What is ‘New Finance’?

Hey, I’m Mike Kelly. I’m a software engineer, product designer, and founder. I’ve been working on startups for 18 years. I’ve been involved in Bitcoin since 2011 — attending the early London Bitcoin meetups back when it was just a handful of people in the back room of a pub, and becoming an investor & founder member of the UK Digital Currency Association. I was part of the early teams at Monzo and Starling Bank, and from there founded Curl — a startup aiming to replace the extortive, archaic card payment system. Recently, I wrote the regulatory and technical analysis that enabled the UK’s Competition and Markets Authority to mandate the 9 largest retail banks offer an open API for unattended payments.

The financial system is being radically restructured through the adoption of the principles and tech underlying crypto. We call that restructured system ‘New Finance’.

It’s a term we are coining to describe a new era of the financial system that we believe will be created when the tech underlying crypto collides with the traditional regulated finance world. We take the view that the regulators have made it clear they are going to step in at some point. Most of the world won’t be comfortable operating on the fringes, as governments adopt legislation that covers the crypto space New Finance will emerge.

Why?

We want to make it clear we don’t think crypto is going anywhere and it has its purposes.

But we still believe a regulated market will emerge in part of the system, and arguably already has. We also think this part of the market will be huge.

Gary Gensler, the SEC, FinCEN and the CFTC have made it clear they will not just step aside and let all of crypto keep developing without some regulatory intervention. Even FATF finally release their crypto guidance here. Let’s be honest, are any of us surprised? No. We aren’t here to debate whether it’s good or bad, it just is.

Our view is that crypto is revolutionary and the technology underpinning it is going to revolutionise the financial system. However, much of the crypto space is fundamentally & philosophically opposed to regulation (which we agree has its positives, regulation doesn’t automatically = good. Kieran is always pushing me on this). The theory we have is that a new hybrid will emerge in the middle and no it’s not enterprise blockchain…

Brought to you by ‘blockchain not Bitcoin’

Regulators are going to start stepping in and many businesses will work with them, both to produce new regulations that fit this new paradigm and to operate within them. They have been trying to figure out how to deal with crypto for the last decade and just because they haven’t stepped in before does not mean it won’t happen in the future.

Most retail investors want, at the very least the perception of, some safety net and so this area can offer the opportunity to open up banking and financial access to people who may not have the confidence, belief, or technical chops to operate wholly in the crypto arena. Try giving your mum a hardware wallet or explaining the insurance options currently available in the space.

So what are some examples of what we view as New Finance, and where could it head?

Examples

This is New Finance- the likes of Coinbase, Binance, Blockfi, USDC but also Novi, Circle, Revolut & CashApp

We feel it’s at the confluence of companies that:

• Apply cryptography to controlling risk
• Use smart contracts applied to products but also organisational structures
• Create open API’s to spur competition
• Transparency to help reduce the obfuscation and dishonesty that we have seen in areas of the tradfi world

Some of what we view as New Finance

Are we bullish on crypto and the future developments and experimentation going on there? Yes! Do we also feel there will be an area that becomes a regulatory sandbox? Also yes. The two can be true and are not mutually exclusive.

So we view New Finance as the intersection of Crypto and regulation. We think it presents a huge growth opportunity and will overhaul traditional finance. We don’t think it replaces or negates the current crypto market but we feel there is a huge opportunity to invest at this intersection that is
currently underserved.

TLDR? New Finance is where crypto and regulated finance meet. We think it is a large part, if not the largest, of the future of the revolutionized financial world that we expect to see over the coming decade.

If you are an early-stage founder building in this space, we want to talk to you. Stay tuned for our next announcement to find out more… 👀

Mike Kelly & Kieran Parker-Moroney