News Briefing - Crowdfunding, SME And Alternative Finance

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The essentials are here and will be regularly updated. If you want to be well-informed about the investment crowdfunding scene, and you're short of time, this is the place to visit.

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1.UK – P2P

P2P fund pioneer Simon Champ has left his role as head of the investment manager of the £735m P2P Global Investments trust, AltFi exclusively reports.

“Champ, AltFi has learned, has left the firm recently. Commenting on the news Champ told AltFi that he had departed amicably to concentrate on his role as chairman of Pots & co, an upmarket pudding business selling to supermarkets in both the UK and globally.

"After almost five years since the founding of the business I have left by mutual agreement on 12 March and I am looking forward to spending more time with my other business interests including Pots & Co the UK artisanal luxury deserts business I helped to create in 2013,” he said. 

Champ was a founding partner of P2P Capital Solutions which later became MW Eaglewood Europe and was the driving force behind the launch of the P2P Global Investments trust (P2P GI), raising a large seed portfolio for the investment trust from respected fund managers such as Neil Woodford and Mark Barnett. Through a series of subsequent share issuances the trust raised a total of £880m under Champ’s leadership.”


2. UK – P2P

P2P business lender Funding Circle will no longer allow retail investors to download its loanbook.

The company, which is said to be planning a landmark IPO for later this year, will switch to quarterly reporting through the launch of a ‘new and improved’ statistics page.

This revamped statistics page will feature information on lending volumes, returns and the businesses funded by the platform.

Investors will now see projected annualised returns as a range. They are told, for example, to expect approximately 6-8 per cent returns for loans originated in 2018. But as time passes, and returns crystallise, that range will narrow to reflect the actual return for the cohort.


3. UK – P2P

Bridging & Commercial reports moves at RateSetter.

“On 6th June, the monthly roll of matched loans stopped, which meant that from this date, investments in the rolling market remained matched to borrowers for the duration of the loan contract at the same consistent rate of interest until the loan is fully repaid.

The P2P platform first announced that it would be making changes to its rolling market in May this year.

The market has become RateSetter’s most popular and is used by two-thirds of its investors.

Another change is that as monthly repayments from borrowers are received by investors, repayments are automatically reinvested.”


4. UK – P2P

 

Six months after the closing of the S-BOLT 2016 transaction, Zopa closed last week with final details of its debut peer-to-peer securitisation ‘Marketplace Originated Consumer Assets 2016-1 (MOCA 2016-1), reports AltFi.

“The capital structure consists of multi-class notes rated by Fitch Ratings and Moody’s. Moody’s pre-sale report has the Class A notes sized at £114m and rated Aa3. They carry a coupon of 1 month LIBOR plus 1.45% p.a. and a par issue price. For comparison, S-BOLT 2016-1 – which had a similar rating from Moody’s but a ‘BBB’ rating from Standard & Poor’s – was priced at 1 month LIBOR plus 2.90%. Fitch has also issued final ratings of AA- on the same notes. According to Fitch’s pre-sale report, the firm has placed a ‘AA’ ratings cap for this particular issuance as MOCA 2016-1 is Fitch’s first sortie into EMEA securitised assets originated on a ‘market-place platform’. It should be noted that this is the highest level cap Fitch has reached globally on this relatively new asset class on account of Zopa’s quality of data. Notwithstanding this ratings cap, Zopa opted to apply for a rating one notch beneath the ratings cap at ‘AA-‘. According to Fitch, this ‘notched’ rating was based on the cash flow model rather than restricted by a credit dependent counterparty.”


5. UK – FinTech

 

A new pressure group emerges re Brexit, reports iNews.

 

“More than 100 technology founders and entrepreneurs have joined forces to lobby the government to back a meaningful vote on the actual terms of Brexit. New group Tech for UK, whose members include lastminute.com founder Martha Lane Fox, George Bevis, founder of small business banking provider Tide and Giles Andrews, co-founder of peer-to-peer lending firm Zopa, is lending its support to a public vote and final say on the terms of Brexit. The group is supporting anti-Brexit campaign group Best for Britain, which is trying to find a democratic way to stop the UK from leaving the European Union. “

 

6. UK – FinTech/EIS

 

City A.M. reports:

 

“London-based early stage venture capital firm Ascension Ventures has announced a joint venture with Unicorn India Ventures (UIV), launching the first UK-India Enterprise Investment Scheme (EIS) Fund.

Known as the Unicorn Ascension EIS Fund (UAF), it will leverage the EIS tax relief wrapper to enable investment into UK-based technology scale-ups which hold a focus on products and services that can expand into the Indian market.

The fund’s UK team will work out of Ascension’s London offices, while the Indian team will be based in UIV’s offices in Delhi, Mumbai and Bengaluru, meaning that scale-ups which receive investment can expect local business support on both continents.”

 

7. US – FinTech

 

The Canadian Securities Administrators (CSA) has published a notice addressing the issue of initial coin offerings and whether, or not, these tokens are securities, reports Crowdfundinsider.

“The document by the CSA leaves little room for utility tokens to actually exist – at least not in the current ICOs environment.

Furthermore, the CSA states:

“Staff are conducting active surveillance of coin and token offerings activity to identify past, ongoing and potential future violations of securities laws or conduct in the capital markets that is contrary to the public interest. CSA members have taken and intend to continue taking regulatory and / or enforcement action against businesses that do not comply with securities laws.”

The statement should cause concern for any issuer that sold a “utility” token to Canadian investors at any point in the past.

