Ambitious Plan
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WEDNESDAY JUNE 23, 2021 VOL. 186 No. 119 AMERICANBANKER.COM Follow us on Twitter @AmerBanker A Las Vegas casino 5 bets against cash Resorts World is building its entire customer Ambitious plan experience around a digital app, hoping to eliminate the need for — and costs of — The challenger bank Dave has grown steadily since its handling paper money. Page 6 inception and predicts that adding more banking and investment products will help it take off in coming years How fintechs are 6 helping salons straighten See story on page 3 out payments problems Beauty shops must handle transactions Gross profit Total revenue for multiple employees and contractors operating under one roof. Tech companies $600M are customizing software and transaction processing services for this niche. Page 7 $500M $400M Goldman Sachs starts 7 to offer transaction bank $300M services in U.K. $200M Goldman Sachs Group has begun offering cash management and treasury services in $100M the U.K. as it builds out its new transaction- $0 banking arm. Page 8 2018 2019 2020 2021* 2022* 2023* Morgan Stanley backs Source: SEC filing *estimated 8 blockchain with investment in Securitize The Series B round, also led by Blockchain Capital, marks the first investment in the dailybriefing Regional banks, credit unions blockchain industry by Morgan Stanley’s 3 begin lending to pot firms opportunistic investment arm. Page 9 Cannabis, though still illegal at the federal Basel’s crypto capital plan level, continues to inch into the financial Revolut said to eye 1 could boost banks’ interest mainstream. Small credit unions and lenders 9 fundraising at over in stablecoins as large as Valley National and East West $20 billion valuation The Basel Committee on Banking have moved beyond just taking deposits Revolut is in the early stages of a fundraising Supervision issued a proposal this from marijuana companies. Page 5 round that could value the British company month laying out how banks should treat at $20 billion or more. Page 9 cryptocurrencies held on their balance Banks’ robust capital mitigates sheets. It could give stablecoins, which are 4 risks, regulators tell Biden Banks can make indelible tied to traditional assets, an edge over more The huge buffers that banks built up over 10 impact on society without volatile digital assets like Bitcoin. Page 2 the pandemic are protecting the financial sacrificing profits system from looming threats, regulators It is possible for financial firms to value the How neobank Dave hit 10 told President Biden during a meeting that future of the planet and lift up marginalized 2 million users in four years also touched on climate change, extension communities while still generating strong The company, which started in personal of credit to the underserved and other returns for shareholders, Monica O’Reilly of financial management, has grown quickly topics. Page 6 Deloitte writes. Page 10 by helping consumers avoid overdraft fees and, more recently, adding a no-fee bank account. It’s counting on a merger deal with a special-purpose acquisition company to fuel further growth. (See chart above.) Page 3 WEDNESDAY JUNE 23, 2021 AMERICANBANKER.COM PAGE 2 was “revolutionary,” said Georgia Quinn, of digital assets that are there, just like there DIGITAL CURRENCIES general counsel at Anchorage Digital is differentiation between capital treatment Bank, a financial institution that provides in connection with different types of debt cryptocurrency-related services. instruments and different types of different Basel’s “Stablecoins are a different type of asset classifications of equity,” he said. and they don’t have the same volatility At a point in time where much of crypto capital concerns,” she said. “I’m really excited the public conflates stablecoins with that they’re finally getting some credit cryptocurrencies writ large, the Basel somewhere.” committee proposal could serve to highlight plan could While the Basel committee’s proposal the crucial differences between the asset asked for public comment on whether classes, added Mizrach. boost banks’ there should be potential capital add-ons “Basel is hopefully helping people wake to what it called “group one” cryptoassets up to the fact that the digital asset space (tokenized traditional assets and assets with is not just Bitcoin, or not just Bitcoin and interest in stabilization mechanisms, like stablecoins), Ethereum,” he said. “There’s a range of regulators appeared to acknowledge that things.” stablecoins those assets posed less of a risk to banks While banks are not currently clamoring than assets like Bitcoin. to hold cryptocurrencies on their balance By Hannah Lang That could pave the way for banks to warm sheets, there could be potential benefits to June 22, 2021 to holding stablecoins or other tokenized holding stablecoins in the future, Quinn WASHINGTON— Although