Cryptocurrencies & ICOs | FinTech and Blockchain Law Watch

The politicization of encryption: party “platforms” or “platitudes”?

Sep 01 2016

In the United States, the political stage is set for what may turn out to be one of the most infamous presidential elections in America’s history. As noted in an earlier blog post, the regulation of encryption by U.S. legislators and regulatory agencies may have a damaging impact on FinTech, and in particular, on the adoption of blockchain and other distributed ledger technologies. In this post, we look at the relevant Party Platforms to learn what, if anything, they say about encryption.

Bitcoin heist – alleged $72M stolen from Bitfinex

Aug 05 2016

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

Jul 29 2016

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.

K&L Gates Adds Leading FinTech Partners

Jul 28 2016

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.

Increasing investment in blockchain initiatives

Jul 07 2016

By Jim Bulling

Over US$1B is likely to be collectively spent on bringing blockchain technology to capital markets in 2016, according to a recent survey of 134 global market participants. Of the businesses with bitcoin projects, 32% have an annual budget in excess of US$5 million, and 47% top US$2 million. This significant level of investment has been motivated by the various advantages presented by bitcoin technology and its potential to revolutionise global capital markets. Indeed, a majority of businesses surveyed predicted blockchain would create ‘meaningful change’ in capital markets within five years. Furthermore, the survey participants were mostly unconvinced that legal regulation would significantly impede blockchain adoption. As such, the nascent interest in blockchain use in capital markets seems likely to continue.

Public financial institutions are also getting involved. At a recent international summit of international bankers, the US Chairperson encouraged attendees to educate themselves on blockchain. In Canada, the central bank is working alongside private banks and R3 (a blockchain company). They are trialling a digital currency (Cad-Coin) and allowing limited participants to engage in interbank payments with blockchain technology. The Bank of England is also looking into possible applications of the technology, with the deputy governor raising the possible consequences of a digital pound in a recent speech.

EU movement on virtual currencies and distributed ledger technologies

Jun 07 2016

By Jim Bulling and Michelle Chasser

The EU Parliament has called for the creation of a task force to be led by the EU Commission to monitor distributed ledger technologies (DLT) and virtual currencies (VC). The EU Parliament proposed that the task force consist of technical and regulatory experts who will:

provide the necessary expertise to support EU member states’ efforts to monitor DLT;
bring together stakeholders;
foster awareness and analyse the benefits and risks of DLT;
identify best practice standards;
assess existing EU regulation with a view to updating it in response to increased DLT use; and
develop stress tests for widely used VCs and DLT schemes.

The EU Parliament also recommended that the EU Commission revise EU legislation on payments in light of new technological developments with a view to furthering competition and lowering transaction costs possibly by means of promoting a universal and non-proprietary electronic wallet. The EU Commission is currently considering proposals to include VC exchange platforms in the EU Anti-Money Laundering Directive to end the anonymity that has been traditionally associated with such platforms.

This recent regulatory activity in the EU reflects the increased attention that VCs and DLT have been receiving from governments around the world. Australia has recently focused on anti-money laundering and tax implications for VCs and Japan introduced regulations on VC exchanges in March.

AML review targets digital currencies

May 17 2016

By Jim Bulling and Michelle Chasser

The Australian Attorney General’s Department (AG) has released its statutory review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML Act). Recommendations have been made to better incorporate digital wallets and digital currencies in the AML Act.

The AG has recommended that:

the AML Act be amended to ensure that digital wallets are comprehensively captured. Some digital wallets are already caught by the AML Act where they are considered to be ‘accounts’ provided by traditional financial product providers such as banks and credit unions. However, a potential regulatory gap was identified for new types of digital wallets inspired by technological advances. For example, digital wallets which store digital currency are not regulated under the AML Act;

CFPB Takes Aim at Marketplace Lenders

May 16 2016

By David Christensen

Last Fall, in its 2015 Rulemaking Agenda, the Consumer Financial Protection Bureau (“CFPB”) signaled its intent to “to develop rules to define larger participants in markets for consumer installment loans.”[1] Under the Dodd-Frank Act, the CFPB is authorized to issue “larger participant” rules to define entities in a particular market for consumer financial products or services. The issuance of such rules opens the door for supervisory and examination authority over such entities. Fast forward to Spring 2016, when the CFPB announced that it is accepting complaints from consumers regarding alleged problems with online marketplace loans, and it appears that the CFPB has marketplace lenders squarely in its sights.[2]

Digital currency and GST

May 09 2016

By Jim Bulling and Michelle Chasser

The application of consumption tax to digital currencies varies between countries. The UK and countries in the EU have made Bitcoin exempt from such taxes, while other countries such as Japan, Singapore, Canada and Australia treat digital currencies as intangible property which is subject to the tax.

In Australia, this has resulted in consumers paying Goods and Services Tax (GST) when they exchange money for digital currencies and again when they use the digital currency to make a purchase. Treasury has released a discussion paper on the application of GST on digital currencies. While the proposals are very different technically, they both result in removing the double taxation.

New European virtual currency trade body

Apr 26 2016

By Jonathan Lawrence

A new trade body designed to aid regulatory understanding of virtual currencies has been launched in response to increased government interest in Europe.

The Brussels-based European Digital Currency & Blockchain Technology Forum (EDCAB) is a public policy platform for digital currencies and distributed ledger technologies. It also co-organised an industry expo for policymakers in the European Parliament from 18 to 21 April 2016.

Virtual currencies have rapidly risen up the European policy agenda in all the major institutions:

The Council of the European Union put virtual currencies at the top of a list of targeted areas for rapid progress at its February 2016 meeting, and has called for legislation to be tabled by the end of June 2016.
The European Parliament is preparing its own initiative report on virtual currencies, with the Committee on Economic and Monetary Affairs scheduled to vote on the report on 25 April 2016. