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JPMorgan launches fundraising platform for entrepreneurial companies – Industry roundup: 21 October

JPMorgan introduces a fundraising gateway for entrepreneurial companies

JPMorgan Chase & Co has launched a new gateway platform, Capital Connect, that will reportedly link new start-ups with venture capital investors in efforts to streamline the fundraising process. The new platform is expected to address the financial requirements of start-ups in their initial phases, allowing them to further expand into the private market. Michael Elanjian, Head of Digital Investment Banking and Digital Private Markets, JPMorgan, is expected to lead the team, which has grown from a workforce of three to 125 within the last two years, said reports.

Start-up business owners can expect to use Capital Connect to request introductions to investors and create virtual data rooms, as well as trade their shares of the company on the secondary market. Additionally, the website can be used to raise funds as early as the Series A round.

Private market growth has reportedly been consistent over the past ten years. Elanjian stated that JPMorgan aims to become a full-service bank by serving investors and businesses of all sizes and by providing them a modular digital platform to meet their private-based activities. The need to meet the fundraising requirements of entrepreneurs and investors has driven banks to establish relationships early on as the size of venture capital-backed companies has grown significantly over the past few years, said reports.

Visa and Thunes join forces to introduce a cross-border send-to-wallet feature for SMBs and consumers

Giant digital payments provider, Visa, has partnered with Thunes, a B2B company, to assist individuals and small businesses in transferring funds worldwide to 78 “digital wallet” providers, aiming to reach 1.5 billion digital wallets in 44 countries and regions. This collaboration will reportedly extend Visa Direct's scope to nearly seven billion cards, including accounts and digital wallets combined, as well as supporting 160 currencies, connecting to 16 card-based networks, 66 domestic ACH schemes, 11 real-time payment networks, and five payment gateways, said reports.

Digital wallets are reportedly growing rapidly, a first step into the financial system for unbanked individuals in emerging economies. Customers can expect to load or receive funds directly into their digital wallets without having a card or account, potentially fostering greater financial inclusion and giving underserved populations access to financial products.

Thunes' B2B payments platform links with Visa Direct by including the cross-border send-to-wallet capability to the 78 digital wallet providers that are currently embedded with Thunes. Financial institutions, governments, neobanks and money transfer operators can expect to use the new Visa Direct functions and features, enabling small businesses and consumers to transfer the funds to markets throughout Africa, Asia and Latin America, where wallets may be the preferred payment method.

New climate risk transfer partnership between the African Development Bank, UK and London insurers

The African Development Bank, the United Kingdom government and three globally recognized insurance companies have completed the “Room to Run Sovereign” risk-sharing transaction.

The Room to Run Sovereign transaction was reportedly designed to increase the African Development Bank Group's commitments to climate finance by up to US $2 billion, aiming to assist countries in Africa in meeting their Nationally Determined Contributions (NDCs). The bank has been looking to reduce the risk capital currently consumed by its sovereign operations. Furthermore, the bank aims to expand its lending operations in priority sectors, particularly climate finance, to support more mitigation and adaptation projects across the African continent through this risk transfer arrangement.

Reports indicate that the Room to Run Sovereign is a risk-sharing arrangement based on a subset of the Bank's portfolio of sovereign loans for up to fifteen years, in which the insurance market, specifically AXA XL, Axis Specialty and HDI Global Specialty, will take a $400 million first loss tranche, while the United Kingdom's Foreign Commonwealth and Development Office (FCDO) provides an additional $1.6 billion of cover on a second loss basis, on the same subset portfolio of loans, said reports.

N26, a German fintech, unveils cryptocurrency trading in Austria

N26, a Berlin-based online bank, has announced that it will begin allowing some customers in Austria to trade cryptocurrencies, its first expansion into the equity market. N26 plans to expand the service to other clients in the coming months and eventually facilitate the trade of nearly two hundred cryptocurrencies. The bank has partnered with Bitpanda, an Austrian-based trading platform, for coin trades and custody. However, Bitpanda lacks a license in Germany, making it difficult for N26 to offer the service in its domestic market.

As reports have shown, the value of major cryptocurrencies such as Bitcoin and ether has plummeted this year due to the global market downturn, which has prompted investors to abandon risky assets. Regulators have reportedly cautioned investors that there is a significant risk of loss due to lack of regulation in the crypto asset sector, and N26 stated with their announcement that purchasing crypto could potentially result in the loss of the investment funds. However, Bitcoin and other cryptocurrencies are still a popular and intriguing asset class, according to Valentin Stalf, Co-Chief Executive, N26.

According to CoinGecko data, the total market valuation of all cryptocurrencies is estimated to be approximately US $960 billion, with more than $2 trillion lost since last November’s high point. N26, considered to be one of Europe’s most valuable fintech companies, reported a significant loss for 2021, which included a fine for lax money laundering controls by financial regulators in Germany, and slow customer growth was also noted last week.

