Welcome to Shearman & Sterling’s FinTech Blog, where we provide you with insight on key trends in the FinTech ecosystem. Here you can find relevant information with the latest on digital banking, FinTech regulation, digital assets, blockchain, AI, and more.
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European Commission Proposal for Pilot Distributed Ledger Technology Regime Regulation
09/24/2020The European Commission has published a proposal for a new EU Regulation on a pilot regime for distributed ledger technology. The pilot regime is intended to promote legal certainty, to support innovation, to preserve market integrity and to ensure financial stability for the use of DLT in crypto-asset and e-money token markets. The Commission has simultaneously published a proposed Regulation on markets in crypto-assets and e-money tokens. The proposed Regulations follow the Commission's consultation on an EU framework for crypto-assets, which closed in January 2020.
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European Commission Proposals for Digital Operational Resilience Regulation and Amending Directive
09/24/2020The European Commission has published proposals for a new EU Regulation on digital operational resilience for the financial sector and a new EU Directive amending certain pieces of existing EU financial services legislation to strengthen digital operational resilience and provide legal certainty on crypto-assets. The new legislation has been proposed as a result of the risks arising from the increase in digital opportunities within the financial sector. There are currently no detailed rules at EU level on digital operational resilience, exposing the need for comprehensive and harmonized legislation governing this area.
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European Commission Proposal for Crypto-asset Regulation
09/24/2020The European Commission has published a proposal for a new EU Regulation on crypto-assets. The proposed Regulation is intended to improve legal certainty in the regulatory treatment of crypto-assets, to support the development of crypto-assets, to preserve consumer protection and market integrity in crypto-asset markets and to ensure financial stability. The Commission has simultaneously published a Regulation on a pilot regime for distributed ledger technology. The proposed Regulations follow the Commission's consultation on an EU framework for crypto-assets, which closed in January 2020.
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Telegram Settles With SEC, Agreeing to Return $1.2 Billion to Investors and Pay Penalty
06/26/2020On June 26, 2020, the U.S. Securities and Exchange Commission (“SEC”) received court approval of its settlement with Telegram Group Inc., and its wholly owned subsidiary TON Issuer Inc. (collectively, “Telegram”), of charges that it conducted an unregistered offering of its digital token, “Grams,” in violation of the federal securities laws. Telegram agreed to return more than $1.2 billion to investors, and to pay an $18.5 million civil penalty. The settlement follows a March 2020 order from Judge Kevin Castel of the U.S. District Court for the Southern District of New York granting the SEC’s motion for a preliminary injunction and enjoining Telegram from delivering Grams to all potential buyers. Shortly after the order, Telegram announced that the project would be shut down largely due to the SEC’s action.
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U.K. Court Confirms Bitcoin Status as Property for Certain Proprietary Claims
01/17/2020A U.K. court has granted an interim proprietary injunction over Bitcoin held in an account of a cryptocurrency exchange after it had been transferred there as part of a cyber attack on a Canadian insurance company. The judgment in AA v Persons Unknown & Ors, Re Bitcoin [2019] EWHC 3556 (Comm) was given on December 13, 2019, and following the lifting of reporting restrictions, was released for publication on January 17, 2020. In coming to its decision, the High Court adopted the analysis as to the proprietary status of crypto assets set out in the recent legal statement by the U.K. Jurisdiction Taskforce. Although each case will depend on the relevant facts and issues, the decision confirms that crypto assets are a form of property capable of being the subject of a proprietary injunction.
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Committee on Payments and Market Infrastructures Publishes Report on Wholesale Digital Token
12/12/2019The Committee on Payments and Market Infrastructures (CPMI) has published a report on wholesale digital tokens. The report focuses on how digital tokens might be used to effect settlement in wholesale transactions, replacing existing systems where such transactions are settled by updating balances in account records on a centralized register. The CPMI confirms that any wholesale digital token arrangement would need to comply with the applicable regulatory requirements, including, if the arrangement is systemically important, the Principles for Financial Market Infrastructure.
