence will be among the first big technology headlines of the new year.

Buy Now, Pay Later, Regulate Someday?

According to research from Lafferty, the international Buy Now, Pay Later market will top $532 billion in 2024. And observers of the Buy Now, Pay Later phenomenon – supporters and critics – have known for some time that tougher regulations were coming to the industry. The only question was when.

Is the answer, “next year”? In the U.S., the Consumer Financial Protection Bureau (CFPB) has been studying the BNPL industry since at least late 2021. As such, the CFPB has recognized a number of key benefits BNPL provides relative to traditional credit products, especially with regard to the absence of interest payments, ease of access, and simple repayment structure. At the same time, the agency has also acknowledged a number of potential issues: discrete consumer harms, data harvesting, and overextension.

At this point, much of the CFPB’s impact on BNPL has been minimal. And while some observers believe that regulation is inevitable, few see signs of any specific imminent changes to law or policy with regard to BNPL in the U.S. There has some concern at the state level, with state attorneys general voicing consumer protection warnings. But at this point, “study and recommend” seems to be the approach the agency is taking toward BNPL for the immediate future.

Unsurprisingly, the EU is significantly farther down the path toward regulating BNPL than the U.S. is. In September, policymakers revised their Consumer Credit Directive (CCD) which updated rules for consumer credit and roped in Buy Now Pay Later products for the first time. With regards to BNPL, the revised directive specifies the circumstances under which a given BNPL service falls under the CCD. It also mandates that those BNPL services that are within the scope of the CCD be “subject to license requirements and certain regulations regarding responsible lending.” The new stipulations in the CCD must be implemented into member state national law by the fall of 2025.

Will the Regulators Curtail Crypto’s Comeback?

The price of Bitcoin is up more than 148% year-to-date. Ethereum is up more than 90%. Even the lowly Dogecoin has gained more than 35% from the start of the year through mid-December. After a slow start, 2023 is turning out to be a great year for cryptocurrency asset prices.

So will the regulators show up to take away the punch bowl?

Once again, the EU is the first mover when it comes to major regulation of enabling technologies in fintech. Next year, the EU will implement the Markets in Crypto Assets regulation – also known as MiCA or MiCAR. The first instance of a regulatory body establishing a comprehensive set of regulations for cryptocurrencies, MiCA was established in June. The regulations set new rules for stablecoins, including e-money tokens; require authorization for certain types of services provided by companies deemed crypto-asset-service providers; and introduce new rules to prevent market abuse via unlawful disclosure, insider trading or other activities “that are likely to lead to disruption or manipulation of crypto-assets.”

In the U.S., 2023 seemed like the year when regulators were doing everything they could to make life miserable for the cryptocurrency business. But 2024 could bring better news for the industry in the form of rule changes like the one recently made by the Financial Account Standards Board (FASB). This rule change allows institutions to represent their crypto holdings at fair value beginning late in 2024. Under current accounting rules, cryptocurrencies suffer from something called impairment.

This occurs because of the imbalance between how cryptocurrencies are recorded when they lose value as opposed to when they regain value. According to one observer, TradeStation Head of Brokerage Solutions Anthony Rousseau, this change gives corporate treasurers a potential way to include cryptocurrencies like Bitcoin to their balance sheets as a reserve asset. And as we’ve seen with the emergence of crypto ETFs in 2023, institutional adoption of crypto is one of the key leading indicators for potentially greater adoption of crypto throughout society.

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Photo by Joshua Miranda

Last week, Elon Musk informed his employees that he wanted X, the social media platform formerly known as Twitter, to become the next big thing in consumer finance starting next year. And while this seems like an audacious plan for the man behind Tesla and SpaceX, Musk is a member of the PayPal mafia, after all. Could he know something about turning X into a financial services superapp that the rest of us don’t?

Let’s take a look at a few reasons why Elon Musk might be crazy as a fox when it comes to turning X into a fintech superapp – and a reason or two why he might not stand a chance.

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Payments: The Gift That Keeps Giving

Whether you see payments as the “gift that keeps giving” in fintech or merely the lowest hanging fruit for a platform looking to expand into financial services, the idea of adding payments to X as an initial step in the direction of becoming a financial superapp makes sense.

Moreover, Musk sees payments as not just an initial step, but a key one in terms of not just the success of X but the end of the bank account as we know it.

“When I say payments, I actually mean someone’s entire financial life,” Musk said in an all-hands staff meeting last month. “If it involves money, it’ll be on our platform. Money or securities or whatever. So, it’s not just like send $20 to my friend. I’m talking about, like, you won’t need a bank account.”

As such X has already secured money or currency transmitter licenses in seven U.S. states: Arizona, Maryland, Georgia, Michigan, Missouri, New Hampshire, and Rhode Island. These licenses enable X to offer a range of payment services, including crypto payment services. Observers have suggested this means Musk is initially planning on offering a Venmo or PayPal like payment processing service nationwide.

Elon Musk Has a Payments Pedigree

Although often forgotten amid his achievements with satellites, rockets, and automobiles, Elon Musk is a member of the group that paved the way for PayPal. Known colloquially as the “PayPal Mafia”, the group of 20+ technologists includes a number of entrepreneurs who, like Musk, have gone on to do more great things in the world of technology. These include the founding of companies such as YouTube and LinkedIn.

Musk’s specific contribution to the group was his founding of online financial services and e-mail payment company X.com in 1999. Among the first online banks to be federally insured, X.com merged with online bank Confinity in 2000, which had launched its money transfer service PayPal the year before. Interestingly, it was Musk who has been credited for moving the combined entity away from internet banking and toward a focus on payments. Nevertheless, within a month Musk was replaced as X.com CEO by Peter Thiel. The company took on the name PayPal in 2001 and in the following year generated more than $61 million in its IPO.

