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Mint
3 days ago
- Business
- Mint
Crypto, Startups and Banking Make a Scary Mix
(Bloomberg Opinion) -- The next must-have accessory for crypto and tech bros looks to be far less sexy than a Lamborghini — it's a banking license. Getting approved is typically time-consuming, bureaucratic and dull, but these budding lenders are likely to find themselves pushing on an open door — and that poses dangers. Stablecoin issuer Circle Internet Group Inc. and tech billionaire Peter Thiel are among the names linked with trust bank charter applications in recent days. The backdrop to this is a White House pushing for regulators to help innovation and growth in the economy and finance. Some of that is down to the backing Donald Trump got from Silicon Valley billionaires and crypto moguls in last year's presidential race, plus his personal financial interests in memecoins and digital assets. But it is also down to frustrations with a long drought in new bank formations since the financial crisis of 2008. Before that, many years had seen 100-200 new banks each, according to the Federal Deposit Insurance Corp. Since then, most years have barely seen 10 or 15 lenders open for business. Ultra-low rates have made simple banking less profitable, but campaigners for small banks also blame heavy-handed regulation and tough capital rules. Michelle Bowman, the Trump-appointed chief regulator at the Federal Reserve, has spoken often about this dearth in new banks and promised to bring back more tailoring of supervision and regulation to make life easier for small banks. Stoking the system with banks heavily linked to venture capital and crypto could be a terrible idea, however. These two industries were at the heart of the mini-banking crisis in spring 2023 — and not by coincidence. 'These are the most macroeconomically sensitive parts of the economy,' Steven Kelly, associate director of research at Yale School of Management's Program on Financial Stability, told me. 'When interest rates go up, they are the first sectors to turn down.' Ripple Labs Inc. and BitGo Inc. have recently begun trust bank charter applications, according to Bloomberg News, following the lead of stablecoin issuer Circle, which started its bid to become a bank hot on the heels of its $8 billion initial public offering last month. These national charters don't allow banks to collect deposits or make loans directly, but they can use technology and correspondent banking partners to accomplish the same services. Only one crypto company has gained this kind of national license previously, Anchorage Digital Bank in 2021. But other lenders have become deeply entwined with the industry: The best known, Silvergate Bank and Signature Bank, both failed in March 2023. Another hopeful is Erebor, a digital bank startup backed by an all-star cast of JRR Tolkien fans, including Thiel and Palmer Luckey, according to several reports last week. Their bank, named for a dragon's mountain home in The Lord of the Rings, will focus on the 'innovation economy' including tech businesses and digital currencies. It aims to fill a gap in the market left by the failure of Silicon Valley Bank. The 2023 crisis was concentrated around the West Coast tech scene similar to the way Texas suffered a wave of bank failures in the 1980s, as I wrote at the time. The boom and bust of a dominant local industry (oil in the Texas case) caused irreparable harm to the banks most exposed to it. With Silvergate and Signature (the New York-based exception to the West Coast rule), the problem was that a dominant share of their deposits was there only as a gateway to crypto markets: When prices tumbled and trading dried up, the money left, ruining the banks. At SVB, its funding was mainly cash raised by startup companies. When rising interest rates hit valuations and froze venture capital fundraising, the bank's funds began to shrink too. Startup cash burn became SVB's deposit burn, exposing cracks in its business months before the faster run that killed it off. These banks were focused on economically sensitive industries that are highly correlated to each other, and they lacked diversification of funding. That's a bad business model and it is much more significant in explaining the 2023 failures than depositor fears about unrealized losses on bonds, or the role of social media in transmitting panic, according to Kelly and Jonathan Rose, a senior economist at the Fed Bank of Chicago, in a paper(1) they co-authored on the 2023 blowups. Circle, Erebor and the rest look like they're running straight back toward this bad business model trap. The more successful they are and the bigger they grow, the more dangerous they could be. It's worth remembering that Silvergate and Signature were still small when they created fears of a rolling disaster. As Bowman has discussed in several speeches, the tailoring of bank rules isn't just about size but also complexity and business models. The last of these is what should be ringing alarm bells over these wannabe bankers. The last thing the US needs is a whole new group of banks with a hyper focus on stablecoins, crypto and startups. More From Bloomberg Opinion: (1) Rushing to Judgment and the Banking Crisis of 2023. Steven Kelly and Jonathan Rose. Working paper for the Federal Reserve Bank of Chicago, March 2025 This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times. More stories like this are available on
Mint
26-06-2025
- Business
- Mint
UK Mobile Bank Starling Looking to Buy a US Lender in Expansion
Starling Bank, one of the UK's largest mobile-only banks, is looking to buy a nationally chartered bank in the US to continue the firm's expansion in the market, according to a person with knowledge of the matter. The London-based company is initiating talks to hire US bankers this summer to begin the acquisition process, with a particular focus on firms located on the East Coast with assets of around $2 billion, according to the person, who asked not to be identified discussing information that isn't public. Starling made its first foray into the US earlier this year when it announced it would make its banking technology available in the market and registered a subsidiary in Delaware. The goal is to buy a bank with digital offerings that are outdated and could be improved with Starling's modern banking technology, the person said. A spokesperson for Starling declined to comment. The move may be easier to make now than it would've been during Joe Biden's presidency, when regulatory scrutiny stymied deals, particularly among banks. Aside from mergers and acquisitions, financial-technology companies may pounce on the opportunity to obtain banking charters amid lighter regulation under President Donald Trump's administration. The US has had a robust fintech sector for many years, with its peak occurring during the pandemic, followed by lower company valuations and less funding. Fintechs have rebounded somewhat more recently, with Circle Internet Group Inc. and Chime Financial Inc. making their trading debuts earlier this month and Ramp raising $200 million in funding. Starling Chief Executive Officer Raman Bhatia took over the top role last year after founder Anne Boden exited the job in 2023. Soon after Bhatia joined Starling, the company was fined £29 million for its allegedly lax handling of risky customers between September 2021 and November 2023. Among Starling's UK competitors, Revolut Ltd. and Monzo Bank Ltd. have yet to acquire US bank licenses, while OakNorth agreed earlier this year to buy Birmingham, Michigan-based Community Unity Bank. With assistance from Aisha S Gani. This article was generated from an automated news agency feed without modifications to text.
Yahoo
26-06-2025
- Business
- Yahoo
US IPO Stocks Jump Over 50% in 2025 as Investor Appetite for Risk Grows
(Bloomberg) -- Roaring returns for US IPOs are driving fresh optimism that activity will pick up steam later this year and into 2026, even as worries over geopolitics and President Donald Trump's tariffs hang over the market. US Renters Face Storm of Rising Costs US State Budget Wounds Intensify From Trump, DOGE Policy Shifts Commuters Are Caught in Johannesburg's Taxi Feuds as Transit Lags Mapping the Architectural History of New York's Chinatown Led by triple-digit-percent increases for Circle Internet Group Inc. and CoreWeave Inc. — two of the year's five largest initial public offerings on US exchanges — this year's class of debutantes are trading up by a weighted average of about 53%, data compiled by Bloomberg show. That's left investors hungry for more, particularly in a year where the S&P 500 Index has struggled to remain in the black. 'We've been positively surprised by the way the market has handled the tariff headlines, and how investors have thought about that potential risk factor,' according to Keith Canton, JPMorgan Chase & Co.'s co-head of Americas equity capital markets. That resilience could draw out some of the companies that had been planning to go before Trump's tariffs briefly derailed activity. The US IPO calendar into summer is sparse, but the second half of 2025 has more promise. A handful of $1 billion-plus IPOs are likely before the end of the year, most of which will come after Labor Day, said Canton. Volume Mirage At nearly the half-way mark of the year, IPOs on US exchanges have raised $29.1 billion, surging 45% versus the same period last year, according to data compiled by Bloomberg. That's not nearly as good as it sounds. Proceeds from IPOs are actually down from last year, when you excise the $12.1 billion of blank-check vehicle listings — an increase of more than 400% from last year. While special purpose acquisition companies have raised a lot of money in listings, some of the underwriters' fees are deferred until the blank-check merges with a private firm and takes it public. That activity remains depressed compared to the heady levels of 2021. Excluding SPACs and tiny listings by companies raising less than $50 million, only 33 IPOs have priced this year, down from 41 in the first half of 2024. April, typically a strong month, saw only two sizable debuts, with the Trump administration's so-called Liberation Day tariff announcement putting dozens of deals on hold. With those tensions having retreated to the background, blockbuster debuts such as stablecoin issuer Circle's are working to restore the reputation of IPOs for fast share-price appreciation, and wealth creation. Thematically, financial technology and crypto-related companies may continue to figure heavily in the deal mix, and many investors await the return of software and biotech, sectors that historically saw plenty of activity. Private tech companies that have been on many IPO wishlists still have no shortage of alternatives to going public. ChatGPT developer OpenAI raised $40 billion from a private funding round, the latest record-setting demonstration of the depth of capital available. Still, bankers say even that has its limits. 