FinTech Law Watch

At the Crossroads of Law, Innovation and Commerce

 

1
Banks Invest in Developing a Digital Blockchain Settlement System
2
ASIC Updates Guidance on Initial Coin Offerings and Crypto-Assets
3
ECB Task Force recommends regulation of crypto-asset gatekeepers
4
Are You in Control (of a Bank)? The Fed’s Proposed Framework for Presuming Control under the Bank and Savings and Loan Holding Company Acts
5
ASX Takes First Steps in introducing its Blockchain-Based Replacement to CHESS
6
Bank of Canada and Monetary Authority of Singapore jointly publish report on the use of blockchain in making cross-border payments
7
Make cryptocurrency by driving a Jag?! Sign us up
8
CFPB Seeking Comments On Possible Remittance Rule Revisions
9
Italy’s legal recognition of blockchain-based timestamping
10
International Cryptocurrency Regulation Top of the Agenda for the Japan G20 Summit

Banks Invest in Developing a Digital Blockchain Settlement System

By Jim Bulling, Felix Charlesworth and Andrew Fay

Late last month, several of the world’s largest banks invested $50 million in a digital cash settlement project with the aim of developing a more efficient clearing and settlement system. The new technology, referred to as the ‘utility settlement coin’ (USC), has been a work in progress since 2015, after Swiss bank UBS Group and London-based technology startup Clearmatics announced to the market that they had commenced working on the project.

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ASIC Updates Guidance on Initial Coin Offerings and Crypto-Assets

By Jim Bulling and Edwin Tan

On 30 May 2019, the Australian Securities and Investments Commission (ASIC) updated its Information Sheet 225 which sets out guidance for entities that are looking to raise funds through initial coin offerings (ICOs) or are otherwise involved with crypto-assets. Interestingly, ASIC has grouped crypto-asset participants into several distinct categories and has broadly set out the obligations that may apply to participants in each category.

Particular aspects of the information sheet that may be of interest to crypto-asset participants include:

  • ASIC has stated that entities should be prepared to justify a conclusion that their ICO does not involve a regulated financial product;
  • platform operators that allow crypto-assets that are financial products to be traded on the platform must hold an Australian market licence or be otherwise exempt. As at the time of release, there no platform operators that have been appropriately licensed or exempt;
  • assessments of Australian Financial Services (AFS) licence applications for the purposes of crypto-asset-related financial products may take more time; and
  • clearing and settlement obligations may apply to “miners” that are part of the clearing and settlement processes for tokens that are financial products.

In summary, while ASIC’s updated Information Sheet does not break any new ground in relation to the regulation of crypto-assets in Australia, it serves as a useful resource for any entity that is looking to be involved as a crypto-asset participant. We remind our readers there are many avenues to market for token issuers, even where their tokens constitute financial products, and it may be useful to seek legal advice in this regard. For example, tokens that only constitute securities can be offered to sophisticated investors without attracting significant disclosure obligations including the provision of a prospectus.

ECB Task Force recommends regulation of crypto-asset gatekeepers

By Giovanni Campi

The European Central Bank’s Internal Crypto-Assets Task Force (“ICA-TF”) issued a report analysing the implications of crypto-assets for financial stability, monetary policy, payments and financial markets infrastructures (“FMIs”).

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Are You in Control (of a Bank)? The Fed’s Proposed Framework for Presuming Control under the Bank and Savings and Loan Holding Company Acts

By Rebecca H. Laird, Dean A. Brazier and Daniel S. Cohen

On April 23, the Federal Reserve Board (the “FRB”) published a Notice of Proposed Rulemaking (“NPR”) to “simplify and increase the transparency,” while maintaining “consistency” to its determination of whether an entity “controls” a bank or a savings association (collectively, “depository institution”).  According to the FRB’s announcement, the NPR is a first draft of a “comprehensive regulatory framework for control determinations.”  FinTech companies seeking to become depository institutions should pay close attention to the NPR as it provides clear guidelines for when its investors would become subject to the Bank Holding Company Act (“BHCA”). 

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ASX Takes First Steps in introducing its Blockchain-Based Replacement to CHESS

By Jim Bulling, Felix Charlesworth and Andrew Fay

On 30 April 2019, Australian Securities Exchange (ASX) released the first of seven “drops” of software code into the “Customer Development Environment”. This marks the beginning of the introduction of the new equities clearing and settlement system, which ASX is developing to replace the existing CHESS system. The new system is based on distributed ledger technology (DLT) and promises to provide customers with access to real-time, synchronised, source-of-truth data.

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Bank of Canada and Monetary Authority of Singapore jointly publish report on the use of blockchain in making cross-border payments

Jim Bulling and Felix Charlesworth

Two central banks have taken steps to facilitate cross border payments through the use of blockchain. On 1 May 2019, the Bank of Canada (BOC) and Monetary Authority of Singapore (MAS) jointly published a report on their trials of settling tokenised digital currencies across different blockchain platforms (Report).

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Make cryptocurrency by driving a Jag?! Sign us up

By Cameron Abbott and Allison Wallace

Firstly, no, you don’t have to be an Uber driver driving a Jag to reap the benefit of the car manufacturer’s new innovation.

Jaguar Land Rover has announced it is testing “Smart Wallet” technology that will enable drivers to earn cryptocurrency while driving.

How? Technology embedded in the car will automatically report road condition data, such as traffic congestion and potholes to navigation providers and local authorities, which will earn the car’s driver credits.

The credits can be used to buy coffee, pay tolls and parking tickets – which all sounds pretty handy to us.

Jag has partnered with IOTA Foundation which is providing the “IOTA-powered car wallet” which uses a distributed ledger technology to make and receive payments. It is currently being trialled in Ireland. IOTA forecasts that 75 billion devices will be connected to the Smart Wallet technology by 2025 – we’re pretty excited to see how this unfolds.

CFPB Seeking Comments On Possible Remittance Rule Revisions

By Daniel S. Cohen and Jeremy M. McLaughlin

On April 25th, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued a request for information (“RFI”) asking for input about the scope of its Remittance Rule (the “Rule”), whether the Bureau should exempt certain small financial institutions from the Rule, and how the expiration of the Rule’s “temporary exemption” for insured depository institutions and credit unions would adversely affect consumers.  Comments are due 60 days after publication in the Federal Register.

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Italy’s legal recognition of blockchain-based timestamping

By Claude-Étienne Armingaud and Alessandra Feller

Italian law no.12/19 dated 11 January 2019 (the “Law”) came into force on 13 February 2019 and cemented the legal enforceability of electronic timestamping performed through blockchain technologies.

As part of a national reform pertaining to the simplification of administrative formalities for companies, the Law explicitly states in its Article 8 ter, 3° that “storage of a computerized document through the use of technologies passed on distributed ledger creates the same legal effect as ‘electronic time stamp’”, as defined in the European Regulation no. 910/2014 on electronic identification and trust services for electronic transactions dated 23 July 2014 (“eIDAS”).

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International Cryptocurrency Regulation Top of the Agenda for the Japan G20 Summit

By Jim Bulling, Felix Charlesworth and Andrew Fay

In the lead up to the annual G20 Summit, to be hosted by Japan, Prime Minister Shinzō Abe has commissioned the creation of a cryptocurrency governance manual. The manual, which will be distributed at the G20 Summit, supports a uniform approach to regulating cryptocurrencies and contains regulatory proposals and justifications relating to the following issues:

  • protecting customer assets;
  • international security protocols; and
  • providing customers with information (particularly in the event of a hack).
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