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EU Statement on Stablecoins
12/05/2019The Council of the European Union and the European Commission have published a joint statement on stablecoins. The statement reiterates many of the messages of the G7 working group paper on the impact of stablecoins. The EU statement confirms that no global stablecoin arrangement should begin to operate in the EU until the legal, regulatory and supervisory issues can be identified and dealt with appropriately. In the statement, the two EU bodies allude to the lack of information as a key impediment to global stablecoin arrangements being able to operate in the EU, in particular, because without it the authorities are unable to consider the impact on monetary policies or assess how to address other risks presented by this type of cryptoasset.
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UK Legal Statement on CryptoAssets and Smart Contracts
11/18/2019The UK Jurisdiction Taskforce has published a legal statement on cryptoassets and smart contracts under English private law. UKJT is part of the LawTech Delivery Panel, an industry-led group established in 2018, with the aim of identifying barriers and opportunities for growth. The legal statement provides the UKJT's view of the principles applicable under English and Welsh private law for determining when a cryptoasset will be considered property and when an enforceable contract is concluded through a smart contract. The intention of the statement is to help improve confidence among market participants and investors due to the perception of legal uncertainty on the legal status of cryptoassets and smart contracts.
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Shearman & Sterling and the Global Blockchain Business Council Convene Panel on Stablecoins
11/04/2019Shearman & Sterling and the Global Blockchain Business Council (GBBC) convened a panel on Monday to discuss the world’s most talked about digital assets – stablecoins and their proliferation on a global scale.
The evening’s dialogue focused on the impetus for companies launching enterprise digital assets, including factors such as the fast settlement of cost-efficient transactions without incurring the risk of price volatility, as well as questions raised around the regulations of such coins. How accessible should they be? What are the AML and transparency concerns and how will they be addressed? Who ultimately should be responsible for the monetary policy of these coins?
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Jay Baris Authors Chapter in Global Legal Insights: Blockchain & Cryptocurrency Regulation 2020
11/01/2019Partner Jay Baris (New York-Investment Funds) authored a chapter titled "The custody of digital assets – 2020" in the latest Global Legal Insights edition entitled Global Legal Insights: Blockchain & Cryptocurrency Regulation 2020. The publication covers the regulation of cryptocurrency, as well as taxation, money transmission laws, anti-money laundering requirements, licensing requirements, ownership and mining in 38 global jurisdictions.
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Distilling U.S. Regulatory Environment and Market Access Considerations for Growing FinTechs
10/22/2019The rise of global FinTech has brought markets together and enabled cross-border business formation and innovation, but local regulations still prevail worldwide. The United States, with its developed capital markets, solid investor base and deep pool of talent within the finance and technology sectors, is a desirable location for FinTech businesses to expand or launch operations. But it’s also home to one of the most complex and sophisticated regulatory regimes in the world.
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Shearman & Sterling’s Fintech Foundry, this week, launched Entering the U.S. Market: A Guide for Fintech Firms, a demystifying overview of the issues, regulations and resources that FinTechs from the United Kingdom and around the world will want to be aware of before they expand into the U.S. -
SEC Order Freezes Alleged Unregistered Digital Token Offering
10/21/2019Earlier this month, the Securities and Exchange Commission (SEC) obtained a temporary restraining order freezing an alleged unregistered digital token offering by a messaging service. The SEC alleged that the defendants violated the registration requirements of the Securities Act of 1933 by conducting a securities offering through a sale of digital tokens, without registering the offer and sale of the digital tokens (or relying on an exemption from the registration requirements).
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G7 Working Group Reports on the Impact of Global Stablecoin
10/18/2019The G7 working group on stablecoins has published a report investigating the impact of global stablecoins. The working group is comprised of senior officials from the G7 central banks, the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board, and is chaired by Benoît Cœuré (Chair of the Committee on Payments and Market Infrastructures). The report discusses the existing challenges in payment service provision, particularly on a cross-border basis, and how cryptocurrencies were originally envisaged as having the potential to solve many issues, but due to other difficulties such as price volatility, have not done so. The report goes on to consider stablecoins, focussing on global stablecoins, and how they might improve cross-border payment services. The working group recognize that stablecoins are similar to cryptoassets, but are able to stabilize the price by linking the coin's value to a pool of assets. However, stablecoins still present risks that need to be addressed, such as legal certainty, sound governance, anti-money laundering checks, market integrity, data privacy and investor protection. Global stablecoins pose further risks to financial stability, monetary policy, fair competition and the international monetary system.
