Warren Buffett’s Holding Invests $600 Mln in Fintech Firms Focused on Emerging Markets

Multinational holding conglomerate Berkshire Hathaway – which counts outspoken crypto critic Warren Buffett as its CEO and chairman – has invested around $600 million in two fintech payment firms focused on emerging markets, the Wall Street Journal (WSJ) reported Oct. 29.

Both investments are said to have been spearheaded by one of Berkshire’s two portfolio managers, Todd Combs. In August, Berkshire is reported to have bought a roughly $300 million stake in the parent company of Paytm, India’s largest mobile-payments service.

The second investment was made just this past week, through the purchase of shares in an initial public offering (IPO) for Brazilian payments processor StoneCo, the country’s fourth-largest by volume.

The WSJ underscores that both decisions mark something of a departure for Berkshire, which  which has $711.932 billion in assets under management as of 2018, and is best-known for its investments in blue-chip firms such as Coca-Cola and acquisitions of utilities and insurance firms.

Buffett has in the past said that tech investments are beyond his area of expertise, WSJ notes.

That tech is not within Buffett’s “circle of competence” was affirmed by self-professed Buffett disciple venture capitalist Chamath Palihapitiya this spring, when he took his icon to task for his virulent anti-crypto stance.

Combs, alongside Berkshire’s second portfolio manager Ted Weschler, are nonetheless reported to be “widening the net” of the conglomerate: yet, as WSJ highlights, both Stone and Paytm are considered to be established companies, which dominate their respective local markets and operate in tightly regulated industries.

The WSJ says Berkshire’s backing is a sign of the “maturity” of the fintech sector, which reportedly raised almost $35 billion in venture capital during the first three quarters of 2018.

Berkshire’s move to put major capital into two fintech firms that target emerging markets squares uneasily with the vocal position of Buffett, who has become notorious in fintech and crypto circles for castigating Bitcoin (BTC) as being “rat poison-squared.” He has made repeated statements claiming that Bitcoin is neither a currency, nor a way of investing. In October 2017, Buffet predicted that Bitcoin had entered the “bubble territory,” and was set “to implode.”

India saw soaring demand for cryptocurrencies during the period of economic turmoil that followed its prime minister’s bold — and still highly contentious — demonetization policy in late 2016. Crypto’s popularity continued through 2017, eliciting a controversial anti-crypto crackdown from the country’s central bank (RBI) this April, which has prompted both public and industry-led petitions.

As a final verdict on the RBI ban continues to be repeatedly stayed, the judiciary has now thrown the ball back in the executive’s court, setting a deadline for the government to clarify and finally cement its official position on crypto by mid-November.

This month, in Brazil, the country’s largest brokerage has revealed it will launch a Bitcoin and Ethereum (ETH) exchange, saying it was pushed into the crypto business by the popularity of the asset class among investors.

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We Should Not ‘Scurry to Keep Pace’ With Fintech, Says CFTC Commissioner

A new commissioner at U.S. regulator the Commodity Futures Trading Commission (CFTC) repeated called for handling fintech – including blockchain and cryptocurrency – with an “open mind” in a speech Thursday, Oct. 25.

Speaking at the 2018 International Swaps and Derivatives Association (ISDA) Annual Japan Conference in Tokyo, Rostin Behnam, who has now held the post for a year, revealed he had spent much of that time focusing on issues related to disruptive fintech.

“I am surprised by the amount of time I spent examining issues related to bitcoin, crypto assets, distributed ledger technology (DLT), artificial intelligence, and cloud-based programming,” he told the audience.

Behnam also spoke to the variety of potential use cases for DLT, such as blockchain, listing the range “from agriculture to healthcare, finance to art, CryptoKitties to Dogecoin.”

Calls for fair handling of disruptive technology have also come from regulators of other spaces. As Cointelegraph reported this week, the chairman of the U.S. telecoms regulator defended the need for a “level playing field” for phenomena such as blockchain going forward.

Preempting the importance of such phenomena marks a further key focus for Behnam, who added about his engagement with the crypto, DLT and AI sectors:

“I had no single goal in mind, just a desire to avoid being the typical regulator on the tail end of technological advancement, scurrying to keep pace with swift innovations that capture market efficiencies, open markets to new products and participants, and often reward those willing to take risk.”

Both the CFTC and fellow U.S. regulator the Securities and Exchange Commission (SEC) have increasingly found themselves in the spotlight regarding the cryptocurrency industry this year.

The latter, having rejected a raft of Bitcoin exchange-traded fund (ETF) applications in August, is now communicating with prospective operators who are attempting to iron out the agency’s concerns about their offerings.

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US Treasury Releases Fintech Report, Discusses Issues Relevant to Cryptocurrency

The U.S. Treasury Department released its highly anticipated report that examines the current monetary system, discusses cryptocurrency, and proposes sweeping changes that would cut regulatory inefficiency and incubate new technologies.

The report, which is titled “A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation” was drafted under Treasury Secretary Steve Mnuchin and addressed to President Donald Trump.  The report does not directly provide any recommendations or conclusions on cryptocurrencies, but the technologies are mentioned.

Cryptocurrency-Related Issues

The report covers a broad range of issues, many of which are highly relevant to the cryptocurrency industry. The Treasury Department acknowledges the escalation of cryptocurrency and blockchain technologies, noting the rapidly progressing nature of the economy.

