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TBW #57: Fear on European platforms 😱

TBW #57: Fear on European platforms 😱

Read all about The Big Whale's 57th Premium newsletter.

Hello Whales and welcome to the little newcomers who have just joined us in the Premium edition! There are more of you every week. Thank you so much 😍

To devour this week

🖊️ Editorial

🗣 Our exclusive info exclusive news

😓 PSAN investigation

💸 Bermuda

THE BIG SPLASH

"BRC20" ? 🙄

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The web3 ecosystem is not just a technological jungle, it's also one hell of a semantic labyrinth. Take the number of acronyms and initialisms - there are hundreds of them, each more exotic than the last - and a new one has just appeared: "BRC20".

If "BRC20" rings a bell, it's probably because of its cousin, "ERC20", which is the token standard for projects developed on Ethereum. The big difference between ERC20 and BRC20 is that the former is available on Ethereum, while the latter is available on... Bitcoin.

Yes, you read that right, we're talking about tokens on Bitcoin, which proves once again that despite much criticism, particularly about its rigidity, the network is still capable of innovation 💡.

The craze for these BRC20 tokens started a few weeks ago thanks to the Ordinals protocol, which allows any satoshi - Bitcoin's smallest unit of currency (1 satoshi = 0.00000001 BTC) - to be digitally marked.

Several series of BRC20 tokens are already very popular, and the total capitalisation of BRC20s has exceeded $1 billion!

Proof that the sector is still fairly immature, however, and that the revolution will therefore wait a little longer, none of these cryptos really has any use, to put it mildly 😅.

Most importantly, the craze surrounding these new tokens has caused Bitcoin's transaction fees to skyrocket - to their highest level in just over two years, which has partly congested the network...

THE BIG NEWS

Our Exclusive News 🔥

👉 OKX wants to expand in Europe

Is this the MiCA effect? What is certain is that more and more crypto players want to expand in Europe. According to our information, the OKX platform, which has already had a presence in Malta since 2018, wants to expand its activities in the European Union, and in particular in France 🇫🇷.

The platform, which was created in 2017 in the Seychelles, could set up offices in Paris in the coming months. "They are working on this," confirms a source.

In less than 18 months, several industry heavyweights such as Binance and Cryptocom have announced their arrival in France. Binance, by far the largest Exchange on the planet, already has more than 100 staff in the French capital.

OKX (formerly OKEx) is one of the leading crypto platforms on the planet. According to CoinMarketCap figures, it is one of the world's Top 10 exchanges in terms of volumes.

OKX already has a strong presence in Asia - the platform has just obtained a licence in Hong Kong - as well as in America and the Middle East, where it has an office in the Bahamas and Dubai. And perhaps soon in Paris.

TO

The Big Whale launches its mapping of the European ecosystem

All European projects that wish to do so can enter their information and appear in "The Ocean".

Each project included in this mapping will have the opportunity, after a vote by The Big Whale's 300 founding subscribers ❤️, to:

👉 Pit the project to The Big Whale community (20.000 members)

👉 Be visible (with a listing) within a dedicated space in The Big Whale

The questionnaire is available by clicking here, and only takes a few minutes. 😎

THE BIG REPORT

Crypto platforms: is there room for everyone in Europe?

By Grégory Raymond (in Paris)

In just a few years, the number of crypto applications and Exchanges has exploded in Europe. While some of them will succeed in developing, not all will survive, notably because of the market's lack of maturity. Behind the scenes, the manoeuvring has already begun for takeovers.

If there is one crypto field in which Europe has no shortage of representatives, it is platforms. In France alone, which holds the continental record, there are a good fifty of them, including nearly 30 registered with the Autorité des marchés financiers (AMF). "That's far too many for the size of the market," blows one entrepreneur in the sector.

Faced with falling share prices for more than a year, most European platforms, particularly in France, have seen a significant drop in activity 📉. They're counting their pennies (well, what's left of them) and some are contemplating the worst, even though most of them haven't even been in existence for three years.

"A lot of apps are going to end up on the floor, it's only a matter of time," anticipates Réda Berrehili (*), the boss of Klub, a private investment platform. "Most have designed their business model for the bull market of 2020-2021, with revenues conditional on volume. When the market turns, there is no more volume, and therefore no revenue", he believes.

The other big problem is that many of these European start-ups look the same 😅.

They offer more or less the same service: buying and selling cryptos, and not much more. Sometimes they also offer yield solutions (staking or lending), but there is not enough differentiation.

"We all have our little differences, but we often target the same customers, and there is a bottleneck of offers," concedes François-Julien Alcaraz, co-founder of the investment app CryptoSimple.

The French start-up recently announced a €1 million fundraising round, but several industry experts are quick to point to a "fragile" financial situation. François-Julien Alcaraz admits that the situation is not easy, but believes that he is not alone. "80% of companies are currently in difficulty", says the boss of the Marseille-based start-up.

The next few months will be key for CryptoSimple, which is thinking about targeting a more professional clientele.

Among companies in difficulty, the names of Mon Livret C and Yuzu also regularly come up in the mouths of good investors.

The former has been forced to pivot its business to become an intermediary for distributors (FinTech, asset managers, etc.) whereas it was initially targeting individuals. "The question of our survival was on the table for a while, but we're doing better since we changed our positioning," says its managing director Mathieu Charret.

Mon Livret C currently has fewer than 100 customers, admittedly "very wealthy", but the company launched in June 2022 is not yet profitable.

As for Yuzu, which launched in October 2022 and has fewer than 1,000 retail users, everything rests on the shoulders of its founder Clément Coeurdeuil.

The initial team has already been reduced from 10 to 5 people, one partner has left and the app now intends to offer advice on "investing at the right time". With what visibility over the next few months? "That depends on me, I have enough personal funds to fuel the company until the end of 2024", Clément Coeurdeuil assures.

These start-ups suffer in particular from launching at the height of a market downturn. However, the newcomers are not the only ones sticking their tongues out 😰.

"Many companies are in the hot seat," blows a lawyer who has had access to the accounts of some of them. "Many publicly give the impression that they are doing well, when this is not at all the case. Several French PSANs who have funds blocked in FTX and other companies have still not informed their clients", he blurts out.

Would many PSANs be unable to respond to their clients' requests if they wanted to withdraw all their funds? "Certainly," says this source.

Bitstack and Swissborg, the oasis in the middle of the desert

In the middle of the desert, however, several players such as Bitstack 🇫🇷 seem to be standing out.

The start-up, which has adopted a 100% Bitcoin positioning, makes it possible to invest in bitcoin via recurring programmed purchases or by rounding up to the nearest euro all movements that pass through customers' bank accounts.

Bitstack, which looks after the safekeeping of bitcoins, claims a 20% monthly growth in its users over the past three months. It has 30,000 customers after just a short year in existence. "According to the market rumours I've heard, I think we're the only ones with this much traction", says co-founder Alexandre Roubaud.

"Globally, all the companies that have launched in the last three years and whose offering hasn't yet met with their public are very likely to disappear, unless they have the cash to hold on, but it's very complicated to raise funds at the moment", he points out.

Except when you have a strong reputation or can present a glowing business to investors... Bitstack has just announced a €2 million fundraising round in which the prestigious Californian start-up accelerator Y Combinator participated 😎.

"Investors appreciate this type of business because it ensures a certain predictability of income, whereas a traditional broker is exposed to a sudden drop in business during a market downturn", analyses Julien Henrot-Dias, CEO of the Deskoin platform (12.Its competitor StackinSat, also positioned on 100% Bitcoin, but reserved for a more expert clientele (and therefore also smaller), is struggling a little for its part to raise money. It is said to be looking for between €5 and €10 million, and is likely to turn to its user community because of the reluctance of venture capital funds.

StackinSat hopes to reproduce the success of Swissborg, which raised $23 million in early April from 16,660 people (in exchange for 9.53% of its capital).

"This operation is a success and many would like to emulate it, but not everyone is called Swissborg and cannot rely on such a strong community", says a good connoisseur of the sector. The latter claims to have 720,000 users, including 400,000 with euros or cryptos in their accounts.

"The market is titanic, we have linear growth, so I'm very confident about the future," assures Jonathan Herscovici, co-founder of StackinSat.

The big players are gritting their teeth and relying on their experience

On the side of the "big" players, the situation is not much simpler. But structures like Coinhouse are well capitalised. The latter raised €40 million in spring 2022. This enabled it to absorb the FTX-Genesis shock, despite the freezing of nearly $15 million of its assets in these structures.

"Although I don't wish it, I think that many start-ups will disappear and that there will only be a handful of players left at the end," says its CEO Nicolas Louvet (read his interview published earlier this year).

Including Coinhouse? "Our long history (2014, editor's note) and our historic link with Ledger give us a strong reputation to which we must add the seriousness of our work," he judges.

"The key to our success is also the personalised support we provide to our individual and corporate customers. It is very rare to offer advisers (available on the phone, ed. note) in the crypto sector", insists the French boss.

