Fabric Ventures at Money20/20 Europe: Where Open Banking and Crypto became Mainstream and also met Regulation
For those not familiar with Money20/20: As they like to promote on their website, “it’s the world’s leading, premium content, sales and connections platform for the global money ecosystem”. In reality, as a premium conference, it’s heavily concentrated with payments and established financial institutions. After two years in absence, due to Covid19, not only was it a pleasure to be back networking in the real world with serendipitous conversations, but it was also a major surprise to see the incredibly strong presence there of two “startup” trends which have been so successful and impactful on the “global money ecosystem”, particularly in the last 2 years.
On the one hand, Fintech infrastructure was the talk of the town with premium real estate on the floor taken by players such as Solaris and Railsbank (a Firestartr investment, note the F1 car was supplied by Mercedes thankfully) and especially the significant presence of many Open Banking infrastructure players such as SaltEdge, Truelayer, Tink (my prior investment when at PayPal) and Trustly. They were all highly visible, either on the floor space or as sponsors, complimented by others such as Banked (also a Firestartr investment) on stage. Indeed Open Banking has been a tremendous success, for example in the UK with over 3 million users, +300 regulated providers and close to 6bn API calls per year. No doubt the acceptance into the establishment was helped by the announcements of the unicorn funding round of Truelayer by Stripe and the Visa acquisition of Tink.
The other presence of note was the number of Crypto related players in prime floorspace or sponsoring roles, such as Fireblocks, Crypto Finance AG, Chainalysis and Copper.co, as well as Bitstamp. In just 2 years crypto has come in from the cold to the money mainstream. Notably however, it was the more institutional and CEX end of the spectrum that represented this industry, although I was also pleased to see Fabric Ventures portfolio 1inch holding the fort for DEX. At Fabric we were investors in these institutional themes with Tagomi, albeit perhaps too early (acquired by Coinbase, but yes we held on to COIN and now the mission is the hands of my good friend Rick Schonberg over there at Coinbase, so don’t underestimate them).
In addition, there were a number of interesting crypto startups who undertook the onerous Dutch Covid19 entry requirements (I think i filled in 7 forms to get to Holland, but maybe that’s mostly Brexit related and yes, Money20/20 did pull out all the stops to get us Brits over without quarantine.. kudos!)
No surprise in guessing the sectors covered by these crypto startups (at least the ones I saw) were also thematically similar to the larger players present i.e. B2B infrastructure, CEXs, institutional crypto services, or those partnering or intersecting with payments and compliance-KYC. Still, this is what it will take to make crypto mainstream, so I’m all in favour: Improved knowledge and risk management will lead to larger token investments. Institutions will likely become nodes and stakers of DeFi protocols, enabling them to share in the economics. Increased institutional demand for DeFi will create long-term tailwinds for custodial services. Traditional financial institutions will also likely continue to explore and develop DeFi custodial capabilities. All good stuff.
The panels tried to add a bit of depth to the crypto theme covering topics such as CNDCs/Stablecoin design (don’t worry about missing that, instead please see my partner Max Mersch’s post on Angle, Fabric Venture’s new investment, for proper substance on this topic), lessons learnt from Libra, risks of DeFi (yes, risks were the focus), programmable money (why Superfluid.finance, a Fabric Ventures portfolio company, were not invited to this panel, I don’t know) and open data (my own panel, tackling how we move from the success of open banking towards a broader open data economy with workable business models for all participants).
Regardless of the panel title (with one exception: a highly inspiring left field topic on the creator economy moderated by our friend Yusuf Ozdalga, from QED Investors, which tackled the emergency of NFTs as a branding and monetisation tool for creators), it was the topic of regulation that dominated every crypto related panel discussion (even my panel on open data was guilty of this given the critical role of PSD2 regulation in open banking). Now, regulation has indeed dominated the payments and banking industry as well as the institutional end of centralised crypto and for good reasons as financial regulations are designed to uphold the stability and integrity of financial systems, market confidence, consumer protection, and financial crime prevention. No one will argue with that. What got me frustrated however, was the lack of discussion around the benefits and opportunities of DeFi and the closed minded presuppositions in all of these discussions that a) regulators actually understand crypto, let alone can distinguish between the risks of centralised versus decentralised activities and risks and b) whether current centralised financial regulation has actually been sufficiently successful or at least inclusive enough to even be used as a template for DeFi. More on this exciting regulation topic within DeFi in an up and coming post.
Good start Money 20/20, but I do hope future Money 20/20 conferences play due credit to the true potential of DeFi, because as the DeFi ecosystem matures, we expect it will increasingly become interconnected with CeFi. In the same way Bitcoin has already become highly integrated with CeFi services such as in payments (PayPal, for example), in exchanges (such as Coinbase) and with custodians (Fidelity, for example), at Fabric Ventures we foresee a proliferation of “CeFi-to-DeFi” on- and off-ramps (such as our investment in Ramp), enabling DeFi for the masses, and infrastructure APIs for APYs, all driving industry expansion. Ironically, the true open finance vision (that both regulators and Money 20/20 this year celebrated with the emergence of open banking) in tackling increasing financial inclusion, increasing innovation and competition, reducing costs and trimming the fat of burdensome intermediaries, might only be actually realised when the industry embraces DeFi.