In a section titled “Digitization of Finance and the Economy,” they note that parallel to the rise of mobile and digital banking, complimenting technologies like cryptocurrencies and distributed ledger technologies are “poised to impact innovations in financial services.” They elaborate on this, saying:

“Technology developments that are poised to impact innovation in financial services include advances in cryptography and distributed ledger technologies, giving rise to blockchain-based networks.”

The Treasury also notes that blockchain and distributed ledger technologies are being examined by the Financial Stability Oversight Council, which was founded after the 2008 financial crises with the goal of guiding federal regulators on important issues.

Importantly, the Treasury makes it clear that the government wants to support new innovations, and to develop regulations that incubate growth within emerging industries, saying:

“Support of innovation is critical across the regulatory system — both at the federal and state levels…Treasury supports encouraging the launch of new business models … to pursue innovative technologies to lower costs, improve customer outcomes, and improve access to credit and other services.”

A do no harm approach by the government is critical for cryptocurrencies and will ultimately lead to greater success and adoption. The report acknowledges that current regulatory frameworks may be outdated and updates to it are necessary in order to allow solutions that offer benefits to consumers, saying:

“The financial regulatory framework is not always optimally suited to address new business models and products that continue to evolve in financial services … Financial regulation should be modernized to more appropriately address the evolving characteristics of financial services of today and in the future.”

Regulatory Efficiency

The U.S. Treasury discusses technologies that could streamline payment systems, and importantly mentions the development of regulatory sandboxes that allow for innovation in order for the U.S. to stay competitive with places like the U.K., Singapore, and Hong Kong.

The sandbox method, which entails the government keeping a watchful eye on emerging industries, but not harming them with regulation, is popular in many countries, and most people see it as the best way to regulate the cryptocurrency industry.

Arizona has been on the forefront of cryptocurrency adoption and was the first state in the United States to offer a sandbox environment for fintech companies, which will allow companies to test their products and services for up to two years with as many as 10,000 customers before needing to apply for licensing.

This allows cryptocurrency and blockchain companies to actively develop and test products without working around regulatory requirements.

The report recommends creating a sandbox regulatory environment in the U.S., stating:

“Internationally, many countries have established ‘innovation facilitators’ and various regulatory ‘sandboxes’ — testing grounds for innovation…While replicating this approach in the United States is complicated by the fragmentation of our financial regulatory system, Treasury is committed to working with federal and state financial regulators to establish a unified solution that accomplishes these objectives — in essence, a regulatory sandbox.”

The Treasury report concludes that the United States must “stay abreast of developments in technology and to properly tailor regulations in a manner that does not constrain innovation.” And that U.S. regulators “must be more agile than in the past in order to fulfill their statutory responsibilities without creating unnecessary barriers to innovation.”

Featured image by Shutterstock.

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Singapore FinTech Enables Instant Blockchain Remittance for Myanmar Migrant Workers in Thailand


Everex, a Singapore-based financial technology firm, has partnered with Myanmar’s Shwe Bank to introduce blockchain-Powered remittance Services between Myanmar and Thailand.

The blockchain firm claims that the partnership will enable millions of Myanmar migrant workers living in Thailand to send money home instantly and securely at much lower transaction costs than traditional remittance methods.

Blockchain in Remittances

The remittance industry stands as one of the most disrupted industries by blockchain technology. The reasons for this are not far-fetched as the comparative advantages which the technology boasts over traditional remittance systems are easy to identify.

The speed of transaction, negligible cost and decentralized auditability of blockchain remittance processes are some of the leading factors that are behind its increasing adoption rate. These factors appear to be suitable for a significant fraction of the global migrant community who are always sending money back home to their families.

According to the UN Migration Agency, there are about about three million Myanmar migrant workers live in Thailand. The majority of this population adopt crude and informal means to send money home in an attempt to avoid the high fees that are charged by traditional remittances. This exposes them to substantial risks and poorly coordinated procedures.

Myanmar people working in Thailand are foreign currency earners of our country, and their hard-earned money is at risk when they send it home via informal channels”, says U Thein Zaw, Shwe Bank’s Executive Vice Chairman.

Zaw elaborates that Shwe Bank and Everex have partnered to offer faster, less expensive and, most importantly, safer money transfers using Everex’s digital remittance platform. I look forward to working with Everex and expect this technology to greatly improve financial inclusion for Myanmar migrant workers”, he concludes.

Reaching the Underserved Population

By partnering with the mid-tier challenger bank, Everex also intends to employ blockchain technology in eliminating high remittance fees, reduce money transfer time to under a minute and provide a clear audit trail of the entire transaction. This is an innovation that is considered as a huge step away from what is currently obtained in the industry.

One area of development where most emerging fintech solutions are focusing their efforts is reaching the unbanked and the underbanked population of the world. According to statistics, nearly 2.5 billion of the world’s population do not use formal banks or semi-formal microfinance services. 2.2 billion of this population are found in Africa, Asia, Latin America and the Middle-East.

As part of its services, Shwe Rural & Urban Development Bank (Shwe Bank) is working to foster financial inclusion for the underbanked population within its region. To this effect, the bank has adopted financial technology for use throughout its distribution network of about 410 banking agents across Myanmar in an effort to provide quality service for customers currently underserved by traditional banks.

This incidentally justifies the purpose of this partnership between theabove-mentionedd companies. This collaboration will enhance the achievement of financial inclusion for the underserved without the incidental barriers of infrastructure, cost and accessibility that have been responsible for the existing industrial limitations.

Featured image from Shutterstock.

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