N26 was reportedly ordered to limit the number of new customers it accepts. The firm also shut down its operations in the United States. N26 claims that its controls have been improved.

Malaysia plans to implement e-invoicing beginning in 2023

The Malaysian government plans to implement an electronic invoicing system (“e-invoicing”) beginning in 2023 in order to improve the efficiency of its tax system and aid in the implementation of a sustainable electronic business ecosystem, according to Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz.

Reports indicate that implementing e-invoicing could offer a more accurate audit trail and increase tax visibility and potentially tax revenues. The finance minister stated that this effort would complement one of Malaysia's government's small-medium enterprises (SMEs) targets under the 12th Malaysia Plan, which aims to digitalize 90% of SMEs' operations by 2025. Additionally, e-invoicing would reportedly facilitate the use of the tax identification number (TIN), which would be required for all documents and instruments, as well as become a measure to broaden the collection of income taxes.

The finance minister further stressed the importance of tax administrations in order to ensure that the country's financial state was sufficient to support the government's planned spending. SMEs reportedly play an important role in Malaysia's economy, accounting for more than 97% of total registered companies in 2020. Reports indicate that SMEs contributed 37.4% of Malaysia's GDP and employed nearly 48% of the workforce in 2021. "As a result, more effort must be made to improve and enhance SMEs' tax compliance knowledge, and digitalization is the way forward in supporting their compliance while reducing administrative burden", commented Tengku Zafrul.

Eurosystem postpones the T2 wholesale payment system rollout

The European Central Bank has postponed the launch of T2, a new real-time gross settlement system and central liquidity management model, by four months until March 2023 to allow more time for testing by some member countries.

Reports indicate that the “go-live” date had been set for next month, but after an assessment by the ECB's Market Infrastructure Board, it was determined that users needed more time to conduct their experiments in a secure environment. The decision was based on T2's significance and systemic nature, particularly in light of the present geopolitical environment and the unstable financial markets, said reports.

The large value payments system project will combine the RTGS system and the Eurosystem's securities settlement platform, as well as merge the technical and functional aspects of the Target2 and Target2-Securities platforms. Furthermore, RTGS will reportedly replace Target2 and optimize liquidity management across all Target Services.

India's central bank may recommence bond purchases in efforts to manage liquidity deficit

Per reports by Bank of America (BofA) strategists, the Reserve Bank of India (RBI) may need to restart open market bond purchases in order to control its banking system liquidity, which could potentially fall into deficit over the next two months.

Reports indicate that India's banking system currently has a liquidity deficit of 100 billion Indian rupees (US $1.21 billion), with more tax payment-related expenditures expected. However, even if foreign exchange reserve drawdowns halt, strategists claim that a seasonal uptick in currency leakage, which is expected to deplete about 0.5 trillion rupees ($6.07 billion) per month over the coming few months, would potentially cause a liquidity deficit.

RBI’s foreign exchange reserves have reportedly fallen by approximately 16% this year to $532.9 billion as of 7 October due to valuation changes and the central bank’s intervention to contain the rupee’s rapid decline. BofA strategists state that the RBI would need to determine how to maintain money market rates near the policy interest rates. Additionally, purchasing bonds in the open market would add liquidity as well as prevent larger sell-off in the bond markets, said strategists.

The Bank of England claims non-banks require stricter regulations due to the LDI crisis

Non-banks are still not properly regulated a decade after the global financial crisis, according to Deputy Governor Jon Cunliffe, Bank of England. Liability-driven investment funds (LDI) in the UK were pressured by regulators to strengthen their liquidity defences after the Bank of England was required to buy UK government bonds to prevent the funds from weakening. As the world's financial markets begin to acclimate to the sharp increases in interest rates, Cunliffe cautions that additional stresses, such as emerging markets and emerging market bond funds, could develop, with shortcomings primarily in non-banks like leveraged funds.

Regulators reportedly tightened capital requirements for banks in response to the global financial crisis, but initial attempts to regulate non-bank entities failed due to discrepancies amongst central banks, which are said to prioritize financial stability and securities regulators. Additionally, the funds sector claims to have made a strong effort to block heavier forms of regulation, such as demands to hold significantly larger liquidity buffers or capital reserves.

According to Cunliffe, there is a global discrepancy between the financial stability authorities and the information they have access to about non-banks. Furthermore, without global cooperation, jurisdictions will find it challenging to change the cross-border industry. Cunliffe added that non-bank finance is less tolerant of liquidity issues, as demonstrated by LDI and the pandemic, where central banks had to infuse liquidity into the market to prevent money market funds from freezing. Reports states that authorities such as the Bank of England and the securities regulators in charge of those markets require more attention to issues relating to financial stability and macroprudential policy.

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