Archives: FinTech Trends

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Hong Kong Securities Commission Launches Inquiry Into Seven Crypto Exchanges

On February 9, 2018, the Hong Kong Securities and Futures Commission (“SFC”) released a statement which, among other things, informs the marketplace that the SFC sent letters to seven Hong Kong cryptocurrency exchanges warning against listing instruments that qualify as “securities” under the Securities and Futures Ordinance (“SFO”) without a required license.[1]  Additionally, the SFC … Continue Reading

Securities Class Action Lawsuits Continue to Test the “Utility” Token Sale Model

On January 30, 2018, dissatisfied crypto token purchasers filed a class action lawsuit against Paragon Coin, Inc. (“Paragon”) and founders Jessica VerSteeg and Egor Lavrov, alleging that the Paragon initial coin offering (“ICO”) violated the federal securities laws.[1]  This lawsuit follows those filed by plaintiffs against Centra, Tezos, ATBCoin, BitConnect, and Xunlei in connection with … Continue Reading

Beyond SegWit2X

Bitcoin’s Blocksize Debate: Behind the scenes of Bitcoin’s (BTC) success, a debate continues about whether to expand the leading cryptocurrency’s blocksize from 1MB to 2MB. On one side, the “Big Blockers” want to increase Bitcoin’s blocksize, allowing the cryptocurrency to realize its potential as a cash alternative and compete with traditional payment systems. On the … Continue Reading

SEC Scrutinizes Pumping of Blockchain-Related Securities

The U.S. Securities and Exchange Commission (“SEC”) is continuing to increase its scrutiny of companies that might be taking advantage of investor excitement for blockchain and cryptocurrency (ICO) deals to inflate their share prices and raise funds.  On January 8, 2018, the SEC suspended trading in the securities of Hong Kong-based UBI Blockchain Internet, Ltd. … Continue Reading

CFTC Issues Proposed Interpretation on Retail Virtual Currency Transactions

“Virtual currencies,” such as bitcoin and ether, qualify as “commodities” under the Commodity Exchange Act (“CEA”).[1]  The extent that such products are subject to regulation by the U.S. Commodity Futures Trading Commission (“CFTC”) depends upon whether the products are traded in the spot (or cash) market, on a forward basis, or as the underlying of … Continue Reading

New York Regulator’s Suit Challenging OCC Fintech Charter Dismissed as Premature

On Tuesday December 12, 2017, a federal judge dismissed without prejudice a suit filed by the New York Department of Financial Services (NYDFS) against the Office of the Comptroller of the Currency (OCC) challenging the OCC’s proposed new special-purpose fintech charter.  Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of … Continue Reading

ICOs Must Remain Aware of Regulatory Enforcers

Digital assets, popularly referred to as “cryptocurrencies”, “coins”, and “tokens”, continue to provoke regulatory attention and create discord amongst regulators. Recent actions by the U.S. Commodity Futures Trading Commission (“CFTC”) and the U.S. Securities and Exchange Commission (“SEC”) demonstrate that activities by the issuers of tokens may draw scrutiny from either or both agencies. As … Continue Reading

Security Implications for Blockchain Technology Reviewed by SEC

On October 12, 2017, the U.S. Securities and Exchange Committee (“SEC”) held an Investor Advisory Committee (“IAC”) meeting to consider, among other things, blockchain technology and the implications for securities markets.1 The meeting covered a broad range of topics relating to blockchain and distributed ledger technology (“DLT”), including initial coin offerings (“ICO”), post-trade processing, and … Continue Reading

ICOs Receive Guidance from Abu Dhabi FSRA

Earlier this month, the Financial Services Regulation Authority of the Abu Dhabi Global Market joined the ranks of various regulatory agencies from countries, including Australia, Canada, and the United States that have addressed ICOs, by issuing Supplementary Guidance on the regulation of ICOs and virtual currencies. The Guidance offers parameters for classifying, for legal and … Continue Reading

Regulatory Authorities Respond to Coin Offering Endorsements

Floyd Mayweather, a world famous boxing champion, recently used his Twitter and Instagram accounts to help a company raise more than $30 million in an initial coin offering (“ICO”).1 Other celebrities have similarly capitalized on their “influencer” status by promoting digital tokens to their Twitter and Instagram followers. Token issuers raised over $3 billion via … Continue Reading

Using Tether’s Loss to Prepare for Possible Cryptocurrency Theft

On November 20-21, 2017, Tether, the company behind USDT – a digital token backed by fiat currencies like the dollar and euro – disclosed that a hack resulted in the loss of $30.95 million worth of tokens.1 Tether posted an announcement to its website November 19 reporting that a “malicious action by an external hacker” … Continue Reading

CFTC and SEC Chairs Seek to Apply Existing Laws and Regulations to Digital Assets

Nine years after Satoshi Nakamoto circulated his whitepaper and introduced the world to bitcoin, regulated bitcoin derivatives are about to be introduced in the United States. CME Group recently announced that it will begin to offer bitcoin futures based on the CME CF Bitcoin Reference Rate later this year[1] and the Chicago Board Options Exchange … Continue Reading

