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David Marcus, former head of Meta's crypto initiative, believes PayPal is in a better position to fulfill its stablecoin dreams than Meta was four years ago, Lucinda writes.

Why he matters: After Meta's stablecoin project died on the vine, Marcus has remained a high-profile entrepreneur in the space with plenty of experience dealing with regulators.

Background: This conversation comes after PayPal launched a dollar-backed stablecoin last month to much fanfare, as well as some criticism from Rep. Maxine Waters.

Context: Last year, Marcus raised $175 million for Lightspark, his buzzy bitcoin-based payments startup, with backing from investors like a16z and Paradigm.

Lightspark aims to make it easier and faster for businesses to transact via the Bitcoin blockchain, and it builds on the Lightning Network. Marcus, notably, sees the most promise in using bitcoin for settlement.

This conversation has been edited for clarity.

It's been a little over a year since Lightspark launched. Give us an update on the business.

The first version of our product shipped a few months ago and enables crypto exchanges, wallets and financial institutions (like banks) to get on the Lightning Network and send/receive transactions or create experiences.

We first started serving places where people are buying smaller amounts of bitcoin —in Latin America, in Africa, in the Middle East, where they need a cheaper, faster way to move it around. Now that we're moving upstream, and enabling all kinds of transactions and using all kinds of different currencies, we're starting to find a lot of traction both in Western Europe and here in the U.S.

Quite a few crypto companies are moving some operations outside the U.S. due to the regulatory environment. Is that something Lightspark has had to do in terms of hiring talent outside of the states?

No. We're here in Los Angeles, where 90% of our people are based.

It's sad to see that the U.S. is not at the forefront of a revolution that will change the trajectory of how capital moves around the world. But as far as we're concerned at Lightspark, bitcoin is one of a kind in terms of regulatory clarity. It's an asset that the SEC has repeatedly said is not a security.

You led Meta's crypto efforts, Libra. You were also once at PayPal. Now PayPal has launched a high-profile stablecoin project that gotten some regulatory scrutiny. What are your thoughts?

PayPal's competitive advantage here is really its reach. If they build inside of their products and their wallets, it'll enable people to on-ramp easily. 

I think that they'll find success because it removes a ton of friction for people to onboard. I'm really happy that they've done this, and I'm excited for others to do it as well.

Libra died in part due to regulatory actions. Do you think PayPal and future players have a better chance of getting through whatever may come from D.C.?

My view is it wasn't regulatory action, but political action. It's an important distinction point, because on the regulatory front, the Libra project — by the time that it was killed — actually perfectly matched or exceeded the regulatory requirements. It was a political reason. The sponsor of the project wasn't a palatable sponsor.

If you look at PayPal and other stablecoin projects out there, they use the same framework we were proposing — minus the actual underlying settlement layer and payment network. The technology that builds the Libra network is now in other startups, but that core Libra technology that would have enabled real-time, cheap global money settlement is not something that exists today.

Correct me if I'm wrong, but it sounds like you do think that PayPal has a better chance of passing through whatever political firestorm because they aren't as unpopular, on a political level, as Facebook.

I think when you're already in the business of moving a lot of money for a lot of people, it's definitely easier than when you have a reputational challenge. Meta is in a much better place today than I think it was at the time, when we tried to launch the project, which was arguably probably the worst time to actually do it.

1 big thing: Marcus sees promise in PayPal stablecoin

Photo illustration of David Marcus surrounded by abstract shapes and a digital grid.

Photo illustration: Gabriella Turrisi/Axios. Photo: Tobias Hase/picture alliance via Getty Images

U.K. neobank Zopa has raised £75 million in debt financing from IAG SilverStripe, Ryan writes.

Why it's the BFD: Late-stage fintechs are increasingly opting for debt as an alternative to equity.

Context: The Tier 2 capital fundraise follows a £75 million all-equity financing deal — also led by IAG SilverStripe — announced in February.

Altogether, the company has raised £530 million from investors that include SoftBank, Augmentum Fintech, Northzone Ventures, Volution Ventures, Chimera Capital Management, Davidson Kempner and Silverstripe Investment Management.

By the numbers: Zopa Bank, which launched in 2020, now touts 1 million customers and an annualized revenue run rate of £250 million.

The company claims £3.5 billion in deposits and more than £2 billion of loans on its balance sheet and says it has issued 470,000 credit cards.

What they're saying: "Today's financing is a clear market validation of Zopa Bank's financial performance, pointing to strong investor confidence in its growth and in its ability to deliver strong financial performance despite the economic uncertainty,"  CEO Jaidev Janardana said in a statement. 

"As a profitable business, it is also a seal of approval for our responsible and sustainable business model, our strong unit economics, and our vision to build Britain's best bank," he says.

Zopa expects to hit full-year profitability for the first time in 2023.

2. The BFD: Zopa raises £75M 

🏛️ Ex-FTX exec Ryan Salame pleads guilty (Axios)

Each of the two counts Salame pleaded guilty to carries a maximum sentence of five years in prison. He also agreed to a $1.55 billion forfeiture order.

The plea agreement did not include a promise to testify against Sam Bankman-Fried, but the deal will probably ratchet up pressure on the FTX co-founder.

💷 Adyen secures banking license in the U.K. (CNBC) 

The Dutch payments giant said its new license would allow its merchants to offer cash advances to small and mid-size enterprises in the U.K.

🪙 JPMorgan exploring payment speed up (Bloomberg)

The bank is in the early stages of exploring a blockchain-based digital deposit token for speeding up cross-border payments and settlement, but it wouldn't create the token unless U.S. regulators approve the project.

The Australian fintech, which allowed users to earn fractional shares on purchases, has closed down. The 4-year-old company raised about $3 million from investors including McKinsey, Antler and Black Nova Ventures.

3. Credit score

Illustration of a dart in the bullseye of a dartboard that says "credit score."

• Clara Analytics, an insurance claims optimization firm, raised a $24m Series C funding round. Spring Lake Equity Partners led, with participation from existing investors such as Aspen Capital Group, Oak HC/FT and QBE Ventures. https://axios.link/3EPhM33

• Alix, an estate settlement company, raised $5.5m in seed funding. Initialized Capital led and was joined by Magnify, Scribble, American Family Ventures and Alumni Ventures. https://axios.link/44K0Hlw

4. Deals!

• Ankit Wadhwa, CEO of NFT startup Rario, and CTO Sunny Bhanot are being pushed out of the startup one year after it raised $120 million in funding. https://axios.link/3PaoAgn

• Motie Bring, chief commercial officer of U.K.-based digital payments infrastructure provider PPRO, was promoted to CEO. https://axios.link/483MFhp

5. It's personnel

Sept. 5 — Affirm founder and CEO Max Levchin spoke with Ryan last week about the company's march toward profitability and its wider-frame outlook.

Why it matters: Affirm surprised Wall Street with robust full-year results and strong guidance for its fiscal first quarter, pushing shares up more than 25% as a result.

Sept. 6 — SimpleClosure, a company that helps venture-backed businesses automate the shutdown process, has raised $1.5 million in seed funding, Lucinda wrote.

Why it matters: Guidance to shut down a company is a rarity in an industry that tends to sweep failures under the rug.

Sept. 7 — Greycroft hired Blockchain.com board member Marcie Vu as its first San Francisco-based partner just months after raising over $1 billion in new funds, the firm told Lucinda exclusively.

Why it matters: Vu will be New York City- and Los Angeles-based Greycroft's first San Francisco-based partner.

6. 🗞️ Catch up quick

Happy Friday! Lots for you today, including a Catch up quick wrap-up of the week that was.

Situational awareness: Square has resolved a daylong outage that left small-business owners unable to process payments or access their accounts.

🥨 @Lucinda is obsessed with Zappo's Vodoo pretzel sticks.

☀️ @Ryan is headed to the Future Proof Festival in Huntington Beach, California, next week.

Thanks to George Moriarty and Rob Reinalda for today's edits.

And thanks to you for reading. Please tell your fintech friends about this newsletter. They can sign up here.

September 08, 2023

1 big thing: Marcus sees promise in PayPal stablecoin