The global financial landscape has undergone a seismic shift over the past two decades, with FinTech and cryptocurrencies at the forefront of this transformation. However, with innovation comes challenges, and the FinTech scene has seen its fair share of highs and lows. From the meteoric rise of companies like Wirecard to the subsequent crises faced by crypto giants, the journey has been tumultuous. Here is a summary and a glimpse into the future.
The Dawn of the FinTech Era
Wirecard, founded in 1999 in Munich, initially catered to niche markets like online payments for porn and gambling websites. However, its evolution into a global FinTech player between 2006 and 2010 marked the beginning of the FinTech hype. As the first European fintech Unicorn, Wirecard‘s success story inspired many, setting the stage for a new wave of financial technology companies.
The Rise of FinTech Unicorns
Following Wirecard‘s success, several FinTech startups emerged, each bringing unique solutions to the financial sector:
- Wise (formerly TransferWise), founded in 2011, revolutionized foreign exchange with its transparent fee structure.
- N26, a German neobank established in 2013, offered a fresh approach to banking with its user-friendly interface and digital-first strategy.
- Starling Bank and Monzo, both UK-based, emerged in 2014 and 2015, respectively, further pushing the boundaries of what digital banking could offer.
- Revolut, another significant player, was founded in 2015, expanding the FinTech landscape with its diverse financial products.
The new generation of FinTechs used technology to make the existing FIAT system more efficient. Innovative approaches such as OpenBanking or Banking-as-a-Service (BaaS) were pursued, but they did not break with the FIAT system. That was left to the crypto segment, which must be understood as a super-dynamic segment of the overall FinTech industry.
The New Frontier: Gamechanger Cryptocurrencies
While Wirecard was emerging as a global FinTech pioneer and Wise was not yet founded, the cryptocurrency Bitcoin was introduced in 2009, initiating the disruption of the FIAT money system.
While FinTech companies were making waves in traditional finance, the crypto scene was burgeoning. Bitcoin, introduced in 2009, marked the beginning of a new era in decentralized finance. This was followed by the establishment of crypto exchanges like the infamous Mt. Gox in 2010. As the decade progressed, other major exchanges like Kraken, Bitstamp, Coinbase, and Bitfinex emerged, each contributing to the growing crypto ecosystem.
The Downfall: Crises and Legal Challenges
However, with rapid growth came challenges. Wirecard‘s bankruptcy in June 2020, following the revelation of a €1.9 billion financial discrepancy, marked a turning point. This event, coupled with the subsequent arrest and trial of its former CEO Markus Braun, signaled the end of the FinTech hype.
The crypto world wasn’t immune, either. The collapse of the Terra-Luna stablecoin scheme in May 2022 triggered a domino effect, leading to the downfall of giants like Three Arrows Capital (3AC), Celsius Network, Voyager Digital, and FTX. Legal challenges soon followed, with founders like Do Kwon, Alex Mashinsky, Su Zhu, and Sam Bankman-Fried (SBF) facing indictments and trials.
The world’s largest crypto exchange, Binance, and its founder and CEO, Changpeng Zhao, are confronted with intense scrutiny from regulators across multiple jurisdictions.
Conclusion: The CyberFinance Era
The concurrent trials and regulatory actions against former FinTech and crypto leaders are not mere coincidences. They represent the culmination of a decade of innovation, growth, challenges, and lessons learned. As the dust settles, the FinTech and crypto sectors are poised for a new chapter: the reboot with an improved system environment!
It must be noted that the collapse of many crypto companies was not only the fault of the founders and managers but also the regulators who failed to create the framework conditions. However, they were unable to do so due to a lack of knowledge and competence. Crypto was too new for the regulators (and still is in some cases). The regulators are also on a learning curve, and hopefully, the crisis of the last two years has been a learning experience.
With the insights gained from past mistakes, both sectors are undergoing a consolidation phase, laying the groundwork for the next surge into the era of cyberfinance. In the EU, lawmakers approved the Markets in Crypto-Assets Regulation (MiCA) as the regulatory framework for cryptocurrencies. The regulation will require issuers of cryptocurrencies to obtain authorization from national regulators before issuing their tokens
The journey of FinTech and crypto is far from over; it’s merely evolving, ready to embrace the challenges and opportunities of the future.