'At some point these companies want liquidity on a larger scale than private markets provide, even in an environment in which a $40 billion round is possible,' said Heath Terry, Citigroup Inc.'s global head of technology and communications research. 'We will see that eventually.' Understanding Over Valuations The lack of near-term listings speaks to a perennial debate over whether investors and pre-IPO companies are reaching an understanding over valuations. A combination of investors' painful memories from overpaying for IPOs in the go-go days of 2021, and asset owners' unwillingness to go public at valuations significantly below that era's peak, has left many companies stuck in the pipeline for the past three and a half years. The logjam may be easing. IPOs — which can include the company raising new money, backers selling existing shares, or both — have recently featured more shares offered by existing investors, known as secondary shares. These help to limit the dilution that would result from the company selling new shares at a lower valuation than the nosebleed levels achieved in previous funding rounds. 'Since mid-May, we have seen greater secondary participation in IPOs, despite wider IPO discounts versus what we have seen historically,' said Jim Cooney, head of Americas ECM at Bank of America Corp. All that aside, concerns around geopolitical tensions haven't gone away, and the Federal Reserve is keeping interest rates higher than many investors — and the White House — would like. Bankers are required to balance their optimism with pragmatism, according to Clay Hale, Wells Fargo & Co.'s co-head of ECM. 'The optimistic side tells you markets are trading well today, there are a lot of high-quality companies that have a desire to be in the public markets, and investors are making a decent return from IPOs,' said Hale. 'The pragmatic part is that there are a lot of things going on that can grab investors' attention, whether it be taxes, tariffs or geopolitics, which create a need to be more thoughtful.' Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push How to Steal a House Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Apple Test-Drives Big-Screen Movie Strategy With F1 Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
12-06-2025
- Business
- Bloomberg
Crypto Bros Are a Risk to Stability, Just Like Trade
Circle Internet Group Inc.'s blockbuster initial public offering has lent an aura of legitimacy to digital clones of fiat currencies. It has also put regulators and policymakers on notice. With crypto going mainstream, they need to assess the threat it poses to global financial stability. Citigroup Inc. is describing 2025 as a possible 'ChatGPT moment' for stablecoins, which its analysts have pegged for a sevenfold expansion over the next five years. However, for the market to reach $1.6 trillion by 2030, a lot of the dollars held as banknotes and other liquid assets by households and firms will have to get tokenized into the likes of Tether's USDT and Circle's USDC.
Yahoo
10-06-2025
- Business
- Yahoo
Bitcoin on the Brink: Institutional Firepower and IPO Frenzy Fuel Crypto's Next Big Move
Bitcoin (BTC-USD) briefly flirted with record territory on Tuesday, rising as much as 1.7% to $110,572 before easing backjust shy of its May 22 peak of $111,980. The digital asset is still up about 16% year-to-date, buoyed by expectations of a friendlier regulatory stance from the Trump campaign and optimism over improving trade dynamics with China. That shift in sentiment is nudging investors back into risk-on mode. Ether joined the rally too, jumping as much as 8% during the session. But this isn't just retail hype. A deeper undercurrent is at playone that's being driven by real institutional flows. Circle Internet Group Inc.'s IPO is the latest example. Priced at $31, it surged to $107 in just days, showcasing strong appetite for crypto-aligned equities. Meanwhile, BlackRock's IBIT ETF just hit $70 billion in assets under managementmaking it the fastest ETF ever to reach that mark. Michael Saylor's Bitcoin playbook is being replicated across the street, and it's pushing the narrative forward. There's a drumbeat of announcements, said Eric Jackson of Emj Capital. Sovereigns, treasuries, fundsthey're all leaning in. At the policy level, things could get even more interesting. A new wave of stablecoin legislation is in motion, aiming to bring more clarity to crypto regulation. If passed, it could hand institutional investors the regulatory green light they've been waiting for. Jake Ostrovskis at Wintermute sees this building momentum as a key force behind Bitcoin's recent price action. While short-term volatility remains, the structural trend is harder to ignore. A larger share of the market is starting to treat Bitcoin not as speculationbut as a legitimate asset class vying for a place next to gold. This article first appeared on GuruFocus. Sign in to access your portfolio
