Blockchain & Smart Contracts – Page 8 – FinTech and Blockchain Law Watch

Hong Kong and South Korea on ICOs

Sep 07 2017

By Rizwan Qayyum and Robert Crea

Hong Kong’s Securities and Futures Commission released a statement discussing whether existing regulations could be applicable to ICOs. This is a move likely precipitated by China’s ban on ICOs announced earlier this week.

The Executive Director of Intermediaries at the SFC, Julia Leung, warned that purchasers and those involved in an ICO need to be “that some ICO structures may be subject to Hong Kong securities laws.”

South Korean regulators have also taken a step towards tightening ICO regulation. South Korea’s digital currency task force group, comprised of the country’s central bank, and the Financial Services Commission (amongst other bodies) held a meeting on 3 September 2017, in which they discussed ICOs. It was noted that authorities will punish ICO fundraising platforms for violating the Capital Market Act by raising funds through stock issuance using digital currencies.

Monetary Authority of Singapore on Initial Coin Offerings

Aug 29 2017

By Judith Rinearson and Rizwan Qayyum

On August 10, 2017, the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) jointly published a Consumer Advisory document which urged consumers to exercise due diligence before investing in digital tokens, with particular emphasis on the emergence of Initial Coin Offerings (ICOs). In Singapore, several ICOs have taken place in the past year and this has resulted in organisations raising millions of dollars in a few days since their launch.

An ICO is a crowdfunding method, facilitated by blockchain, through which a project or venture, usually a start-up organisation, raises funding by creating and selling its own digital asset, currency or token in exchange for digital currencies or assets of immediate value such as a Bitcoin. The practice is thus far unregulated and enables a new brand of alternative finance. An ICO campaign ‘runs’ for a defined period during which investors are able to support the project, with the aspiration that this digital asset becomes successful and their investment reaps profit.

Bitcoin thieves abound, but Law Enforcement is getting smart and stepping up

Aug 06 2017

By Clifford Histed and Nicole Mueller

According to a federal criminal complaint filed last month in Philadelphia, Theodore Price admitted that he had written software capable of stealing millions of dollars in bitcoins from individual bitcoin wallets. He allegedly admitted to purchasing the software on a dark net market and recoding it to infiltrate e-mail accounts with bitcoin wallets. Price also allegedly admitted that he had a fake passport in the name of the actor Jeremy Renner, and that Price had prepared to flee the U.S. on a private jet to evade arrest. Price is now in federal custody, charged with access device fraud and identity theft.

U.S. SEC issues report on digital currencies and related autonomous organizations

Jul 31 2017

By C. Todd Gibson and Evan Glover

On July 25th the United States Securities and Exchange Commission (“SEC”) released a report to put the market on notice that offers and sales of digital assets are subject to the requirements of the federal securities laws.

The report is a result of an investigation of a German created entity called The DAO (Decentralized Autonomous Organization), which is a virtual organization that exists within computer code and is executed on a blockchain or decentralized ledger. The DAO sold DAO Tokens, which had characteristics similar to stock (e.g. certain ownership and voting rights), with the intent to raise funds to finance various projects. The DAO Tokens were purchased using a digital currency and could be monetized by re-selling the token on a web-based platform that supported a secondary market. The DAO engaged in these offers and sales in the U.S. despite not registering with the SEC.

More banks join SWIFT blockchain Proof of Concept

Jul 13 2017

By Jonathan Lawrence

22 additional global banks have joined SWIFT’s blockchain proof of concept (PoC), designed to validate whether the technology can help banks reconcile their international nostro accounts in real time. A nostro account is an account that a bank holds in a foreign currency in another bank. These banks will test and validate the PoC’s blockchain application, currently under development by SWIFT and a group of six founding banks that launched the PoC in April 2017. Working independently of the founding banks, the 22 institutions will act as a validation group to further test the application and evaluate how the technology scales and performs.