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Financial Stability Board to Assess Potential Risks of Stablecoin
10/18/2019The Financial Stability Board has published a report on regulatory issues arising with respect to so-called stablecoins. The FSB defines a stablecoin as "a crypto-asset designed to maintain a stable value relative to another asset (typically a unit of currency or commodity) or a basket of assets" which may be "collateralised by fiat currency or commodities, or supported by algorithms". It uses the term "global stablecoins" to refer to "stablecoins with a potential global reach and the ability to rapidly scale in terms of users/holders of the crypto-asset".
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Celebrating the One-Year Anniversary of Shearman & Sterling’s FinTech Foundry
09/24/2019It’s been a year since the launch of the FinTech Foundry, Shearman & Sterling’s program dedicated to supporting the FinTech-related activities of our clients and the wider global FinTech ecosystem. The FinTech Foundry touches upon every facet of the FinTech industry, including financial institutions, VCs, accelerators and incubators, startups, policymakers and more, and has put Shearman & Sterling at the forefront of advising on the latest developments in FinTech.
Over the last year, we have immersed ourselves in the FinTech ecosystem, and to commemorate the 12 months since our launch, we’ve put together a roundup of some of our industry observations and areas that our FinTech Foundry team has been watching, including those related to digital assets, open banking, big data, cybersecurity AI, challenger banks, regulatory sandboxes, antitrust, data privacy and more! -
SEC Stays Active in the Digital Asset Enforcement Space, Delays Bitcoin ETF Decisions
08/22/2019In the first three weeks of August, the Securities and Exchange Commission (SEC) commenced or settled three enforcement actions related to digital assets and delayed rule change decisions on three separate bitcoin exchange-traded fund (ETF) applications. The enforcement actions reflect the SEC’s continued commitment to applying all aspects of the federal securities laws in the digital asset space. Meanwhile, the delay of resolving the ETF rule change applications suggests that the SEC is likely still collecting information to evaluate whether certain of the agency’s previous concerns regarding bitcoin ETFs, such as those related to potential market manipulation and liquidity, have been addressed.
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U.K. Regulator Provides Guidance on Regulatory Perimeter and Crypto-Assets
08/05/2019The U.K. Financial Conduct Authority (FCA) has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.
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SEC Issues No-Action Letter Allowing Sale of Ethereum-Based Tokens
08/01/2019In a letter dated July 25, 2019, the Securities and Exchange Commission (SEC) Division of Corporation Finance (Division) stated that it would not recommend an enforcement action if a gaming startup, Pocketful of Quarters (PoQ), issues digital tokens on the Ethereum blockchain. This is the second no-action letter the Division has issued in respect of digital token sales. The Division’s position effectively will allow PoQ, led by 12-year-old CEO George Weiksner, to sell its Quarters tokens for in-game use immediately upon the launch of its Quarters Platform.
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Where Is the Digital Asset Market Headed?
07/30/2019Partner Donna Parisi (New York - Derivatives & Structured Products) recently sat down with Rebank podcast host Will Beeson to discuss the future of the digital asset space.
The conversation touches on a myriad of interesting topics including regulatory frameworks for digital assets, institutional infrastructures that are creating challenges for the market and what the future holds when the power of blockchain and cryptocurrency is fully harnessed alongside other emerging technologies like artificial intelligence (spoiler: digital identities for the untapped market).
Click to listen to the full podcast or from your preferred streaming service below.
iTunes
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FATF Releases Guidance for Global Regulation of Cryptocurrency
07/23/2019On June 21, 2019, the Financial Action Task Force (FATF) released its guidance on the global regulation of cryptocurrency, including sharing of customer data among virtual asset service providers (VASPs). The FATF’s guidance represents the first step toward a global effort to combat money laundering utilizing virtual assets (VAs). Under the guidance, VASPs such as global crypto exchanges would gather and transfer customer data (i.e., originator and beneficiary information) when transferring funds or VAs between entities, a practice similar to the “travel rule” that currently applies to banks.
