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Inflation expectations stay high. Biden’s crypto EO is finally out – now what? Raskin withdraws as Fed nominee. Stilt raises $114Mn, launched credit-as-a-service offering. Argyle raises $55Mn Series B. Acorn buries failed SPAC, raises $300Mn Series F. Revenue-based financing startup Capchase raises Series B. Microsoft invests in ConsenSys. Affirm abandons bond deal. Coinbase advances derivatives plans.
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Six More Rate Hikes on Deck for 2022
Inflation remains top of mind for the public, with a recent survey showing respondents expect the rate to remain at 6% a year from now. The Fed raised rates by 0.25%, the first such rate increase since 2018. Six more quarter-point increases are expected this year, with another three or four increases in 2023.
Still, as the economic environment has become even more challenging, there is some fear the Fed could raise rates too quickly, tipping the economy into recession.
Biden’s Crypto EO Is Out. Now What?
The Biden administration’s long-awaited crypto Executive Order was finally released. The Executive Order can be read as a ‘plan to make a plan,’ as it primarily serves to get disparate banking and financial regulators on the same page.
Still, the Executive Order has been met with cautious optimism from the crypto community. Crypto markets were up about 10% after the EO was released, presumably welcoming the prospect of increased regulatory clarity paving the way for increasing institutional and consumer adoption.
While that outcome is far from certain, there are indicators Americans are interested in accessing crypto services through their banks, if they were available. Of consumers who already hold or trade crypto, about half said they’d “definitely” be interested in using their bank to purchase/trade crypto, with another 42% saying they “might” be interested.
Banks, however, are less enthused about the EO’s apparent endorsement of a U.S. central bank digital currency. Various banking trade groups expressed skepticism about the necessity of a CBDC and concern that a digital dollar could disintermediate the existing banking system.
Manchin Sinks Raskin’s Fed Nom
After Senator Joe Manchin (D-WV) said he would not support Sarah Bloom Raskin’s nomination to the Fed’s top banking regulatory role, the candidate withdrew her name from consideration. Manchin, who represents coal-producing West Virginia, said he couldn’t support Raskin due to her views on addressing climate change.
The development is the latest setback as the Biden administration has struggled to get nominees for key financial regulatory roles approved by a Senate under razor-tight 50-50 Democratic control.
Stilt Raises $114Mn in Debt and Equity
Stilt, an online lender focused on recent immigrants to the U.S., announced it has raised a $14Mn Series A and secured a $100Mn debt facility to power its expansion. The startup also announced the launch of Onbo, what it dubs a “credit-as-a-service” offering. Onbo will enable other fintechs and non-financial startups to quickly build and launch credit-related offerings, without needing to build their own tech stack or obtain their own lending licenses or bank partnerships.
Stilt’s expansion into the B2B space with its credit-as-a-service offering demonstrates continued investor interest in the fintech infrastructure space. While the debit space is flush with “banking-as-a-service” offerings, the economics and compliance considerations for credit are a more complicated puzzle to solve.
Argyle’s $55Mn Series B
Payroll data API company Argyle announced it has raised $55Mn in fresh funding, led by SignalFire. Argyle’s platform enables companies to confirm key employment-related information, including identity, employment status, and income. The company claims to currently cover over 170Mn employees and gig workers in the U.S. It plans to use the additional capital to continue building out its engineering team, scale go-to market operations, and for international expansion.
Acorns Raises $300Mn After Burying SPAC
Who needs SPACs anyway? Just six weeks after scrapping its planned SPAC merger, Acorns has announced it raised a $300Mn Series F led by TPG. The latest funding round values the micro-investing company at just shy of $2Bn, compared to an implied valuation of $2.2Bn in the canceled SPAC deal. Acorns CEO Noah Kerner said of the canceled SPAC that it “wasn’t the right time to go public,” and that the company planned to pursue a traditional IPO in the future. The pivot back to private market fundraising, especially for smaller companies, makes sense, given the challenging performance of newly public fintechs.
Capchase Series B
Revenue-based financing platform Capchase announced it has raised an $80Mn Series B. Capchase is one of several companies in the trendy sector that seek to provide non-dilutive capital to companies with recurring revenue. To date, Capchase has funded over $2Bn in loans to companies on its platform. In addition to its core revenue financing product, Capchase Grow, the company also offers a BNPL-style product, Capchase Extend, and a high-yield cash management account, dubbed Capchase Earn.
