FinTech Law Watch

At the Crossroads of Law, Innovation and Commerce

 

1
California Regulator Seeking Comments on “Agent of the Payee” Exemption to Money Transmission Law
2
Crypto founder’s death elevates taking a secret to the grave to the next level
3
Massachusetts State Senators Seek to Enact Biometric Data Protection Law
4
Global Financial Innovation Network Launch
5
The Global Financial Innovation Network invites Fintech start-ups to test their products and services across borders
6
UK FCA New Guidance on Cryptoassets
7
Islamic-compliant Cryptocurrency Exchange Certified
8
Australian Buy Now Pay Later businesses discuss the utility of Open Banking Regime
9
EU supervisors call for EU-wide policy response to crypto-assets
10
Empire “Blockchain” Building

California Regulator Seeking Comments on “Agent of the Payee” Exemption to Money Transmission Law

By Jeremy M McLaughlin

Several states exempt from their money transmission law, either through statute or regulatory guidance, an “agent of the payee.”  California is one such state.  In general, the exemption applies to a party that a payee has appointed as its agent for purposes of receiving payment from a payor.  The Department of Business Oversight (“DBO”), the agency that enforces California’s money transmitter law, has invited comments on a proposed rule making regarding the scope of the exemption.  Comments are due by April 9, 2019.

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Crypto founder’s death elevates taking a secret to the grave to the next level

By Cameron Abbott and Ella Richards

In an age where cyber security breaches are a near daily occurrence, and where we’re frequently reminded to keep our passwords secret and safe, the story that’s emerged regarding the fate of over AU$190 million of crypto-currency following the death of Gerald Cotten, the founder of Quadriga CX, is a little ironic to say the least.

The untimely death of the 30-year-old in December brought with it an unexpected sober reality – Mr Cotten was the only person with access to Quadriga’s coin reserve. No really … the ONLY person… you can see where this is going can’t you?

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Massachusetts State Senators Seek to Enact Biometric Data Protection Law

By Andrew C. GlassGregory N. Blase and Daniel S. Cohen

The rise of Big Data and the development of tools to interpret massive data sets to better understand consumer behavior have led to booming demand for consumers’ personal information.  Technological advances have also made biometric data, such as fingerprints and facial features, useful security tools for electronic devices. The growing use of Big Data and biometric data has caused some concern among consumers and policymakers.  In response, several state legislatures have taken steps to regulate companies’ ability to acquire personal and biometric data.

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Global Financial Innovation Network Launch

By Jonathan Lawrence

The Global Financial Innovation Network (GFIN) has been formally launched by an international group of financial regulators and related organisations. The GFIN is a network of 29 organisations of which 17 are currently offering cross-border trials for firms wishing to test FinTech products, services or business models across more than one jurisdiction. Those offering trials include the UK Financial Conduct Authority, the Australian Securities & Investments Commission, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, the Monetary Authority of Singapore and the Dubai Financial Services Authority. GFIN members that are not participating in the initial trial scheme include the Consumer Financial Protection Bureau, the Abu Dhabi Global Market, the Israel Securities Authority and the Jersey Financial Services Commission.

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The Global Financial Innovation Network invites Fintech start-ups to test their products and services across borders

By Jim Bulling and Luke Camilleri

On 1 February 2019, the Australian Securities and Investments Commission (ASIC) announced its participation in the recently created Global Financial Innovation Network (GFIN). The GFIN is comprised of 29 regulatory bodies from jurisdictions such as Hong Kong, Singapore and the United Kingdom. The GFIN was established to:

  • act as a network of regulators to collaborate and share experiences of innovation in respective markets, including emerging technologies and business models, and to provide accessible regulatory contact information for firms;
  • provide a forum for joint regtech work and collaborative knowledge sharing; and
  • provide firms with an environment in which to trial cross-border solutions.
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UK FCA New Guidance on Cryptoassets

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) has issued its consultation paper, Guidance on Cryptoassets. It focuses on where cryptoassets interact with the FCA’s regulatory “perimeter” (the perimeter).  The guidance looks at where cryptoassets would be considered ‘Specified Investments’ under the Regulated Activities Order (RAO), ‘Financial Instruments’ such as ‘Transferable Securities’ under the Markets in Financial Instruments Directive II (MiFID II), or captured under the Payment Services Regulations (PSRs), or the E-Money Regulations (EMRs). It also covers where cryptoassets would not be considered ‘Specified Investments’ under the RAO. Comments on the consultation paper are requested by 5 April 2019.

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Islamic-compliant Cryptocurrency Exchange Certified

By Jonathan Lawrence

Rain, a cryptocurrency exchange in Bahrain has received a Shari’a compliance certification from Shariyah Review Bureau (SRB).  SRB is licensed by the Central Bank of Bahrain as a Shari’a advisory firm authorised to issue Shari’a compliance certifications.  SRB reviewed Rain’s brokerage service and determined that the sale, purchase and custodian activities of Rain are in compliance with Shari’a principles.  The Shari’a certification covers three cryptocurrencies (bitcoin, ethereum, and litecoin). Rain aims to enable family offices, investors and Islamic institutional investors to buy, sell and store cryptocurrency in an Islamic-compliant way.

Rain was co-founded in 2017 by blockchain professionals from Saudi Arabia, Egypt and Silicon Valley.  In September of that year, Rain was invited to join the Central Bank of Bahrain’s regulatory sandbox.  It was the first digital currency exchange to be admitted to the sandbox – but since then four more have joined including UAE’s BitOasis.  However, many governments in the Middle East (including those of Saudi, Egypt and Morocco) have officially banned cryptocurrencies, urging residents not to invest in them.

Australian Buy Now Pay Later businesses discuss the utility of Open Banking Regime

Jim Bulling, Felix Charlesworth, Edwin Tan

On 22 January 2018, two of the largest ‘buy now, pay later’ businesses in Australia, Afterpay and Zip.co, appeared at a hearing before the Senate’s Economic References Committee.

During the Senate hearing, both Zip.co and Afterpay presented how their respective business models operate and responded to questions about how the ‘buy now, pay later’ industry should be regulated. As previously mentioned, ‘buy now, pay later’ businesses are not currently classified as ‘credit providers’ under the National Credit Code (Code) and, as such, are not subject to the responsible lending obligations under the Code.

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EU supervisors call for EU-wide policy response to crypto-assets

By Giovanni Campi and Martina Topercerova

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) published two complementary assessments of the regulatory coverage of crypto-assets under existing EU legislation and also set out their advice to the European Commission on potential policy initiatives in the future.

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Empire “Blockchain” Building

Authors: Cameron Abbott and Sara Zokaei Fard

The New York City Economic Development Corporation (NYCEDC) is looking at 2019 with fresh eyes. Although digital coin prices plummeted in 2018, some by as much as 90%, NYCEDC has announced that it will open a blockchain centre in Manhattan. The blockchain centre is being developed by NYCEDC in partnership with blockchain industry leaders Future\Perfect Ventures and the Global Blockchain Business Council. 

It is reported that the blockchain centre will be a resource for industry professionals as well as those interested in learning about the technology. It will create a peer community that will provide business support, mentorship as well as public education to assist people to understand how blockchain can impact daily life. The block chain centre will also be utilised to convene bodies including from industry and government to further dialogue on a regulatory environment that supports both consumers and innovation.

Industry leaders have described it as “a nascent technology” and a “burgeoning innovation sector”. The question now becomes, should we invest in bitcoin, or the blockchain centre itself as Microsoft and IBM have done!

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