Hey, it’s Gavin with your weekly recap of all things internet & money.

This week in fintech and crypto: Bitcoin is rallying again. We dive into Earned Wage Access. A trading scandal at Two Sigma. And more.

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STORIES OF THE WEEK

1) It’s so over We’re so back 🚀

The headline you wouldn’t expect to hear in a relatively crummy economy…

…bitcoin is roaring back.

Last week saw a healthy bitcoin rally, with bitcoin jumping ~30% in two weeks. At one point it broke the $35,000 mark, a number that hadn’t been hit since May 2022. (Don’t ask any HODLers where BTC was back in 2021.)

Most people agree that the surge was catalyzed by speculation that the SEC will soon approve the first spot bitcoin exchange-traded fund (ETF), with other crypto ETFs to follow.  A rare potential regulatory win for crypto coincides with a broadly tepid stock market, an environment in which some argue that bitcoin is a store of value and a flight to safety.

• 📊 Digits: $326 million net inflow into crypto-focused investment funds last week.

• 💬 Words: “I don’t own bitcoin, but I should” - Stan Druckenmiller

What it means →

It’s been a while since crypto has been on the ‘good news’ side of the regulatory ledger, but there’s reason to be optimistic. Approval of a spot bitcoin ETF wouldn’t just be credibility-boosting, but would also likely unlock substantial pent up demand for the cryptocurrency. 

Not everyone is on the bandwagon. Vanguard has announced it won't be pursuing a bitcoin ETF, with CEO Tim Buckley telling CNBC that “it's just like we don't use gold as an asset class for our clients…we don't go towards bitcoin or gold or any other of those stable assets."

Regardless, it’s an interesting and important moment for the ecosystem, after years of regulation-by-enforcement from the SEC and a generally hostile political environment.

2) Wages on demand 🛠️

Wisconsin is considering legislation that would regulate Earned Wage Access (EWA), and I wanted to go a bit deeper on this fintech trend that's been gaining steam.

Earned Wage Access has been around for a while, initially gaining popularity with gig workers around 10 years ago. The core idea is simple – allow employees to access a portion of their earned but unpaid wages before the regular payday. This enables workers to turn future wages into instant cash without resorting to predatory payday loans.

Various EWA models have evolved over the years, with some being integrated directly into employers' payroll systems, while others function through third-party apps providing cash advances. Prominent employers like Amazon and Walmart have embraced the former, offering in-house EWA programs. On the other end of the spectrum, third-party providers like EarnIn, MoneyLion, and DailyPay have been providing similar services (for a fee, of course).

The market has exploded, with accessed wages jumping from $3.2 billion in 2018 to $9.5 billion in 2020. But the model also has its critics. Detractors argue that the fee structures associated with some EWA models resemble those of payday lenders, potentially ensnaring low-wage workers in a vicious cycle of borrowing and repayment.

• 📊 Digits: The EWA market saw workers accessing $9.5 billion in 2020, up from $3.2 billion in 2018.

• 💬 Words: "The biggest problem with these programs is they really end up [with] people paying to be paid, and that’s just wrong.” - Lauren Saunders, National Consumer Law Center.

What it means → 

EWA isn’t inherently bad or good. It depends how it’s done. If done well it can be a financial lifeline, providing crucial and timely access to cash for workers who need it. If done poorly, it's a potential financial trap, with the risk of high fees and a dependency cycle akin to that of payday loans.

Like anything with the potential to help and harm, the government is stepping in, and many states are setting their own rules when it comes to EWA. For instance, the Maryland Office of Financial Regulation recently issued guidance on EWA products to clarify their position and set some ground rules for providers. Wisconsin is the latest to join the party. And at the federal level, the CFPB has stepped up enforcement as well.

Fundamentally, the existence of the EWA industry highlights the fact that employees don’t get paid quickly enough. We have the technology to enable streaming, real-time payments (and it’s something that many people working in crypto—like Superfluid—have worked on). Until that’s a reality, it seems we’ll be dealing with a patchwork of regulations around EWA.

Byte of Bliss

As I was learning a bit more about Earned Wage Access, I came across this fun fact: