Archives: FinTech Trends

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Federal Regulation of Virtual Currency and Digital Tokens: Preemption, Jurisdiction, and Clarity. But will States Push Back?

In September of this year, certain congressmen expressed their intention to preempt state regulation of virtual currency regulation.  Rep. Darren Soto (D-Fla.) expressed a need for “partial federal preemption” of state laws and Rep. Warren Davidson (R-Ohio) plans to introduce a bill that may seek federal preemption of state licensing and oversight requirements of virtual … Continue Reading

Virtual Currencies and Digital Assets: NFA Disclosure Requirements Further Evidence of Increasing Attention from Self-Regulatory Organizations

In March of this year, the NFA issued a notice reminded futures commission merchants (“FCM”), introducing brokers (“IB”), commodity pool operators (“CPO”) and commodity trading advisors (“CTA”) that trade in, solicit or accept orders in virtual currency products (spot and derivatives) of their ongoing obligation to notify the NFA of such activities by amending the … Continue Reading

Regulation A+: A Path to Market for Crypto Companies?

Most companies considering an Initial Coin Offering to U.S. purchasers have resigned themselves to the fact that their proposed token or coin offering is likely to be considered an offering of securities by the Securities and Exchange Commission (“SEC”) and must be made in compliance with U.S. securities laws. The logical next question then becomes … Continue Reading

Reed Smith partner applies AI techniques to develop new type of contract – a Data Contract

Click here to see a demonstration of a simplified “AI and the Law: Data Contract”: https://lnkd.in/gRNDBk2  and the Companion Software Application.  This demo shows how we can access contract information stored as fields of data on the Microsoft Azure cloud.  (I use a credit agreement as an example, but the same principles work for any … Continue Reading

Ohio Enacts Blockchain Legislation

Governor John Kasich signed a bill into law on Friday, August 3, 2018, adding Ohio to the list of U.S. states enacting blockchain legislation.  Introduced last October and passed by the House at the end of June, SB 220 legally recognizes records or contracts and signatures secured through blockchain technology.  Specifically, the bill amends Section … Continue Reading

CFPB Picks Paul Watkins to Lead Office of Innovation

On July 18, 2018, Acting Director Mick Mulvaney of the Consumer Financial Protection Bureau (“CFPB”) announced that Paul Watkins will head the CFPB’s new Office of Innovation. According to the press release, the office, which Mulvaney created to focus on consumer-friendly innovation, “will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, … Continue Reading

Bank of England Governor backs FinTech

In a speech delivered at Mansion House on 21 June 2018, Mark Carney, the Governor of the Bank of England (BofE), made the case for a modernised financial services sector, which would be underpinned by a thriving FinTech sector, especially in the area of payments. The remarks reinforce the BofE’s plan for FinTech in central … Continue Reading

Digital Tokens and Coins Advisories and Regulatory Proposals – CFTC and Financial Stability Board Pronouncements

CFTC Customer Advisory On Monday, the Commodity Futures Trading Commission (“CFTC” or “Commission”) issued its fourth virtual currency customer advisory, Customer Advisory 7756-18, as part of its outreach effort to educate market participants.  Titled, Use Caution When Buying Digital Coins or Tokens, the advisory warns customers of the risks of speculation of future value and … Continue Reading

Applying Howey, Court Concludes that Centra Token Likely a Security:

While the SEC continues to target fraudulent crypto-projects, we’ve seen a marked increase in the number of class actions targeting a wider-range of ICOs.[1] The crypto-industry is watching these cases intently; awaiting the judiciary’s play in the on-going game of “Are Crypto-Tokens Securities?”. Earlier this week, United States Magistrate Judge Andrea M. Simonton (Southern District … Continue Reading

CFTC Issues Guidance on Listing Virtual Currency Derivatives

Last week, the Market Oversight and Clearing and Risk Divisions of the Commodity Futures Trading Commission (“CFTC” or “Commission”) issued Staff Advisory No. 18-14 regarding virtual currency derivative product listings. The advisory serves as guidance to exchanges and clearinghouses in the context of listing derivative contracts based on virtual currency under Commission Regulations 40.2 (self-certification) … Continue Reading

The Chain Gang – FTC’s New Blockchain Working Group May be Good News for Marketers

One of the greatest developments for marketers in 2018 is likely to be the proliferation of new and innovative applications on the blockchain in the context of marketing and promotion, particularly in connection with loyalty programs, ad fraud mitigation, and ongoing CRM activities that combine brand affinity and peer-to-peer influencing.  The potential magnitude of the … Continue Reading

Massachusetts Enforces While Arizona Provides Flexibility to Fintech

This week, the Massachusetts Secretary of State ordered five companies, 18Moons, Across Platforms, Mattervest, Pink Ribbon, and Sparko, to cease and desist from engaging in initial coin offering (“ICO”) campaigns as part of an ongoing government investigation of token sales.  The companies allegedly offered and sold unregistered securities in violation of the Massachusetts Uniform Securities … Continue Reading

Blockchain Backed International Dispute Resolution

Startups often are at the forefront of creating unique solutions with the ability to have a tremendous impact on various industries. The Miami Blockchain Group, a legal technology startup, has created a novel blockchain application specifically for the international dispute resolution community. The Smart Arbitration & Mediation Blockchain Application, SAMBA, debuted at the 2018 Global … Continue Reading

Berkeley to Use Blockchain for Tokenized Bonds

The City of Berkeley, California will be the first U.S. city to explore blockchain-based financing to tackle social issues such as affordable housing.  Mayor Jesse Arreguin and Councilmember Ben Bartlett are collaborating with the UC Berkeley Blockchain Lab and San Francisco-based financial startup Neighborly for the Berkeley Blockchain Initiative (“BBI”) to develop a tokenized municipal … Continue Reading

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
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