Pilot program to use blockchain to trade electricity

Jun 28 2017

By Jim Bulling and Michelle Chasser

AGL is currently undertaking a trial to test whether blockchain technology can assist in creating a mechanism for users to trade surplus electricity generated from rooftop solar panels. This trial will use customer data generated from a previous AGL project involving the use in households of smart air conditioners, batteries and solar panels to simulate peer-to-peer trading, demonstrating what trades would have taken place and the value they would have generated.

It is possible that ‘smart contracts’ could automatically sell excess energy in real time to other users when excess energy from solar panels is generated. The use of blockchain in this way could help individual households to trade their own energy more efficiently, making renewable energy more affordable and better integrated with power grids. This is a relatively novel application of blockchain technology, which is the distributed ledger technology underpinning the digital currency Bitcoin.

Surge in fintech patent applications

May 05 2017

By Alistair Mann and Steven Wulff

Several business publications have recently reported a dramatic increase in the number of patent applications filed globally for fintech-related inventions. According to one widely-reported analysis, 9,545 applications were filed in 2016 which is 500 more than in 2015 and over 49% more than in 2011. The United States is reportedly leading the charge with 4,523 patent filings in 2016 and China, in a somewhat distant second place, filed about half that number in the same year.

A patent gives an inventor exclusive rights to exploit their invention commercially for a limited term (usually 20 years) in return for public disclosure of the invention. The monopoly conferred serves to incentivize innovation and encourages public disclosure of innovations for the advancement of technology and the common good. The recent surge in patent applications clearly reflects a significant uptick in research and development efforts in fintech and shows that innovators in this space are serious about protecting and commercialising the fruits of their labour.

The types of fintech-related inventions seeking to be patented are diverse and include systems for managing bitcoin and blockchain-based currency reserves. Other examples include credit risk assessment tools and artificial intelligence agents for identifying and analysing fraud and irregular trading activities.

K&L Gates has significant experience filing fintech-related patents including for SMEs and large entities in Australia and the United States. Innovators should consider patenting their new fintech technologies to help protect their competitive advantage and reward their R&D efforts.

U.S. Government Accountability Office Issues Long-Awaited Report on Fintech Industry

May 01 2017

By Judith Rinearson and Eric A. Love

The U.S. GAO has issued a long-awaited report on the fintech industry, which focuses on the regulation of marketplace lenders, mobile payments, digital wealth management platforms and distributed ledger technology (“DLT” – often referred to as blockchain). For each of these fintech industry “subsectors,” the GAO report details the nature of the subsector and how it operates, as well as its potential benefits and risks. Moreover, the GAO report addresses industry trends, regulation and oversight for each subsector.

Marketplace lenders. The GAO report indicates that marketplace lenders may provide expanded and quick access to credit at lower cost than banks, although the report also notes risks related to loan term transparency and certain protections for small business borrowers. Read More

Adapt or die, the reality for retail banks during a digital revolution

Mar 26 2017

By Cameron Abbott and Giles Whittaker

Traditional banking is a thing of the past, at least according to 203 senior retail banking executives surveyed by the Economist Intelligence Unit.

According to an Economist Intelligence Unit report for Temenos, the EU’s Second Payment Services Directive (PSD2), which will force banks to provide interfaces, APIs and data to third parties, is set to “tip the scales between banks and FinTechs for customer loyalty.” More than half of financial transactions will be made through FinTech companies rather than traditional retail banks by 2020, as the latest EU payments directive unleashes competition.

CPMI publishes an analytical framework for DLT

Mar 24 2017

By Giovanni Campi and Ignasi Guardans

The Committee on Payment and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS) recently released a report that focuses on the potential impact of distributed ledger technology (DLT) on payment, clearing and settlement.

In providing an analytical framework to approach DLT, CPMI hopes to enhance authorities and market participants’ understanding of this technology. The report reviews the potential implication of DLT for the efficiency and safety of payment, clearing and settlement activities. The last part also analyzes broader implications of DLT for financial markets, in terms of market architecture and connectivity.

Category:Blockchain & Smart Contracts