Have you ever wondered why VCs keep pouring money into loss-making FinTechs?

For the longest time, financial industry veterans have been saying that financial companies survive and grow by avoiding risks because from their perspective, avoiding risks equals avoiding losses and keeping customers’ money safe.

However, equating the safety of customers’ money to the absence of risks and losses may be the biggest myth in the financial industry. Amazon, PayPal, Revolut, Monzo, Kraken, Coinbase, and the majority of other FinTech unicorns have a common history of long early losses. They are also known to have bent quite a few rules during their early days. 

For example, most fraud experts know that when you launch and test a new financial flow in FinTech, you WANT LOSSES and YOU WANT FRAUD TO HAPPEN, this is how to learn what’s vulnerable and what needs fixing. This is also the reason why most blockchain projects have very generous bug bounty programs.

You have heard the expression “what does not kill you will make you stronger” and this is exactly the risk-management strategy used by many successful fast-growing unicorns: they rarely over-invest into regulatory projects or prepare for unlikely adverse scenarios until such time when it’s certain that they absolutely need to act and it’s clear what needs to be done.

Can you picture someone like Jeff Bezos or Elon Musk delaying important decisions just because someone tells them that there might be a slight chance that in 3 years a customer could complain or an auditor may find their documentation insufficient? 🤔

If you are reading these words, and are still shaking your head believing that proactive risk-mitigating preventative compliance strategies are helpful, let me ask you this: how many companies have you seen spending millions of dollars and tons of time preparing their perfect bullet-proof Brexit solution, GDPR readiness strategy, Travel Rule approach, or whatever is the next inflated regulatory hoax?

If you ask these CEOs or business owners now about whether or not it was worth it, most likely they would tell you, they would have been much better off staying calm, doing nothing, ignoring all the noise, and trusting their business skills and their teams to be able to act, when it’s really needed. 

Do you want to know what are the most popular regulatory hoaxes you can most likely ignore for the time being?

• EU-wide travel rule
• Brexit 
• MiCA
• Crypto custody requirements in Germany for non-German companies
• Most invitations to join open VASPs and other data-sharing initiatives

Don’t believe me and want to invest in some massive-scale regulatory readiness project? – I will ask you in 6 months how much money you’ve wasted by then. 😉