Fintech Digest

Coinbase and Goldman Sachs Prepare for Tough Economic Conditions

What a week. More layoffs at Coinbase and Goldman Sachs, Binance lending a hand for bankrupt crypto broker Voyager, Musk testing a new way to keep content creators on Twitter, and the Hong Kong government works on a new category of securities. Keep reading to find out more fintech stories from last week!

Top News | 09.01-15.01

  • Coinbase and Goldman Sachs prepare for tough economic conditions
  • Microsoft plans to make a major investment
  • Britain plans to become the world's crypto center
  • Stripe's internal valuation has declined
  • Binance lending a hand for bankrupt crypto broker Voyager
  • Crypto startups are losing its demand
  • Bill Gates isn't impressed with metaverse
  • Big monies coming to Goldman Sachs
  • Hong Kong government works on new category of securities
  • Musk found a new way to keep content creators on Twitter

Another Day, Another Layoffs. Coinbase and Goldman Sachs Prepare for Tough Economic Conditions

Back in the summer, we heard about layoffs at Coinbase. Now the company intends to lay off 950 employees.

Cryptocurrency exchange Coinbase announced sweeping new layoffs, citing "ongoing market conditions affecting the crypto economy."

In a filing with the U.S. Securities and Exchange Commission, the company said the restructuring would reduce its workforce by about 950 people. The cost, including severance packages, could be as much as $163 million.

This is Coinbase's second big round of layoffs, following the layoff of 18 percent of its workforce (1,100 people) in June. In November, another 60 jobs were lost.

The leading investment bank Goldman Sachs also announced layoffs. Thus, 3200 employees will be laid off.

Layoffs are likely to affect most of the bank's major divisions but will focus on investment banking and the unprofitable consumer business of Goldman Sachs. The company is taking this step to prepare for difficult economic conditions in 2023. 

Goldman had 49,100 workers at the end of the third quarter.

Microsoft Plans To Make a Major Investment

Microsoft plans to invest $10 billion in the owner of the text neural network
ChatGPT. If the deal is concluded, the company's valuation will increase to $29 billion.

According to corporate sources, the funding conditions allow Microsoft to earn 75% of OpenAI's profits after the latter begins making money on ChatGPT and other products until Microsoft recovers its initial investment.

After reaching this threshold, Microsoft will have a 49% stake in OpenAI, other investors will receive another 49%, and OpenAI's non-profit parent organization will receive 2%.

Britain Plans To Become the World’s Crypto Center

Five UK industry organizations — The City of London Corporation, Digital Pound Foundation, The Payments Association, TheCityUK, and UK Finance — have allied to help shape the future of the country's digital currency and further guide its development.

The group aims to build a safe and productive environment for innovators, stimulate their development and help them attract international investment to the UK. The alliance will also help create a constructive bridge between associations representing existing and new players in the sector.

The group's formation was triggered by UK Finance Minister Andrew Griffith publicly announcing plans to turn the country into a global crypto hub.

Speaking to the  Treasury Select Committee, Griffith said that a public consultation would soon hold on to the attributes of the digital pound sterling and the UK's overall regulatory approach to crypto assets.

Stripe Did It Again. The Company’s Internal Valuation Has Declined

Payment startup Stripe, which was one of the most valuable private technology companies in Silicon Valley, has once again lowered its internal valuation. Now it has decreased by another 11% to $63 billion.

Stripe cut its valuation by 28% in July, shaving $21 billion off the $95 billion estimated by investors in a March 2021 fundraising round. This was followed in October by another reduction.

According to The Information, the new price, known as a 409a value, represents a 40% decrease in the internal valuation over the past six months.

This differs from the valuation assigned to the firm by external investors and can assist employees in determining the cost of their interest in the company.

Last month, did the same thing, adjusting its internal valuation to $11 billion from the $40 billion determined by investors. Thus, according to the new internal tax valuation, it reduced the price at which employees can exercise their stock options from $252 to $65 per share.