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ESMA Publishes Report on the Licensing of FinTech Business Model
07/22/2019Fulfilling its mandate under the European Commission's FinTech Action Plan to map the current authorization and licensing approaches for innovative FinTech business models in Europe, the European Securities and Markets Authority (ESMA) has published a report on the licensing of FinTech business models. The report sets out the key conclusions identified from the information collected from national regulators through two surveys that ESMA conducted in the last two years, and some of the actions that have been taken to address the emerging challenges. The report does not make any recommendations, but instead refers to previous advice and reports that make recommendations for an EU-level response to the issues.
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SEC Approves First Regulated Token Offering under Regulation A+
07/12/2019On July 10, 2019, Blockstack PBC announced that the Securities and Exchange Commission (SEC) has qualified its offering circular, which would allow Blockstack to conduct an offering under Regulation A for its Stacks (STX) tokens. This is the first time that the SEC has approved a digital asset token offering under Regulation A. The offering, which opened on July 11th, is for up to $28 million and will be open to both accredited and non-accredited investors in the United States and globally, subject to certain restrictions.
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SEC and FINRA Clarify Position on Broker-Dealer Custody of Digital Asset Securities
07/11/2019On July 8, 2019, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) issued a joint statement clarifying how their traditional regulatory approaches would apply to how broker-dealers handle their customers’ digital asset securities and transactions. Specifically, the statement focuses on how certain SEC and FINRA rules apply to broker-dealers that wish to take custody of digital asset securities or perform other noncustodial activities involving such assets.
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U.K. Conduct Regulator Proposes Banning the Sale to Retail Clients of Derivatives Referencing Crypto-Assets
07/09/2019The U.K. Financial Conduct Authority (FCA) has launched a consultation proposing to restrict the sale, marketing and distribution of derivatives and exchange-traded notes (ETNs) that reference certain types of unregulated, transferable crypto-asset to all retail clients by firms in, or from, the U.K. The FCA consultation follows the final report of the U.K. Crypto-Assets Task Force in October 2018. The FCA's view is that although the U.K.'s market in crypto-assets is relatively small, there is still a consumer protection issue that needs to be addressed.
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CFTC Approves LedgerX’s DCM Application
07/02/2019Last week, the Commodity Futures Trading Commission (CFTC) approved digital asset exchange LedgerX LLC’s application to be registered as a designated contract market (DCM), in addition to its previously approved role as a swap execution facility (SEF) and derivatives clearing organization (DCO) for swaps. A DCM is an exchange that operates under the regulatory oversight of the CFTC and may list for trading futures or option contracts.
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Would-Be Bitcoin Fund Asserts Bitcoin Are Securities
06/24/2019Are bitcoin securities? One would-be closed end fund says yes.
Turning conventional wisdom on its head, the sponsor of a closed-end fund has argued in a letter dated June 14, 2019 to the Securities and Exchange Commission (SEC) that yes, bitcoin are securities.
The regulatory repartee began on May 13, 2019, when Cipher Technologies Bitcoin Fund filed a registration statement on Form N-2 to register shares of a closed-end interval fund that would invest in – you guessed it – bitcoin and related derivatives instruments.
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Striking the Right Regulatory Balance for the Investment Management Industry: Cryptocurrency Holdings and Digital Asset Custody
06/21/2019At the inaugural FinTech Forum that the Securities and Exchange Commission (SEC) sponsored on May 31, the investment management panel tackled the legal, risk and compliance challenges facing the SEC and market participants with respect to digital assets. Among other things, the panel analyzed issues such as regulation of custody of digital assets by investment companies and investment advisers, noting that proper, well-structured and balanced regulation is necessary for safeguarding the integrity of the capital markets, and critical for harnessing continued innovation in FinTech.
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Financial Services Regulation for FinTech Companies
06/19/2019Partner Nathan Greene and Associate Justin Reda (both New York-Investment Funds) have published a two-part article in Law360 titled "Financial Services Regulation For FinTech Companies." Part 1 of the article uses relevant case studies to examine the ways that FinTech entrepreneurs can best anticipate and navigate financial services regulations, and Part 2 of the article focuses on the regulatory environment in the financial services sector and reviews key regulations surrounding various types of financial and investment products and services.