SEC Files Complaint Against Trader Involving Bitcoin Conversion Scheme

On October 30, 2017, the U.S. Securities and Exchange Commission (“SEC”) filed a complaint in federal court against a day trader for allegedly committing fraud and market manipulation during which the trader utilized a digital currency exchange in a supposed attempt to cover his tracks. The SEC claims that defendant’s associate obtained unauthorized access to … Continue Reading

CFPB Releases Data Sharing Principles for Fintechs and Financial Institutions

On October 18, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) entered  into the long simmering debate over consumer-authorized data sharing.  This debate pits mainstream financial institutions, which are typically reticent to share customer data with third parties, against data aggregators and other fintechs.  Those newer companies provide services directly to consumers—or to enhance the … Continue Reading

CFTC Releases Primer on Virtual Currencies

On October 17, 2017, the U.S. Commodity Futures Trading Commission’s (“CFTC”) LabCFTC released a primer on virtual currencies, available here.  The primer is an “education tool” that provides an overview of the virtual currency landscape and is “not intended to describe the official policy or position of the CFTC, or to limit the CFTC’s current … Continue Reading

SEC Creates New Units Focused On Cyber Crimes That Will Cover Crypto Tokens

September 28, 2017 Two months after its Investor Bulletin stating that U.S. securities laws may apply to digital token sales, the Securities Exchange Commission (“SEC”) announced Monday two new initiatives to address cyber-based threats and protect retail investors.  The SEC’s press release outlined the creation of the Cyber Unit (“Unit”) and the Retail Strategy Task … Continue Reading

Illinois Department of Financial and Professional Regulation Issues Regulatory Guidance on Digital Currencies

On June 13, 2017, the Illinois Department of Financial and Professional Regulation (“IDFPR”) released guidance outlining its policies with respect to the treatment of digital currencies under the Illinois Transmitters of Money Act (“TOMA”).  The guidance document offers a clear distinction between traditional currencies, which it considers “money,” and digital currencies, which it states are … Continue Reading

CFTC Launches FinTech Innovation Initiative “LabCFTC”

On May 17, 2017, Commodity Futures Trading Commission (“CFTC”) Acting Chairman J. Christopher Giancarlo announced an “important step forward” in bringing the CFTC’s regulations into the “digital world of the 21st century.”  The CFTC’s new FinTech initiative, LabCFTC, will facilitate cooperation between the CFTC and FinTech innovators. Acting Chairman Giancarlo stated that the primary aims … Continue Reading

Conference of State Bank Supervisors Files Lawsuit against OCC to Stop Special Purpose FinTech Charter

On April 26, 2017, the Conference of State Bank Supervisors (“CSBS”), the trade association that represents state banking regulators, initiated a lawsuit against the Office of the Comptroller of the Currency (“OCC”) in the U.S. District Court for the District of Columbia. The lawsuit seeks declaratory and injunctive relief to prevent the OCC from moving … Continue Reading

UN Seeks Comments on Blockchain Technology

Following the trend of regulators across the globe, the United Nations Office for Project Services’ (“UNOPS”) issued a request for information regarding the application of blockchain technologies on April 24, 2017.  The UNOPS has formed a blockchain group within the United Nations to analyze the possible applicability of blockchain technologies to the international assistance area.  … Continue Reading

European Commission Requests Comments on FinTech

On March 23, 2017, the European Commission (“EC”) published a Consultation Document entitled “FinTech: A More Competitive and Innovative European Financial Sector.”  The Consultation Document seeks comments regarding the development and regulation of novel financial technologies, including distributed ledger technology (“DLT” or “blockchain”), cloud computing, and artificial intelligence (“AI”).  The EC hopes to obtain feedback … Continue Reading

Supreme Court Holds New York Credit Card Surcharge Statute Regulates Speech

In the ongoing skirmishes between card networks and merchants in the surcharge world, the U.S. Supreme Court has just issued a significant ruling on a novel theory. Merchants in the State of New York sought to charge consumers higher fees for purchases made by credit cards. New York state law contains a prohibition on the … Continue Reading

D.C. Circuit Court Strikes Opt-Out Notice Requirement For Certain Faxes

On Friday, in a decision certain to please the business community as well as the Chair and new majority of the Federal Communications Committee, the D.C. Circuit struck down parts of the FCC’s October 30, 2014 Order, 29 F.C.C. Rcd. 13998 (FCC 14-164), requiring that solicited faxes (those sent with consent of the recipient) must … Continue Reading

SEC Rejects Second Bitcoin ETF Due to Lack of Regulatory Oversight

On March 28, 2017, the U.S. Securities Exchange Commission (“SEC”) issued a second denial of a bitcoin exchange-traded fund (“ETF”), following its rejection of the Winklevoss Bitcoin Trust earlier this month (Reed Smith commentary is available here). SolidX Bitcoin Trust would hold bitcoin as its primary asset, together with smaller amounts of cash.  Theft of … Continue Reading
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