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Hello readers, I hope your weekend was as lovely as it was in Essex, and that you’re awaiting yet more bank holiday fun.
In this week’s issue, Joshua Oliver talks crypto from the even sunnier Bahamas, Tim Bradshaw chats about sports trading cards with Reddit co-founder Alexis Ohanian and I interview Ashutosh Bhatt, chief executive and co-founder of immigrant credit fintech Pillar, who is a Revolut alum.
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Cryptoland sees storm clouds from Brussels’ proposed anti-money laundering rules
Late last month, cryptocurrency enthusiasts from hackers to investment bankers gathered beachside in the Bahamas for a conference hosted by the exchange FTX.
On the island’s shores, politicians have enthusiastically embraced the wandering digital asset community, but for the European executives who made the trip to Nassau — even under the brilliant sunshine — the shadow of Brussels loomed.
The EU digital asset industry is locked in a final effort to convince policymakers to walk back a strict set of rules for money-laundering checks on crypto asset transfers. Virtual asset companies argue the regulations would push more businesses from Europe to offshore hubs like the Bahamas.
The proposed European rules would lower the minimum size of transactions subject to monitoring from €1,000 to zero, requiring virtual asset service providers to collect more data on the people sending and receiving funds, even from so-called “unhosted wallets” — crypto assets held on private devices rather than those guarded by an institution.
EU parliamentarians who support the rules see them as needed to curb flows of dirty money. “Illicit flows in crypto assets move largely undetected across Europe and the world, which makes them an ideal instrument for ensuring anonymity,” said Ernest Urtasun, Green party MEP, when the proposals were waved through a parliamentary committee at the end of March.
“Criminals thrive where rules allowing for confidentiality allow for secrecy and anonymity. With this proposal for a regulation, the EU will close this loophole.”
Crypto firms launched a rapid pushback against the changes, which they see as a late and unwelcome corollary to the EU’s sweeping rule book for crypto, Mica, which has been in development for years.
“You shouldn’t change the rules at the last minute,” said Jean-Marie Mognetti, chief executive of crypto funds group Coinshares, who helped organise a letter to EU finance ministers opposing the rules, which has been signed by dozens of digital asset firms.
“If the text is voted through as composed, it is going to be a bit of a debacle for a lot of companies who will not be able to keep operating long-term in Europe,” he said.
Pascal Gauthier, chief executive of Ledger, which makes crypto wallets, argues the rules for the sector are unreasonably strict compared to standard transactions. “The draft [rules] would require cryptocurrency exchanges to collect more private information for a $5 transaction than is currently required to be shared by consumers seeking to rent an apartment in Paris,” he said.
“This legislation won’t take risk out of the system or end the use of cryptocurrencies — it will just send all the economic opportunity . . . outside the borders of the EU.”
From the sands of the Bahamas, where crypto heavyweight FTX has set up shop with the support of local officials, it’s clear that the crypto industry’s threat to go where they are wanted is not an idle one.
In the UK, ministers recently responded to the exodus of crypto firms, launching a push to make Britain a “global hub” for digital assets and to attract “firms who don’t yet have a settled base”.
Whether EU policymakers will be troubled by the thought of crypto firms quitting the continent rather than playing by the new rules remains to be seen. (Joshua Oliver)
Are collectible trading cards NFTs-in-waiting? Tim Bradshaw scores a fascinating interview with Serena Williams’ husband, Reddit co-founder, and crypto investor Alexis Ohanian, in which he talks about his bet that sports NFTs could be here to stay.
Klarna to report buy now, pay later data to UK credit agencies Europe’s most valuable private fintech announced last week it will begin providing data to UK credit agencies, in an effort to address a major concern about the impact which the popular form of short-term credit could have on consumers.
Crypto’s evolution adds new risks to potential rewards Eva Szalay reports on how personal savers are getting into the crypto market, despite growing concerns from regulators — the European Central Bank’s Fabio Panetta last month compared digital assets to a Ponzi scheme.
I recently spoke to Ashutosh Bhatt, chief executive of Pillar, a fintech which aims to provide cheaper credit products for immigrants by connecting credit histories between countries. Pillar, which is due to launch its platform in the third quarter of 2022, raised a pre-seed round of £13mn last month led by Global Founders Capital and Backed VC.
Where did the idea of Pillar stem from? When I landed here in the UK from India, the iPhone had just launched, but I couldn’t get one from the store. I had good credit and premium cards in India, but I had to start from scratch because I had zero credit here. That’s the driving motivation.
In some ways, working at Revolut was the pivotal moment: I was trying to work with a major credit bureau, and we wanted them to see customers on both sides of the Atlantic. They said no, the data is different so we said why don’t we step up and become the source of joining the data points across the world through our platform. We want to be the Revolut for credit.
Another big motivator is that people have got flashy cards from fintechs in their wallets, but a lot of them don’t put you on the credit ladder. Even having your salary paid into the account doesn’t help. So when Generation Z has done their delivery shifts, graduated and wants to get a card, they end up paying a higher cost of interest. If they had a Pillar card from day one, that could be much cheaper.
What is the impact of Open Banking on your product? We are one of the biggest champions of the Open Banking framework as it drives financial inclusion and backs it up with robust and transparent data. And it forges customer consent as a key pillar of data sharing — we want to use the same consent to share credit reports. And if you look internationally, Europe is big on this, thanks to Plaid in the US we can hook into a lot of this and India is a starting to build it out, so we want to be right at the front.
How does your work intersect with wider credit invisibility? If you look at the superset of 5mn customers who are credit invisible in the UK, 20 per cent are immigrants who are absolutely the core of our proposition. Our main target are the cash rich and credit poor, which includes students and expats. We are deeply passionate about building credit for people who want to get a step on the ladder.
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