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International Body Consults on Issues Relating to Regulating Crypto-Asset Trading Platforms
06/11/2019The International Organization of Securities Commissions has launched a consultation on the key issues to consider for regulating crypto-asset trading platforms (referred to as CTPs). The consultation paper, which aims to assist IOSCO member jurisdictions to assess the issues and risks relating to CTPs, is based on information obtained from national regulators on the operation of CTPs and their current or proposed regulatory approaches. The consultation does not cover Initial Coin Offerings, focussing instead on the secondary markets. Responses to the consultation are due by July 29, 2019.
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SEC Sues Kik Interactive for Conducting Unregistered ICO
06/10/2019On June 4, 2019, the Securities and Exchange Commission (SEC) sued Canadian mobile messaging company Kik Interactive, Inc. (Kik) for allegedly conducting an unregistered securities offering in connection with the sale of digital tokens called “Kin.”
Kik offered and sold more than one trillion Kin and raised over $100 million through its initial coin offering (ICO) that took place between May and September 2017. The SEC in late 2018 sent a Wells Notice to the company alerting them that SEC staff had made a preliminary determination to file an enforcement action. Kik in response claimed, among other things, that Kin is not a security, but is rather more akin to a digital currency, such as bitcoin and ether.
Despite Kik’s response, the SEC said that through the agency’s interpretation of the Howey analysis, it has determined that the ICO constituted an offer and sale of securities. Therefore, by failing to register the offering with the agency, the SEC alleges that Kik was in violation of federal securities laws.
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In Pursuit of Perfection? A Primer on Digital Asset-Related ETPs
06/07/2019
Partner Jay Baris (New York-Investment Funds) co-authored an article titled “In Pursuit of Perfection? A Primer on Digital Asset-Related ETPs” in the inaugural issue of the Blockchain and Virtual Currencies Briefing. The article provides an overview of digital asset-related exchange-traded products and discuses some of the challenges faced by the SEC in establishing balanced regulation that will protect Main Street investors without stifling technological development and innovation.
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SEC Shoots Down Bitcoin Interval Fund Application
06/03/2018In a letter dated May 28, 2019, the staff of the Securities and Exchange Commission (SEC) asked a registrant to withdraw a registration statement to register shares of a closed-end bitcoin-linked interval fund. Cipher Technologies Management LP, the registrant’s sponsor, filed a registration statement for the fund on May 13, 2019. The proposed fund would invest substantially all of its assets in bitcoin, engage in loans of portfolio bitcoins, write covered calls on portfolio bitcoins and utilize bitcoin futures contracts.
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Jay Baris to Participate in SEC FinTech Forum
05/14/2019Partner Jay Baris (New York - Investment Funds) will speak at the Security Exchange Commission’s (SEC) FinTech Forum on May 31. The SEC's Strategic Hub for Innovation and Financial Technology (FinHub) will host the event, which will focus on distributed ledger technology and digital assets.
Jay’s afternoon panel will explore investment management issues involving blockchain and cyptocurrencies. The session will be moderated by Jennifer McHugh, Senior Special Counsel, Division of Investment Management, and feature additional panelists John D’Agostino (DMS) and Amy Steele (Deloitte).
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New York Office of the Attorney General Accuses Crypto Exchange of Covering Up $850 Million Loss
05/07/2019The New York State Office of the Attorney General (OAG) recently sanctioned iFinex Inc., the operator of the virtual currency exchange Bitfinex, and Tether Limited, issuer of the “tether” token, and their related entities in connection with findings from an OAG investigation into the entities. The court order requires that the operators of the companies immediately cease further dissipation of the U.S. dollar assets which back “tether” tokens while OAG’s investigation continues, and produce requested documents and information.
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SEC Must Solve Its Cryptocurrency Custody Conundrum
05/06/2019Partner Jay Baris (New York – Investment Funds) authored an article in the Financial Times titled “SEC Must Solve Its Cryptocurrency Custody Conundrum.” The article discusses the novel challenges posed by blockchain and digital assets with respect to custody and calls for a balanced approach to regulating custody of digital assets.