Microsoft Makes Blockchain Bet with ConsenSys
Microsoft, which has been relatively conservative when it comes to crypto, is jumping in the deep end by participating in blockchain firm ConsenSys’s latest $450Mn fundraising.
The fundraising round doubles ConsenSys’s prior valuation to $7Bn. The company, founded by a co-creator of Ethereum, develops software that runs on the Ethereum network, including web3 and decentralized applications (dApps).
For Microsoft, the investment gives it exposure to the fast-growing blockchain and web3 ecosystems that it currently lacks. Many in the crypto community argue that web3, a new, decentralized version of the internet running on blockchain, represents the future of the web. After badly losing out on the transition from desktop to mobile, it’s understandable why Microsoft wants to get exposure to what may be the next big thing.
Source: CB Insights, Image: CNBC
Affirm Halts Bond Deal Amid Market Volatility
After a bumper 2021, the asset-backed securitization market is showing signs of slowing amid increased volatility. Affirm pulled a proposed ABS sale last week, after a major investor in the $400Mn, top-rated tranche of the deal backed out at the last minute. Affirm continues to have access to other funding channels, including warehouse lines and whole loan buyers.
The deal is at least the fifth securitized-credit transaction canceled or delayed in recent weeks, as capital markets volatility has increased amid rising rates and Russia’s invasion of Ukraine.
Coinbase Outlines Path for Derivatives Offering
Coinbase revealed some of the details of the company’s planned derivatives offerings at an industry conference last week. The initiative involves three key components. First is the company’s planned futures commission merchant, Coinbase FCM. Coinbase’s application to join the National Futures Association, the industry’s self-regulatory body, is pending. Second is FairX, which Coinbase has acquired and will rebrand as Coinbase DCM. FairX already holds a registration with the CFTC. Finally is Nodal Clear, a derivatives clearing entity, which will function as a third party clearinghouse and is owned by Deutsche Börse Group.
Derivatives have been a key attraction of offshore crypto exchanges, like Binance. But given the complexity of U.S. regulation, it has been substantially more difficult to build compliant offerings for U.S. users. Coinbase’s efforts significantly advance its goal of offering a full suite of derivatives offerings to its U.S. user base.
In The News:
NCUA Plans Overdraft Scrutiny with a Close Eye on Financial Inclusion (American Banker, 3/14/2022) The move comes as financial institutions like Bank of America and Capital One have modified or done away with their overdraft charges.
OppFi Asks for Injunction on Loan Interest Rates Caps (PYMNTS, 3/11/2022) The fintech filed a complaint in the LA Superior court, hoping for a ruling that declares the caps (which are part of CA state law) inapplicable to loans originated by its bank partners.
CFPB Urged to Act Quickly on Buy Now/Pay Later Loans (American Banker, 3/15/2022) CFPB Director Rohit Chopra said the CFPB is looking to see if there are any regulatory gaps in the BNPL industry.
FinTech Ribbit Announces Series A Funding Round (PYMNTS, 3/15/2022) ABS Capital led the round, with proceeds going towards supporting growth and accelerating the company’s hiring plans.
Crypto Firm Gauntlet Raises $23.8 Million in Latest Funding Round (American Banker, 3/14/2022) The Series B round, for the company that provides a financial-risk modeling platform for crypto lending, was led by Ribbit Capital.
Flipkart Founder’s Navi Files for $440 Million IPO (Tech Crunch, 3/12/2022) Sachin Bansal’s company, which offers customers insurance and loan products, files to go public.
CloudPay Taps Visa for Direct to Card Salary Disbursements (Finextra, 3/15/2022) With the partnership, CloudPay can now make salary payments in seconds rather than days.
Green Dot Aligns with Plaid (Finextra, 3/15/2022) The partnership will bring secure open finance solutions to GO2bank (Green Dot’s digital bank) customers.
Decentraland: The Financial Activities Happening in the Ethereum-based Metaverse (Tearsheet, 3/14/2022) A JPMorgan report claims that the metaverse will become a $1T market opportunity in yearly revenues.
Mastercard Scales Its BNPL by Adding Merchants, i2c, H&R Block and Others (PYMNTS, 3/16/2022) The growing list of partners includes Amount, Bass Pro Shops and Cabela’s, Deserve, Lithic, Saks Fifth Avenue, Sutton Bank, and Walgreens.
Lighter Fare:
Astronaut Mark Vande Hei Breaks Record for Longest U.S. Spaceflight (collectSPACE, 3/15/2022) Vande Hei breaks record with 340 days, 8 hours and 42 minutes in space, and is expected to extend this U.S. record to 355 days before his return to Earth.