FinTech Law Watch

At the Crossroads of Law, Innovation and Commerce

 

1
Digital Cash Settlement Systems Advance
2
Government committed to introducing mandatory data breach notification laws
3
Bank of England Governor remarks on FinTech
4
UK grants FinTech a banking licence – another tier of regulation?
5
A road map for UK FinTech standards
6
Strong response to ASIC sandbox proposal
7
Marketplace lending technology patents held invalid
8
Bitcoin heist – alleged $72M stolen from Bitfinex
9
BritCoin vs BitCoin: Central banks stepping into the digital currency arena
10
K&L Gates Adds Leading FinTech Partners

Digital Cash Settlement Systems Advance

By Susan Altman

Four important players have just added their heft to efforts of Swiss bank UBS to develop a system to enable financial markets to make payments and settle transactions quicker and at lower cost using blockchain technology reports Reuters. Swiss bank UBS launched a “Utility Settlement Coin” (USC) as a digital cash equivalent of each of the major currencies backed by central banks last year.  Although the USC concept lacks a snappy name like bitcoin, the USC is fully backed by cash assets at a central bank, the lack of that backing being the major weakness of the decentralized bitcoin currency.  UBS and its technology platform provider, Clearmatics Technologies, have now been joined by BNY Mellon, Deutsche Bank, Santander and markets operator ICAP in further developing the potential of the USC.  The USC initiative is an opportunity for industry thought leaders to explore the possibilities of the digital cash technology through a series of short iterative phases and platform deployments increasing the number of market participants, broadening engagement, connectivity and network effect, according to ICAP.  The group intends to have active dialogue with central banks and regulators to ensure a robust and efficient regulatory structure within which the USC can be deployed.  The participants expect that the USC will unlock the benefits of distributive technology to the financial industry and ultimately, to customers, including by lowering costs and increasing transaction security.

Government committed to introducing mandatory data breach notification laws

By Cameron Abbott and Rebecca Murray

After much delay, a spokesperson for Attorney-General, George Brandis has said the government is committed to introducing the Mandatory Data Breach Notification laws this year. We will be sure to look out for it during the next term of Parliament. You can find more information on the proposed scheme and its regulatory impact on the Attorney General’s Department consultation for Serious Data Breach Notification webpage.

Bank of England Governor remarks on FinTech

By Jonathan Lawrence

In remarks that were rather overlooked in the run-up to the Brexit vote in June, Mark Carney, the Governor of the Bank of England, talked on several FinTech topics. He mentioned five ways the Bank is enabling the FinTech transformation:

  • Widening access to central bank money to non-bank Payments Service Providers
  • Being open to providing access to central bank money for new forms of wholesale securities settlement
  • Exploring the use of Distributed Ledger (DL) technology in the Bank’s core activities, including the operation of Real-time gross settlement systems (RTGS)
  • Partnering with FinTech companies on projects of direct relevance to the Bank’s mission
  • Calibrating its regulatory approach to FinTech developments

Read More

UK grants FinTech a banking licence – another tier of regulation?

By Jim Bulling and Michelle Chasser

Has the age of the digital bank arrived in the UK? Following the authorisation of Atom Bank last year, 3 additional digital banks have been issued with banking licences by the UK Prudential Regulation Authority (PRA) since May 2016.

These new licensees are the result of the PRA’s focus in recent years on lowering the barriers to entry for new banks and promote competition in the UK. As part of this focus, in 2013, PRA lowered the initial minimum capital requirements for Small Specialist Bank applicants to €1 million or £1 million (whichever is higher), plus a capital planning buffer (CPB). PRA and the Financial Conduct Authority (FCA) also launched a New Bank Start-up Unit in January 2016 to assist applicants with the authorisation process. Read More

A road map for UK FinTech standards

By Jonathan Lawrence

New research has revealed the important role that standards could play in helping to strengthen and speed-up FinTech’s development in the United Kingdom. The research was published by the British Standards Institution (BSI), the national standards body of the UK. BSI produces technical standards on a wide range of products and services, and also supplies certification and standards-related services to businesses. The research was prepared by Finextra and gathered insights from a cross-section of FinTech companies, banks, trade associations, technology vendors.

