The Coinbase S-1 has a lot of boilerplate plate language on risks. The text is designed to be so boring that you won’t bother reading it.
Here are the four strategic headwinds aka risks that Coinbase faces in non-legal language:
– Regulations vs crypto logic. Coinbase is a regulated on ramp (and off ramp) for an unregulated/permissionless network. There is conflict there. Regulators want data, customers want privacy.
– Institutional clients and Consumers in one company. They have different needs and combining both in one brand image will be tough.
– Cybersecurity. This risk DID make it into the S-1. All. Centralized. Systems. Are. Hacked. There are two types of centralized systems – those that have been hacked and those that will be hacked. Although Coinbase enables trading in fully decentralized coins such as BTC and ETH, Coinbase itself is a traditional centralized system.
–Crypto newbies and enthusiasts in one company. People getting into Crypto for the first time (aka newbies) want the simplicity of a regulated bank like experience. Crypto enthusiasts like unregulated/permissionless/decentralized experience. The enthusiasts market maybe small but they carry a lot of branding weight.
These strategic headwinds are real but Coinbase also has a very strong management team, so I think they will manage them quite well.
Stay tuned for the final instalment in this 4-part post on what will be the impact on the broader crypto ecosystem/
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XBRL News about central banks and data quality
Here is our pick of the 3 most important XBRL news stories from the last week.
Hear from global leaders on key issues around cross-border and retail payments, central bank digital currencies, banking and the new digital ecosystem, decentralised finance, data, analytics, AI and cloud technologies as well as cultural and organisational changes that may be needed within central banks to meet the challenges of this digital age.
We’ve clearly been remiss in not mentioning this conference recording earlier. The Bank for International Settlements (BIS) has done a great job bringing together leaders from all over the place to provide insights into the cutting edge of central banking technology.
Speaking of central banks – according to the above article in Russian (hit that translate button again, we challenge you!), the Bank of Russia really appears to go into overdrive with its digitalisation roadmap. Follow the link above for the details in that roadmap – but only if you’ll have to use the original Russian rather than the English version, which has no substance. There was also a presentation by Bank of Russia at Data Amplified, but we haven’t found a public version of that, yet.
The XBRL US Data Quality Committee (DQC) has published its 15th Ruleset for a 45-day public review and comment period, which closes on June 2, 2021. This latest draft ruleset contains eight rules specific to US GAAP filers, and one new rule for IFRS filers. Since the program began in 2015, the DQC has finalized and approved 14 rulesets, covering a range of potential error types and alerting filers to possible problems in thousands of filings. The 14th ruleset was approved at the Committee’s January meeting, and has an effective date of May 1, 2021.
Wow, the title above literally flows off the tongue, does it not? But mockery of bureaucratic language aside, the DQC performs important work which deserves our undivided attention.
Christian Dreyer CFA is well known in Swiss Fintech circles as an expert in XBRL and financial reporting for investors.
We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.
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Lloyds Market’s Extended Innovation Factory: Lab’s Cohort 6
Lloyd’s Lab is an accelerator launched in September 2018 by Lloyds, the insurance market. After intensive global talent searches that attract several hundred applications, selected companies receive privileged access to its market for specialist insurance and reinsurance. These teams are tasked with driving innovative solutions to unique challenges the market faces. Over a ten week period, teams are proffered guidance as they develop products, platforms and processes to potentially transform Lloyd’s. The start-ups receive expert support from market participants, catalyzing development of ideas for their unique needs.
Generally, accelerators are fixed-term, cohort-based programs where a sponsor offers expertise to help develop solutions. The average cohort has 16 businesses running for 6 months. Sponsors benefit from cutting-edge solutions that participants co-create while gleaning first-hand insights from latest trends.
Since the first Lloyd’s Lab cohort of ten companies, five similarly sized cohorts have followed. The latest, due to start later this month, is themed on creating simpler products for customers and building solutions mitigating climate risks. Each of the previous cohorts had distinctive themes, focused on enhancing customer experiences, powering data-driven underwriting with new insight sources or creating smarter insurance products. While few emphasized enabling back-office efficiencies, one cohort specifically targeted addressing COVID-19 challenges. An overarching driver is to find solutions that contribute to its services ecosystem, part of the “Future of Lloyd’s” vision.
Word Cloud (Cohorts 1 -6)
A recurring emphasis has been to draw rich, alternative data sets for precise risk understanding and improved underwriting profitability, such as to flag high risk policies or predict future claims. The accelerator solicits innovations in new algorithms, models and statistical techniques to create more personalized experiences while closing protection gaps. The latest cohort will begin virtually and is expected to return to the physical workspace in June. The final ten selects represent solutions based on four themes: climate change, geopolitics, data/models and claims support services.
Three of the selects offer analytics and automation solutions tackling climatic risks:
Tesselo is 2017 founded Lisbon-based insurtech that simplifies accessing environmental insights from Earth Observation data, combining satellite imagery with AI to produce actionable spatial intelligence. By classifying tree species, measuring and predicting forest growth, monitoring plantation harvests, detecting pests and estimating the risk or impact of forest fires and other natural disasters, it provides insurance and certification to help businesses develop adequate responses to natural hazards and give timely damage estimates post-disaster.
