19 August 2022 |

Canada Limits Crypto Buys To $30k—Reddit & FTX To Turn Karma Into Tokens


Reddit x FTX

  • Internet community giant Reddit has teamed up with FTX to allow its users to pay for ETH gas with fiat. Since 2020, Reddit users that participate in certain subreddits (currently only r/cryptocurrency and r/fortnite) and earn Community Points, Ethereum based tokens that are meant for governance and as a status marker on this communities (not meant to be sold in secondary markets).
  • However, since the L2 rollup – developed by Arbitrum – is built on the Ethereum blockchain, users need ETH gas to pay for transactions using their Community Points. That’s where FTX comes in, allowing them to pay for gas fees through their crypto-fiat solution FTX Pay.
  • This could be a huge deal for crypto and blockchain technology in the future. Reddit has been a key player in the adoption of the Internet and it could be positioning itself as one of the main onboarding platforms for web3 in the future. With more than 1.5 billion registered users, and 430 million of them active per month, the potential for mass adoption of their Community Points has always been enormous, but this new feature is a step towards seamless transactions that might be key for non crypto-native users.
  • We’ll have to wait and see if adoption of Community Points rises with the integration of FTX Pay, and its expansion to more subreddits and communities, but it is definitely a collaboration worth keeping on your radar.

eToro is going shopping: Gatsby for $50M

  • Social investing platform eToro announced on Wednesday that they have signed a definitive agreement to acquire options trading platform Gatsby in a $50M deal. 
  • Gatsby was founded in 2018 as a commission-free stocks and options trading platform that targeted Gen-Z and Millennial investors. From its beginnings, it was said to be the startup that was going to take on giant Robinhood. However, they are now joining forces with giant eToro, previously valued at $10.4B amidst a SPAC acquisition. 
  • The interest in Gatsby reportedly comes from eToro’s desire to expand its US market offer, especially by providing access to options trading, which is currently not available for their US customers.
  • As you might remember from our FTT Friday a few weeks ago, Robinhood is not having a good year. They had a lousy Q2 earnings report, had to lay off almost 30% of their staff, and their stock has been plummeting – it’s down to $10.17 as of market close, while it was around $50 just a year ago. Meanwhile, eToro might take advantage of its main competitor’s situation to grow their market share in the US.
  • The Israel based company is relatively new to the US market (March 2019), although it was founded back in 2008. Since they incorporated crypto into their range of asset offerings in 2017, they have experienced exponential growth in registered users, from ~8M at the time to 28.5M at the end of Q1 2022. 

Consumer Credit + Remittances: Pomelo raises $70M

  • The remittance market is massive, expected to reach $630B this year alone, and to keep growing to over $1T by 2030. Naturally, this growth is correlated to technological advancement and innovation in the Digital Remittance space, with the rise of companies such as Wise and MoneyGram. However, fees remain relatively high and the infrastructure around global digital payments remains a complicated tide to navigate.
  • SF based startup Pomelo is aiming to disrupt this space by combining consumer credit and international money transfer in one product. In partnership with MasterCard, they are aiming to create a credit card that allows US customers to allocate credit to their loved ones in other countries. Thus, they would be eliminating the need for money transfer itself, while allowing the people they wish to share their purchasing power in their home country. As a plus, the US cardholder would be creating a positive credit score by complying with their remittance payment obligations. 
  • This is a creative solution looking to disrupt a market with tremendous potential, but that seems overcrowded. It has been said that a percentage of remittance funds are used for money laundering and financing of illicit activities, which would be of less concern with this method. Also, in terms of financial inclusion, and taking into account that the receptors of remittances are usually residents of emerging or developing economies, it has been observed that final users usually cash-out their remittance income, which in turn means they are not fully participating in the financial system, remaining underbanked. 
  • As of Tuesday August 16, Pomelo is officially launching in the Philippines, after completing a seed round for a total of $70M comprised of $20M in equity and $50M in debt, led by Founders Fund and A* Capital. We’ll keep an eye on the rollout and performance of this interesting product, and see if it manages to disrupt the $600B industry. 

Canadian Crypto-Exchange Platforms set new buy limit at $30K CAD

  • Crypto-exchange platforms in Canada are facing a wave of new requirements by securities regulators in their country that resulted in new established buy limits for certain cryptocurrencies. These crypto platforms are being asked to register with their state securities regulator, according to their province of establishment, and in some of them that comes with purchasing limitations for retail investors. 
  • As explained by trading platform Newton, following their announcement of registration with the Ontario Securities Commission (OSC), retail investors will now have to comply with an annual net buy limit of 30K Canadian dollars (CAD) on alternative cryptocurrencies, that is, every time a consumer purchases one of these coins the amount will increase to their net buy limit of the year, and every time they sell that amount will decrease their net count accordingly. For a full year, net purchases can’t exceed the 30K limit, however, increase or decrease in value of the coins will not be taken into account, it is only the amounts at buy-sell that are counted towards the limit. 
  • However, the limit only applies in certain circumstances. First, it is only applicable to retail investors, as opposed to eligible investors, whose limit is increased to 100K, and accredited investors, that face no limit. In addition, the limits are not enforced in all provinces, since each has their own securities regulator, and BC, Manitoba, Alberta, and Quebec have not enforced these new regulations. Finally, there are four cryptocurrencies exempt from the limit: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. 
  • The limits are meant to protect retail investors and raise awareness of the risks associated with investments in the cryptocurrency space. However, it comes to mind that the list of four coins that were deemed “safe” enough to have no limits seems a bit arbitrary. What was the criteria that led to choosing $BCH and $LTC over $SOL or $BNB, for instance, and if the main concern is price volatility and associated risk for investors, what about stablecoins?