News Briefing - Crowdfunding, SME And Alternative Finance

Young woman whispers in friend's ear

1.UK – P2P

 

From P2P Finance News:

 

THE HONEYCOMB Investment Trust saw its net asset value (NAV) improve for the second month in a row during July.

The alternative finance-focused fund posted a NAV total return for July of 0.64 per cent, up from 0.6 per cent in June.

In a stock market update Honeycomb said that the accounting standard IFRS 9 has had a 0.67 per cent impact on NAV since it was introduced earlier this year.

The listed fund has now delivered growth of 21.73 per cent since its inception in December 2015, it added.”

 

THE HONEYCOMB Investment Trust saw its net asset value (NAV) improve for the second month in a row during July. The alternative finance-focused fund posted a NAV total return for July of 0.64 per cent, up from 0.6 per cent in June. In a stock market update... #honeycomb #honeycombinvestmenttrust


 

2. UK – AltFi

 

Again, from P2P Finance News:

 

“BARONESS Michelle Mone has hit back at claims that her cryptocurrency-backed peer-to-peer platform EQUI has failed to launch.

EQUI – co-founded by entrepreneur Baroness Mone (pictured) and her venture capitalist partner Doug Barrowman – launched an initial coin offering (ICO) in March to let retail investors acquire stakes in or lend to early-stage businesses using EQUItokens.

The ICO was expected to last for six weeks before being extended to 30 June and now reports have emerged that it failed to hit its target and that those who helped promote the campaign – known as bounty hunters – are unhappy with how much they have received in return.

However, a spokesperson for Baroness Mone told Peer2Peer Finance News that the ICO had just been put on hold due to EQUI being transformed from a UK enterprise into a global business.

“All of our EQUI investors are 100 per cent happy,” the spokesoerson said.

“We offered a refund as we are changing our tokenomics but only 32 investors asked for a refund which they have now received.

“Our bounty contract was two per cent of the raise which is being paid out this week.”

 

BARONESS Michelle Mone has hit back at claims that her cryptocurrency-backed peer-to-peer platform EQUI has failed to launch. EQUI - co-founded by entrepreneur Baroness Mone (pictured) and her venture capitalist partner Doug Barrowman - launched an initial coin offering... #dougbarrowman #equi #ico


 

3. UK – AltFi

 

Finextra reports:

 

“Tide, a UK-based mobile-first SME banking service, has received £8 million in fresh funding and welcomed former Kreditech chief operating officer Oliver Prill as CEO.

Founded by former RBS/Worldpay head of innovation George Bevis, Tide launched in January 2017 on the back of a £2 million seed round.

The business - which has fintech czar and Passion Capital partner Eileen Burbidge as chairman - enables users to set up a fully functioning business account in a matter of minutes using their passport or driving licence.

Alongside banking and payment facilities, Tide provides invoicing and bookkeeping services which aim to ease the administrative burdens faced by small companies.”

 

 

4. International – FinTech

 

The government-controlled China Daily reports an announcement by Moody's rating agency:

 

“The global credit rating agency Moody's called China's newly-issued regulations on peer-to-peer lending platforms are "credit positive", because they will strengthen protections to individual lenders and prevent risk spilling over to the broader financial system.

Moody's commentary came after Chinese regulators announced 10 measures to address risks related to P2P lending platforms on August 12. The P2P platforms enable individuals to lend directly to borrowers through the Internet.

The new regulations clarified responsibilities of P2P platforms and their shareholders, stipulated conditions for orderly liquidation of failed platforms, outlined penalties for borrowers that escape their debt obligations and prohibited registration of new platforms.

These measures were issued when P2P platform failures emerged in June and July, amid rising cases of corporate default, tightened liquidity and strengthened regulatory scrutiny in the broader system.”

 

5. International – FinTech

 

A substantial sting operation in northeastern China has netted 3 suspects accused of robbing 100 million yuan (about $15 million USD) in crypto from an individual’s computer, according to Crowdfundinsider.

“According to the Xinhua News Agency, on March 30th, 2018, a complainant contacted the X’ian police station alleging the hack.

“Well-know” internet companies then cooperated with investigators by following faint digital traces as police fanned out across “many provinces and cities” in search of the culprits.

After three months, authorities captured the first suspect, called Zhou. Investigations of Zhou then unearthed two accomplices, Cui and Zhang, “who were active in Beijing and Changchun.”

All three are now accused of being senior-level hackers who had intruded on and taken control of multiple corporate and personal network systems.

The suspects were also allegedly found in possession of over 600 million in yuan and crypto – the equivalent of $87 million USD.

Crypto experts often say: “No keys, no coins,” meaning central to the idea of holding cryptos like Bitcoin is the notion that one must physically control the “private keys” that represent one’s coins.