Binance Lending a Hand for Bankrupt Crypto Broker Voyager

Binance to buy assets of bankrupt crypto broker Voyager for $1 billion. The court issued an initial approval of the deal.

For the deal to go through, it must be reviewed by the US Committee on Foreign Investment (CFIUS). Voyager's attorney stated during the court hearing that Voyager intends to address any concerns that may cause CFIUS to oppose the transaction.

Voyager estimates that the sale will allow customers to recover 51% of the value of their deposits at the time of Voyager's bankruptcy. If CFIUS blocks the transaction, Voyager will be forced to return its cryptocurrency to customers, resulting in lower payouts.

To recap, crypto lender Voyager filed for bankruptcy in the summer of 2022. The company has more than 100 thousand clients, and the liabilities range from $1 billion to $10 billion.

Crypto Startups Are Losing Its Demand

Crypto startup funding has fallen to its lowest level in almost two years. In the fourth quarter of 2022, venture capital firms invested $2.3 billion in crypto startups, down 75% from the same period in 2021.

According to the analytics company PitchBook, venture capital investment in the business reached a two-year low in the Q4 of 2022.

A record $26.7 billion was invested in crypto startups last year, but most of it came in the year's first half. After that, venture capitalists began to reduce their investment activity, and the fall of FTX in November prompted them to slow down even more.

Venture capitalists interested in crypto startups take more time to conduct due diligence. 

In the summer of 2023, venture capital investments in the crypto sector will likely expand.

Bill Gates Isn’t Impressed With a Metaverse

During an AMA session on Reddit, Microsoft founder Bill Gates expressed doubts about the value of Web3 and metaverse concepts. Indeed, he referred to artificial intelligence as a revolutionary technology.

He added that he spends most of his time on innovations in healthcare, agriculture, and other initiatives with shorter-term prospects.

Earlier, Gates also criticized NFT, calling the assets based on the theory of the greater fool a fraud.

Big Monies Coming to Goldman Sachs

Banking giant Goldman Sachs has launched a new digital asset management platform. It is called GS DAP. The new GS DAP tokenization platform should pave the way for market participants to implement blockchain technology.

The service supports smart contracts and is built on the Daml protocol from Digital Asset and Canton developers. It will help facilitate the issuance, registration, accounting, and storage of crypto assets (including digital bonds). The platform is not tied to a specific jurisdiction and is suitable for global capital markets.

In late November, the GS DAP service was tested by the European Investment Bank (EIB). Together with its partner banks (Goldman Sachs Bank Europe, Santander, and Société Générale), it implemented the Venus pilot project. As part of the program, the EIB issued a batch of digital bonds on the blockchain. They created, registered, and settled a two-year bond worth 100 million euros. This is the first experience of using a private blockchain for the European Investment Bank.

Hong Kong Government Works on New Category of Securities

The Hong Kong government is preparing a new category of securities — tokenized green bonds for investment. In this way, the government is implementing its strategy for Web 3.0 and the crypto industry, which aims to open an international headquarters or create other conditions for expanding its business scale.

In parallel, Hong Kong is exploring opening an international headquarters for blockchain companies.

Recall that the Hong Kong Legislative Council approved an amendment to the Digital Currencies Bill last month. It includes the launch of a licensing regime for cryptocurrency companies. The law will take effect on June 1 and allow providers (such as exchanges) to serve retail traders.

Hong Kong and Singapore have recently shown strong support for crypto innovation. In the future, they could compete for the title of a global hub for the industry. 

Musk Found a Way To Keep Content Creators on Twitter

Twitter is testing a Coins option that allows users to reward content creators with digital tokens through various reactions. According to blogger Jane Wong, their recipients can exchange the assets for fiat via the Stripe payment system.

"Coins" will be available for purchase by invoking the appropriate window in the interface. Twitter's minimum payment to creators will be $50.

The community has yet to rule out that the initiative could mark the start of Twitter's use of cryptocurrencies. However, at the moment, there is no indication that tokens will be released on the blockchain.