According to our information, Coinhouse, which has just over 100 employees, has nevertheless slimmed down its payroll in recent months by parting with several staff.

For the boss of a start-up in difficulty, "everyone has reduced the size of the teams, the economic situation is very bad, it is now a question of surviving and hoping that the good times will come again".

All eyes are thus riveted on the hypothetical Bull Market recovery that some are hoping for at the end of 2023, a few months before halving, an event that occurs every four years and during which bitcoin's monetary issuance is halved, contributing to a scarcity of supply and therefore a rise in prices 💡.

Except that there is no guarantee that the scenario will happen again... "It makes no sense to bet only on the Bull Market for a start-up to work," persists one consultant. "It shows that some crypto entrepreneurs have launched with a total lack of knowledge of the market", he insists.

At this point, experience can help. Paymium, another major historical player (2011), assures that it is in a good position to survive this "crypto winter".

"We've already been through several crises and market collapses, it's nothing new for us," rewinds its CEO Pierre Noizat (read his interview). "We're ready for this kind of shock. While most companies in the sector have been impacted and downsized, we have continued to invest," he insists.

The double Kiss Cool effect of the "crypto nation"

In addition to market conditions, some players point to the indirect consequences of France's forward-thinking crypto regulation to explain their woes.

Its regulatory framework (one of the first in the world) has spawned the creation of a huge number of companies, more than anywhere else in Europe, which has created a local traffic jam. Not to mention the fact that the big international players, such as Binance and Cryptocom, have also chosen France as their base.

The result is that competition is particularly intense. So there are three solutions for struggling start-ups: find new funding (except that venture capital is at a standstill), pivot by changing their business model or... consider a takeover.

A bank and Kraken very interested in a PSAN

"Today there are a lot of apps and platforms that are developing their tech and hoping to resell themselves through their licences and PSAN," says Édouard Daunizeau, CEO of SavingBlocks, a London-based crypto robot advisor. "One of the strong probabilities is that medium-sized players will buy up dying smaller companies", adds a lawyer.

According to our information, a traditional banking player is currently combing through the files of at least 5 companies registered PSAN with the Autorité des marchés financiers (AMF). We'll be talking more about this very soon in The Big Whale 👀.

A sign that things could be happening on the market, again according to our information, the American exchange platform Kraken, which is one of the world leaders in the sector, has been sounding out French players with a view to a takeover. "They want to position themselves on the French market," says a boss who turned down an offer from the giant.

Currently, Kraken is accessible to Europeans, but the company is formally prohibited from canvassing them commercially (with advertising, for example). Above all, the platform will no longer be able to target the European market without PSAN from 2025, when MiCA, the European regulation that will regulate the crypto sector, comes into force.

"Obtaining the PSAN has been tightened up in recent months, so it's a lot simpler to acquire a small player that already has it", says the boss of a start-up that confirms Kraken's interest 👀.

Warning, however: buying a PSAN would not allow Kraken to benefit from it automatically. The company would have to go before the AMF to have the new structure validated. It would thus be following the example of the American Voyager, which absorbed LGO in October 2020.

"A buyout does not interrupt the business, so it is very attractive for the acquirer," points out William O'Rorke, a partner at ORWL, a law firm specialising in disruptive technologies. "Whether the AMF takes 2 weeks or 4 months to process the application, it's not a problem if there's business continuity," he insists.

From then on, it's a game of liar's poker to set the price 💶. One of Kraken's targets says it has received an offer of around €50 per customer who has provided their personal information (KYC). That may not sound like much, but companies looking to sell themselves are not in a strong position.

If a company wants to sell itself to a player looking for PSAN registration, it will have to move fast anyway. Every month that passes reduces the value of this regulatory asset, as it will have to be replaced by mid-2026 at the latest by a PSAN registration (which is much more difficult and costly to obtain).

"This is precisely why I don't think PSAN registration is such a valuable asset for a start-up looking to sell itself," judges Coinhouse's Nicolas Louvet.

In any case, for a large majority of PSANs, time is running out.

* Réda Berrehili is an individual minority shareholder in The Big Whale

THE BIG FOCUS

Bermuda, the British Virgin Islands... Why crypto companies keep going there

Bermuda

By Raphaël Bloch (in Paris)

Despite their 'bad' image, some jurisdictions still attract a lot of interest. Taxation, and above all regulatory flexibility, have a lot to do with it.

The rest is available on The Big Whale website 🐳.

This edition was prepared with ❤️ by Raphaël Bloch and Grégory Raymond. The Big Whale is a free and independent media. By supporting us, you are contributing to its development.
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