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FinCEN Settles Charges Against Peer-to-Peer Virtual Currency Exchanger for Violating Registration and AML Requirements
05/02/2019Last month, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced that it has settled charges against Eric Powers, a peer-to-peer exchanger of convertible virtual currency, for violating the registration, program and reporting requirements of the Bank Secrecy Act (BSA). This marks FinCEN’s first enforcement action filed against a peer-to-peer exchanger of virtual currency and represents the first time that FinCEN has disciplined an exchanger of virtual currency for failure to report currency transactions, as required under the BSA.
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BCBS Says Crypto-Assets May Pose Risk to Financial Stability
03/26/2019On March 13, 2019, the Basel Committee on Banking Supervision (BCBS) published a statement, cautioning that the continued growth of crypto-asset trading platforms and new crypto-asset related financial products has the potential to raise financial stability concerns and increase risks faced by banks.
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ABA White Paper Offers Roundup of Global Digital Asset Regulations
03/22/2019Last week, the American Bar Association (ABA) published a white paper surveying the regulation of digital assets in a number of global jurisdictions. The most space is devoted to how digital assets fit in U.S. regulatory frameworks under the jurisdiction of certain federal regulators, including the Commodity Futures Trading Commission, Securities and Exchange Commission and the Treasury Department’s Financial Crimes Enforcement Network. The paper also details certain U.S. state legislation, such as New York’s BitLicense, and surveys digital asset regulatory environments in all 50 states. The paper also explores how digital assets fit in international regulatory frameworks, including those in the EU, the U.K., Switzerland, Japan, South Korea, Australia and China, among several others. It highlights guidance from international standard-setting bodies as well, such as the International Organization of Securities Commissions, the Group of Twenty Nations and the Financial Stability Board.
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SEC Chairman Clayton Addresses Application of Federal Securities Laws to Digital Assets
3/20/2019Earlier this month, Securities and Exchange Commission (SEC) Chairman Jay Clayton responded to a letter from Congressman Ted Budd (NC) regarding the application of federal securities laws to digital assets. Chairman Clayton reiterated the SEC’s “facts and circumstances” position as to whether a digital asset transaction involves the offer and sale of a security and highlighted the agency’s balanced regulatory approach, which “fosters responsible innovation in this area, while also protecting investors and markets.”
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Conference of State Bank Supervisors Endorses FinTech Recommendations
02/21/2019Last week, the Conference of State Bank Supervisors (CSBS), the nationwide organization of financial regulators from all fifty U.S. states, the District of Columbia, Guam, Puerto Rico, American Samoa, and the U.S. Virgin Islands, released a series of action items to implement recommendations received from the CSBS Fintech Industry Advisory Panel. The panel was established in 2017 to help streamline multistate regulation of FinTech businesses and other nonbanks, and comprises thirty-three companies, including FinTech firms like SoFi, Ripple, and Circle. The panel also contains two subgroups: one focused on the lending industry; and the other focused on the payments industry.
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SEC Commissioner Peirce Calls for Thoughtful Application of U.S. Securities Laws to Digital Assets
02/15/2019In a February 8, 2019 speech, Securities and Exchange Commission (SEC) Commissioner Hester Peirce suggested that the regulators should “tread carefully” when applying the Howey test to token offerings. Even though the Howey test generally makes sense in this context, she said, “token offerings go not always map perfectly into traditional securities offerings.” She urged the regulators to apply U.S. securities laws to digital assets thoughtfully, balancing the objectives of investor protection and market efficiency with fostering innovation in the financial industry.
Commissioner Peirce, who has been a vocal proponent of innovation and at times critical of the SEC’s approach to digital asset regulation, argued that regulators must “tread carefully” to avoid misapplication or overextension of existing U.S. securities laws with respect to digital assets and that they should take steps to provide much-needed clarity to market participants.
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Kik Interactive and Kin Ecosystem Foundation Respond to Wells Notice Alleging Violation of Securities Laws
02/12/2019In late 2018, the Securities and Exchange Commission (SEC) sent a Wells Notice to Kik Interactive Inc. and the Kin Ecosystem Foundation (together, the “Respondents”) providing that SEC staff had made a preliminary determination to recommend that the SEC file an enforcement action against them for alleged violations of Sections 5(a) and 5(c) of the Securities Act in connection with the issuance and sale of a digital currency, Kin. In sending this Wells Notice, the Respondents were given the opportunity to make a Wells Submission, which allows them to present facts and legal arguments to convince the SEC that no such enforcement action should be brought. In a somewhat unusual move, the Respondents published their Wells Submission on the company’s website, indicating that they would fight the proposed enforcement action.