banks are assets. said. only starting to grapple with the rising “The first step is to recognize that not all “It diversifies the asset class, and it allows popularity of cryptocurrencies, a framework digital assets will necessarily fit into one them to gain exposure to, potentially, from global banking regulators outlining basket, and the Basel committee certainly inflation,” she said. “U.S. federal banks possible capital charges for them is a likely recognizes that,” said Bruce Mizrach, a don’t necessarily have this problem because preview of how financial institutions could professor in the economics department at they’re generally backed by U.S. dollars, but soon come to view digital money. Rutgers University. “There’s the possibility for central banks in other jurisdictions where The Basel Committee on Banking that some of the truly stable among the that currency may not be as stable, this Supervision issued a proposal this month stablecoins will, in fact, be treated similar to might be a nice addition to their portfolio.” laying out how regulators should make cash-like assets.” However, the capital charge the proposal banks treat Bitcoin and other digital assets. Gannon agreed that it was important for suggests imposing on assets that are not tied Under that proposal, bank exposures to regulators to recognize that the “thousands to a fixed value, like Bitcoin, would likely cryptocurrencies that are not linked to of cryptocurrencies out there” are structured have the effect of discouraging banks from any underlying asset would be subject to differently and thus pose distinctive risks to holding those assets on their balance sheets, a 1,250% risk weight, meaning that a bank bank balance sheets. said Mizrach. would likely need to hold a dollar in capital “My guess is that down the road, in “It seems to be very unlikely under for every dollar’s worth of a digital asset. terms of capital treatment, there’ll be some these rules as proposed, given the group While the proposal is likely years away discrimination based on the different kinds two assets, that there will be prop desks at from adoption and could morph over time as the digital asset space continues to evolve, as even the committee acknowledged, many Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 industry experts were encouraged by the Phone 212-803-8200 AmericanBanker.com framework. “It’s a strong indicator that the regulators Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 are fully conscious and sensitized to the Managing Editor Dean Anason 770.621.9935 developments that are going on in this Reporters/Producers space,” said Stephen Gannon, an attorney at Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 Murphy & McGonigle. Washington Bureau Chief Joe Adler 571.403.3832 The panel of global regulators also Executive Editor, Technology Miriam Cross 571.403.3834 suggested that other digital assets like Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 stablecoins, which are tied to real-world BankThink Editor Rachel Witkowski 571.403.3857 assets and currencies, be subject to less John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 stringent capital rules that would more Hannah Lang 571.403.3855 closely resemble capital regulations for Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 traditional bank assets. Digital Managing Editor In particular, that differentiation between Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 digital asset classes by banking regulators For up to date and complete coverage go to AmericanBanker.com WEDNESDAY JUNE 23, 2021 AMERICANBANKER.COM PAGE 3 JPMorgan trading Bitcoin and Ethereum in said. “But if we looked at the neobanks, large quantities,” he said. “The capital cost is CHALLENGER BANK their approach to overdraft was to not allow just too high.” overdraft at all. So if you’re stuck at the gas Quinn noted that banks have generally station or grocery store with insufficient not been interested in holding assets like How neobank funds, you either can’t get home or can’t feed those anyway, given how volatile they have your family. We saw that people would rather proven to be. Dave hit 10 pay the fee if it meant actually being able to “I don’t think there are any banks out pay for everyday essentials in these sort of there that are wanting to hold crypto on their emergency scenarios. And so we created balance sheets,” she said. “No bank is saying, million users what we thought the most fair product was, ‘Oh I want to hold crypto on my own balance one that I would have loved as a college kid.” sheet. I’m going to hold crypto as my capital in four years Dave provides just-in-time cash advances reserves to back the deposits of clients.’” of up to $100, even to customers who don’t Instead, many banks are looking to offer By Penny Crosman have their paychecks directly deposited in a custodial services for their customers’ June 21, 2021 Dave account.