Embedded Finance Empowers All

The rise of embedded finance has made it possible for virtually any platform that wants to offer financial services to do so. Writing in The Financial Brand, Jim Marous underscored embedded finance as an “existential threat” to banks that could “divert 50% of banking revenue to other providers.” He noted a projection from consulting firm Publicis Sapient that suggested that revenue from embedded finance will reach $160 billion by 2025.

And while early adopters of embedded finance were fintechs and other financial-adjacent companies, the ability to embed basic, widely used financial services into a wider and wider range of consumer experiences has proved irresistible. From ridesharing and retail to hospitality and social media, the opportunity to boost customer engagement and create new revenue streams via embedded finance is clear. And between Musk’s payments pedigree and his desire to monetize X, the rise of embedded finance could not come at a better time.

Increasingly, the question for platforms will not be “can I do payments with you?” Instead, it will be “why would I want to do payments with you?” In this, a popular social media platform will have some advantages that other platforms will not.

Are Elon’s Eyes Bigger Than His Plate?

Whether or not you are a fan of Elon Musk’s X-ification of Twitter, it is hard to see X as a finished product. Some of the platform’s earliest adopters have left or are considering leaving. This is often due to combination of technical issues, changes in functionality, or an environment that critics have described as “a cesspool.”

How fixable are these problems? Much of X’s technical woes have been attributed to staffing issues – Musk claimed this spring to have cut the company’s staff by 80% – and Musk’s own mercurial management style. And many of the changes in functionality – such as making popular features like Tweetdeck a premium service – are essentially just attempts to monetize a platform that has been undermonetized for years in the eyes of many. As for the debate over how much X differs from Twitter in terms of tone and civility, social media platforms inevitably track the tone and civility of the societies that support them. If X in 2023 is a less happy place than Twitter was in 2013, there’s probably a good reason for that. And it isn’t Elon Musk.

That said, the idea that X could grow from a social media platform with a growing list of unfixed flaws into a trusted and widely used financial superapp does seem to skip a step.

Would You Put Your Trust in Musk?

As the launcher of rockets and the developer of tomorrow’s cars, Elon Musk has earned widespread praise and acclaim. But his tenure at the top of X has been rocky – both in terms of technical issues with the platform as well as the alleged proliferation of unsavory actors. Kara Swisher, a technology journalist and writer who has known Musk for years, astutely pointed out in a recent interview that Musk was surprised that he was not able to immediately parlay his success in the world of technology into the world of media. As such, it is an open question as to whether or not people who trust Musk enough to drive his cars, also trust him enough to safely move their money.

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Photo by SpaceX

Halloween is less than a week away, and with the scariest night of the year on the horizon, we wanted to settle in and tell some fintech ghost stories. These ghosts won’t be too spooky– they are more like a walk down memory lane than a visit to a haunted house.

Here’s a look at four fintech ghosts that have come and gone, but still haunt our memories:

Coin

Coin was founded in 2012, offering consumers a single, electronic payment card where they could store their multiple debit, credit, gift, loyalty, and membership card numbers. For $50, users could sign up for the waitlist, but many who paid upfront never received their card.

What happened

Coin had a very long waitlist, and while there was much initial excitement about the card, the enthusiasm faded for many after realizing they may never receive their card. The real death knell for Coin was that it only worked 80% to 90% of the time. As Finovate Founder Jim Bruene pointed out in his post about the card, “… no one wants to be that guy holding up the checkout line with his fancy black card.” Coin closed in 2016.

BillGuard

BillGuard suffered a slower death than most fintech ghosts. Founded in 2010, the company offered consumers a mobile app to access spending analytics, credit scores, payment details, transaction maps, and data breach alerts.

What happened

The functionality BillGuard offered was perfectly suited for fintech’s personal financial management (PFM) era. The company had kept up with evolving consumer expectations of the time, adding fraud alerts and personalized offers. When peer-to-peer lending company Prosper acquired BillGuard for $30 million in 2015, the fintech community had high hopes for the tie-up, thinking Prosper would add PFM capabilities and become a Credit Karma competitor. Two years later, however, after rebranding the BillGuard app to Prosper Daily, Prosper shut down the financial wellness app, shuttering all of its potential and erasing users’ history.

iQuantifi

iQuantifi was founded in 2009 to enable financial institutions to offer a virtual financial advisor, adding wealth management to their offerings. In 2014, the company launched a consumer-facing virtual financial advisor tool to help users identify, prioritize, and achieve their financial goals with a personalized plan. The company had raised $3.7 million.

What happened

iQuantifi showed plenty of promise. The company had formed an aggregation partnership with MX to offer millennial users a lower-cost option to managing their finances. iQuantifi even earned a spot to participate in the Plug-and-Play fintech accelerator. In 2019, however, the company was charged with selling unregistered securities to investors that were ineligible to purchase shares in the offering. Between 2013 and 2019, iQuantifi raised $3.5 million from over 50 unaccredited investors. The U.S. Securities and Exchange Commission (SEC) ordered iQuantifi and its founder to cease and desist from committing violations and pay a $25,000 civil penalty. The company closed in 2019.

ZELF

ZELF was launched in 2019, right as the digital banking craze was taking off. The fintech was geared toward serving millennial and Gen Z users in the E.U. and U.S. ZELF billed itself as the “Bank of the Metaverse” where users could bank their gaming coins, NFTs, and fiat– all anonymously with no social security, ID, or selfie required.

What happened

ZELF is a good cautionary tale of what happens when you combine crypto, fiat, the metaverse, and anonymity. Because of blatant KYC and Patriot Act violations, the company’s partner bank, Evolve Bank & Trust, pulled the plug on ZELF a day-and-a-half after its official launch day. ZELF closed down in December 2022.

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Photo by Daisy Anderson