California based Jupiter Intelligence models catastrophic risk outcomes and helps customers anticipate financial impact of different climate-change scenarios. Jupiter’s models predict asset-level impact from flood, fire, heat, drought, wind and hail events at less-than-one-meter resolution. These models have been used to assess the risk that intense heat waves pose to power grids and inform public-sector infrastructure investment in coastal areas based on expected changes to tide levels and storm surges.
CarbonChain provides a platform that enables companies in polluting industries such as metals, mining, oil and gas to track supply chain greenhouse gas emissions to help transition to a low-carbon economy. With its exhaustive repository of greenhouse gas emission factors, it supports a wide range of hard and soft commodities, providing companies visibility to high polluting transactions to protect supply chains against rising carbon prices and downstream benefits ranging from lower interest rates to ESG leadership recognition.
Remaining 7 from Cohort-6
A key benefit for accelerated start-ups is better access to initial funding rounds, though for subsequent rounds, the impact of accelerator participation tends to wane. Whether companies in a cohort succeed or fail, the ecosystem gains as the initial set of start-ups helps form a critical mass for the innovation. Fortuitous connections forged between entrepreneurs, investors and talent all feed back into the insurance ecosystem, facilitating insurtech innovation and benefitting non-cohort start-ups too.
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First Digital Trust announces $2.15M funding for Asian digital payments service
The funding will be used to develop debit and credit card payment rails in Asia.
Digital asset custodian First Digital Trust has secured funding to bring crypto asset payment services and upgrades to the Asia Pacific region.
The Hong Kong-headquartered company has raised $2.15 million in a convertible note funding round led by private investors including Asian venture studio Nogle. The total funding for the firm is now over $5.2 million according to Crunchbase which reported two prior funding rounds.
The firm stated that the funding will allow it to launch the first debit and credit card rail that will enable its digital assert clients to accept card payments seamlessly. Companies will be able to accept digital assets for payments in more than 100 currencies and offer instant settlement, custody and compliance using a simple widget.
FDT is Asia’s only qualified custodian and trustee capable of holding both traditional and digital assets.
CEO of First Digital Trust, Vincent Chok, stated that many firms have lost business due to the high-level minimum requirements and financial burdens associated with integrating credit and debit services with digital assets.
“Our mission is to open the gateway for open banking in Asia through regulated and compliant payment solutions.”
The announcement noted that in the West, companies such as MasterCard, PayPal, and Coinbase have spearheaded digital asset custody and open banking infrastructure upgrades whereas, in the East, fintech firms have been forced to jump through a variety of regulatory hoops, strike costly individual agreements with financial providers, or build their own infrastructure.
This is despite the fact that crypto trading and digital activity in Asia equivalent to the US and Europe combined. As reported by Cointelegraph in late January, the region accounts for almost half of global crypto trading.
The third round of fundraising this year follows the integration of Fireblocks, a leading enterprise-grade platform delivering a secure digital asset storage infrastructure. On March 18, Fireblocks secured a $133 million investment round led by America’s oldest bank, BNY Mellon.
FDT’s instant settlement technology, security and payment rail infrastructure, and compliance technology will be available to token issuers, payments providers, crypto exchanges, asset managers, banks, and brokers across the Asia Pacific region.
Enterprise Payments Platform Candex Secures $20M via Series A led by Altos Ventures
Enterprise payments platform Candex has reportedly secured $20 million in capital via a Series A funding round that was led by Altos Ventures along with participation from NFX, American Express Ventures, and JP Morgan.
Launched in 2011, Candex serves as a master vendor for small suppliers, enabling enterprises to make direct payments to Candex, which remits the payouts to the suppliers.
After setting up with Candex technology, a buyer needs to only work with the San Francisco-based company as the approved master vendor and make local payments to vendors as well as to service providers across the globe.
The funds raised will reportedly be used to further expand the Candex platform.
Jeremy Lappin, CEO at Candex, stated:
“The Candex system fixes a glaring failure in how major organisations pay their vendors – a process that typically costs significant resources for setup, support, tax, finance and legal and takes months via traditional systems. Candex makes it simple, fast and compliant.”
As mentioned on its website, Candex was founded by Jeremy Lappin and Shani Vaza to “solve the tail spend problem.” Their technology “removes thousands of vendor records from financial systems while delivering control, speed, tax compliance, and visibility,” the company explains. They also mentioned that “great design and attention to detail makes Candex the simplest and most precise way to get tail spend under control.”
The Candex team further notes that instead of having to pay each supplier separately, a company or business is able to pay Candex for those services directly. After the payment is made, Candex sends the funds to each supplier for their service, which helps eliminate the administrative work needed to carry out tail spend payments. The platform can also assist with meeting their the tax, compliance and regulatory requirements – which usually come with doing business with suppliers across the globe.
Lindsay Fitzgerald, MD at Amex Ventures, noted that the organization is always looking for solutions to simplify and streamline its business operations. That’s what made Amex Ventures see the value in Candex’s product offering.
“We believe Candex’s technology creates a better experience for both enterprise buyers and their suppliers.”
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