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Cboe Refiles Bitcoin ETF Application
02/04/2019Last week, the Cboe BZX Exchange refiled its request to the Securities and Exchange Commission (SEC) for a proposed rule change that would allow it to list and trade shares of an exchange-traded fund (ETF) issued by the VanEck SolidX Bitcoin Trust. Cboe had withdrawn its request one week earlier due to the partial government shutdown, however Jan van Eck, CEO of Van Eck Associates, said that the entities had planned to refile the application once the government reopened and the SEC was back to operating at full capacity.
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U.K. Conduct Regulator Consults on Guidance on Crypto-Assets and the U.K. Regulatory Perimeter
01/23/2019The U.K. Financial Conduct Authority (FCA) has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.
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European Banking Authority Reports on EU Regulatory Perimeter for Crypto-Assets
01/18/2019The European Banking Authority has published a report on the application and suitability of the EU bank regulatory framework for crypto-assets. The report is in response to the European Commission's request in its FinTech Action Plan 2018. The report confirms that EU activities related to crypto-assets are fairly low and do not present any financial stability risks. The European Securities and Markets Authority also published a similar report covering Initial Coin Offerings issues within its remit on the same day.
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European Securities and Markets Authority Publishes Recommendations on Crypto-Assets and Initial Coin Offerings
01/18/2019The European Securities and Markets Authority has published a report on the application and suitability of the EU securities regulatory framework to crypto-assets, including Initial Coin Offerings. The report is in response to the European Commission's request in its FinTech Action Plan 2018. Like the European Banking Authority, which published a report on the same day in relation to banking sector issues, ESMA found that EU activities related to crypto-assets are fairly low and do not present any financial stability risks.
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CFTC Requests Feedback on Ether and the Potential Introduction of Ether Derivatives Contracts
12/13/2018In order to further its understanding of Ether and its use on the Ethereum Network, the Commodity Futures Trading Commission (CFTC) earlier this week issued a request for input (RFI) on several topics related to the virtual currency. The RFI poses a number of questions in respect of Ether, including its functionality, underlying technology, governance, markets, cybersecurity and custody, among other things. In addition, the CFTC asks several questions regarding Ether’s susceptibility to market manipulation and the potential introduction of Ether derivatives contracts.
The CFTC said the requested feedback will inform the work of the CFTC and its LabCFTC initiative to enhance the agency’s oversight of virtual currency markets and develop regulatory policy. The CFTC also noted that it hopes to gain a greater understanding of the similarities and differences between Ether and bitcoin, along with potential risks and opportunities uniquely posed by Ether.
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SEC Pushes Bitcoin ETF Decision to February
12/12/2018On December 6, 2018, the Securities and Exchange Commission (SEC) announced that it is delaying a decision on whether to approve a proposed rule change requested by the Cboe BZX Exchange that would allow it to list and trade shares of an exchange-traded fund (ETF) issued by the VanEck SolidX Bitcoin Trust. The SEC said it would make a final decision on the proposal by February 27, 2019.
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Three Central Banks Explore Advantages Of Wholesale Central Bank Digital Currencies
11/27/2018On November 15, 2018, the Bank of England, the Bank of Canada and the Monetary Authority of Singapore published a joint report entitled, "Cross-Border Interbank Payments and Settlements." Referring to current industry projects to address existing problems in cross-border payments affecting end-users, commercial banks and central banks, the report analyzes these issues and discusses proposed new models for processing cross-border transactions. The report sets out three models for cross-border payments and settlements and discusses the key considerations and dependencies of each model. Each model is then assessed against the existing identified challenges in cross-border payments.
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SEC Charges Digital Asset Trading Platform Founder for Operating Unregistered Exchange
11/12/2018On November 8, 2018, the Securities and Exchange Commission (SEC) accused the founder of a digital asset trading platform of failing to register as a national securities exchange. Without admitting or denying the charges, the founder agreed to pay $300,000 in disgorgement and a $75,000 penalty, and to cease and desist from future violations of Section 5 of the Securities Exchange Act of 1934 (Exchange Act).
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