BSI commissioned the research to investigate where standards could best support UK FinTech and help provide leadership in global standardisation following interest from the industry in 2015. This latest research shows there could be a further opportunity to complement regulation with standards, to promote the UK’s position in FinTech. The analysis found a number of priority areas where standards could help promote the streamlining of the procurement and onboarding processes between banks and FinTechs; integrating FinTechs into the standards and language of the financial services industry and providing consumer assurance and the gaining of trust.

To read the full report, please click here.

Strong response to ASIC sandbox proposal

By Jim Bulling and Michelle Chasser

ASIC’s regulatory sandbox consultation has drawn a mixed response from around 30 businesses, industry and consumer groups which have made submissions.  To refresh your memory about ASIC’s proposals check out our previous blog.

Tyro Payments was very supportive of the concept of a sandbox but had a few concerns about the proposed structure. Tyro’s main concern was the role of sponsors controlling start-ups’ access to the sandbox. It noted that Australia’s associations, hubs and accelerators were dependent on funding from industry incumbents and that exposing the sandbox to their influence is like “putting the fox in charge of the hen house”. Tyro was in favour of a UK style sandbox where applicants’ transitions into licensing are considered on a case by case basis by the regulator.

Read More

Marketplace lending technology patents held invalid

By Joseph Valenti, Samuel Reger and Chris Bell

On July 25, 2016, three appellate judges in the United States held that a popular online marketplace lender’s patents were invalid because they merely reflected an “abstract idea” that is not entitled to be patented or otherwise eligible for exclusive protection under American intellectual-property laws.  The practical effect of this decision is that the lender could not sue its competitors for patent infringement where those competitors allegedly used the same techniques to match borrowers with lenders on their own marketplace lending platforms.

The judges from the Federal Circuit Court of Appeals likened the claimed inventions to a “fundamental economic concept” (i.e., an abstract idea) that served as the basis for the consumer-loan industry.  They ruled that simply implementing this concept with “generic technology” to automate the process does not then make it patentable.

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Bitcoin heist – alleged $72M stolen from Bitfinex

By Cameron Abbott and Simon Ly

Hong Kong-based bitcoin exchange Bitfinex has suspended trading after discovering an alleged security breach to the tune of $72M! It has been reported that this is the third largest bitcoin breach in history, with the largest being the infamous MtGox breach in early 2014.

Trading has halted on Bitfinex as the company investigates the security breach and cooperates with law enforcement. Although this may come as only a small consolation to many, in its initial response Bitfinex said that the breach was quarantined to “bitcoin wallets; the other digital tokens traded on Bitfinex are unaffected”.

As of today, Bitfinex is still in the process of figuring out what happened, but disputes the total cost of the heist, stating that the “numbers being quoted are erroneous as nothing has been decided as of yet and [Bitfinex] is still in the process of settling positions and balances”.

Are we all more comforted by the fact that they don’t know?

To keep up to date, you can see Bitfinex’s blog updates here.

BritCoin vs BitCoin: Central banks stepping into the digital currency arena

By Jim Bulling and Michelle Chasser

Certain governments around the world are exploring the possibility of central bank issued digital currencies using distributed ledger technology (DLT) which could compete with private digital currency systems such as BitCoin.

Following the release of the Bank of England’s (BofE) paper on central bank issued digital currencies, the Deputy governor of monetary policy appeared before the House of Lords’ Economic Affairs Committee to discuss the effect ‘BritCoin’ would have on the economy. The BofE has previously raised the possibilities of using BritCoin for retail transfers and issuing interest bearing accounts or ‘wallets’ to hold BritCoins.

Read More

K&L Gates Adds Leading FinTech Partners

Global law firm K&L Gates welcomes Judith Rinearson and Linda C. Odom as partners in the firm’s FinTech and Consumer Financial Services practices. Rinearson joins K&L Gates’ New York and London offices, and Odom, joins the Washington, D.C. office.  “Judie Rinearson and Linda Odom are highly respected authorities in numerous key regulatory and commercial areas within the FinTech ecosystem,” stated Robert Zinn, co-leader of K&L Gates’ global corporate and transactional practice area as well as of the firm’s market-leading global FinTech practice.

To read our full press release please click here.

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