Leaving any amount of crypto on an online device such as a “hot wallet” or storing significant cash or crypto at a crypto exchange are recipes for disaster, they say. Hacks are simply to common.

Crypto funds should rather be kept in safely-secured hardware wallets such as Ledger or Trezor wallets, or on laptops, desktops or phones that rarely or never touch the internet.

Certain companies are also starting to offer secure crypto custodial services. Check the terms.”

 


 

6. International - P2P

 

Crowdfundinsider on STOs v ICOs:

 

“The initial coin offering (ICO) frenzy is a starting to move beyond its toddler years. After a slow start, ICOs rocketed into public awareness with high profile funding rounds and ridiculous scams accompanied by heightened speculation on unregulated crypto exchanges. Crowdsales generated offerings in the tens of millions, and sometimes hundreds of millions. EOS (Block.one) dwarfed them all with a whopping $4 billion in funding that gave the startup sufficient capital to do pretty much whatever it wants for a good long time.

But rampant fraud, and poorly operated firms that flouted existing securities laws, soon caught the attention and ire of securities enforcement agencies. Following the SEC DAO report in July of 2017, it was pretty much accepted that if you wanted to raise capital in an ICO you better file for a security exemption. Or else.

While the ICO ride continues, if somewhat diminished at least in the US, coin offerings led to security token offerings or STOs (some people label them Security Coin Offerings or SCOs).

At CI, we have viewed ICOs as a generic term for blockchain based assets. The digital asset may be a virtual currency (like Bitcoin), a more traditional security, or perhaps something else that may be loosely defined as a utility token. But for STOs, we are talking about debt, equity, convertibles etc. – securities that have been around for quite some time. STOs are regulated digital assets that are managed by distributed ledger technology. In effect, there is little new to an STO except for the fact that it is all handled on a blockchain and thus may potential benefit from the automation and distributed tech.

STO issuers must adhere to all the existing regulatory requirements of the jurisdiction where the offering is issued, or the security is traded. Presently in the US, pretty much only STOs can technically exist. If you want to issue a “utility” token you would be well advised to file a Form D and call it a security. That or just skip the US.

recent report by the Chamber of Digital Commerce, and their Token Alliance, addressed the enigma. The report, a first installment in what is expected to be a series of missives, espouses an opinion that “digital tokens that are not securities or CFTC regulated instruments” are “under threat of extinction by regulation.” The report continues to explain;

“… it is possible – and perhaps appropriate – for some digital tokens to be viewed as neither a security nor a commodity by regulators. In these instances, digital tokens can bear a closer resemblance to participatory rights in channels of communication, collaboration, and commerce, rather than as an intangible commodity or security that is bought and sold.”

CI reached out to Alon Goren for further insight into the ICO vs. STO discussion. Goren is a partner at Wavemaker VC, founder of 805 Startups, and co-founder of the Crypto Invest Summit. He is deeply engaged in the digital asset realm – both regulated and otherwise. We asked Goren for his opinion on the difference between ICOs and STOs;

“Technically, an STO is an ICO, just defined within our current regulatory environment,” said Goren. “I know a lot of people separate them in order to make it easier to illustrate or explain.  By their standard, an STO is tied to equity, debt or some kind of security and an ICO is a token that is not specifically tied to a security.

We asked Goren about the benefits of doing an ICO versus and STO, in light of the current regulatory environment;

“If we go by the standard, unregulated vs regulated, an ICO is beneficial because you do not have to deal with the onerous, bureaucratic, expensive process of essentially, going pubic,” Goren says. “An STO is beneficial because although the process is ugly, it is well defined and well travelled.  There is a roadmap that can be followed that ensures legal compliance.”

While few STOs exist today, we believe there is immense potential for blockchain powered assets. It is just taking some time for the industry to iron things out and the regulators to embrace a distributed future.

So should the US review and perhaps update existing rules, many of which were created before the internet was even a dream?

That is a question that both industry insiders, and some policymakers, are asking themselves now.

Would a digital asset exemption, which maintains some of the benefits of highly speculative ICOs, while providing an element of investor protection make sense?

“Absolutely,” states Goren. “The system that is supposedly in place to protect investors and issuers was not built to support our current world.” And what about utility tokens in the US. Can they exist in the current regulatory environment?

Goren believes they can but asks the question – will they be allowed to exist.

“I have no idea … [if they will be allowed to exist].  I think it should be up to the regulators, government and law enforcement to stop scams and punish the people who create them.  The fact that an offering is not defined by some outdated rules and exemptions does not mean the offering was done in bad faith or is fraud.  The good / bad news here is that in a digital economy, the companies will find a jurisdiction that will work for them.”



 

Regards,


Martin