The CSA sets out a set of questions to ask an issuer if an ICO should be considered a security. Very similar to the US Howey test, the CSA states:

  • An offering of tokens may involve the distribution of securities, including because:the offering involves the distribution of an investment contract; and/or
  • the offering and/or the tokens issued are securities under one or more of the other enumerated branches of the definition of security or may be a security that is not covered by the non-exclusive list of enumerated categories of securities.

The CSA further interprets an “investment contract” as involving

An investment of money

  • In a common enterprise
  • With the expectation of profit
  • To come significantly from the efforts of others


To help further edify their distinction of what constitutes a security, the Regulators have provided a series of examples to help deliver the message that most ICOs must be regulated under existing securities law.”

Canadian Securities Administrators Issue Notice on ICOs, Leaves Little Room for Utility Tokens


 

8. US - FinTech

Brett Redfearn, the Director of the Division of Trading and Markets at the SEC has criticized crypto producers and exchanges for failing to voluntarily register and report their activities to the SEC, reports Crowdfundinsider.

“We’re underwhelmed by the enthusiasm for coming within the regulatory structure right now,” Redfearn told a CNBC moderator at the Sandler O’Neill Global Exchange and Brokerage Conference last Wednesday. “There are a number of exchanges that are trading ICOs that I would think that we would see more registrations.”

Most altcoins and ICOs have so far been built using a simple ERC-20 token generating process made available by Ethereum.

After their creation, the tokens circulate on forks of the Ethereum blockchain.

Token creation is regarded by some Ethereum investors as the blockchain’s main use case, because ERC-20 tokens must be purchased using Ether (ETH), the Ethereum blockchain’s native token.

Token generation thus drives demand for ether, creating an upward draw on the exchange price of ether.

According to Etherscan, the number of tradable ERC-20 cryptographic tokens created on the Ethereum blockchain has risen from 5420 at this time last year to 89 995 now.”


9. International – FinTech

 

The FT reports a new art market that depends on the uniqueness of blockchain provenance.

"Seth Spalding, a portfolio manager at investment firm Passport Capital and a former vice-president of investment bank Goldman Sachs, is amassing an art collection. But you will not find paintings at his home in San Francisco, or sculptures in storage. The art Mr Spalding owns does not exist anywhere, as such. His carefully curated blockchainis digital — works that exist on the cryptographically secured technology known as blockchain. “The concept that we’ve all grown up with, about digital stuff, is that it’s ephemeral, it can be wiped off your hard drive . . . it’s worthless because it can be copied infinitely at incremental cost,” says Mr Spalding. “But blockchain allows you for the first time to create digital scarcity [which] tips the whole idea on its head.” Mr Spalding is part of a vanguard of enthusiasts curious about blockchain’s novel potential to affix value to digital art by making it rare and unreplicable. Riding a wave of interest in cryptocurrency, a new industry of digital collectibles sees blockchain art and other digital items created and traded for cryptocurrencies such as bitcoin and ether, the digital money associated with the Ethereum blockchain. Among the cryptocurrency-wealthy there are willing buyers — one digital cat, which was part of a game called CryptoKitties, sold last month for the cryptocurrency equivalent of $140,000. Mr Spalding collects unique digital pictures called CryptoPunks — his favourite of the tiny pixelated faces has 3D glasses and a Mohican hair style — as well as Curio Cards, which are small digital artworks hosted on blockchain, often featuring graffiti styles and lurid colours.



Computer gamers have been collecting virtual items inside games for years, spending money on better weapons, or gold to use in the digital world. Many gamers would, for example, spend money on “a costume or skin that you put on your character,” says David Pekar, co-founder and chief executive of Rare Bits, an online marketplace for blockchain items, which has raised $6m in a fundraising, according to TechCrunch. A “rare and beautiful” costume confers “gravitas as you move through the digital world”, he says. $140,000 The price paid for a CryptoKitty, a digital cat, at an auction in May While you might pay for those items, however, you never exactly own them. Virtual swords could be deleted from the centralised server by the developers who made the computer game. Blockchain technology, by contrast, is decentralised, meaning no single entity controls it. If your digital item is stored on a blockchain, “the property that you buy actually holds a lot more value because it can’t be taken away from you”, says Mr Pekar — although it can be stolen by hackers.



John Watkinson, a Canadian software developer who works for a small digital agency, was behind the first blockchain collectible project. “I had collected everything from hockey cards and magic cards when I was a teenager,” says Mr Watkinson. But creating the digital equivalent of paintings and baseball cards posed a difficulty: “Is it too easy to copy?” Mr Watkinson and his partner “stumbled across the idea of using blockchain” to make digital collectibles in early 2017. They created simple pixel faces, and wrote their code into tokens on the Ethereum blockchain. Each of these CryptoPunk characters was unique, and because the cryptographic tokens cannot be copied, the CryptoPunks were safe from duplication. “I wrote a [CryptoPunk] generator,” says Mr Watkinson. “There are stock faces . . . including some rare ones like a zombie, ape and alien.” To that he added accessories including hats, sunglasses and earrings, with an algorithm that combines them. It was an experiment, he says. “We posted it to some of the forums and newsboards . . . initially we were giving it away.” After paying a small transaction fee, the CryptoPunk token would be transferred to your cryptocurrency wallet, the public blockchain record proving your ownership.



Just 20 or 30 of the 10,000 free CryptoPunks were claimed that Friday. “We were starting to think, ah no, this doesn’t really have it,” he says. That changed when the website Mashable ran a story about the CryptoPunks. Mr Watkinson recalls that “by Saturday morning they had all been claimed. In one night everyone had gone crazy.” A secondary market quickly appeared, with buyers trading the tokens in exchange for ether. One sold on that Saturday for 10 ether, equivalent to, at that time, $3,500. “That was just sort of astounding,” says Mr Watkinson."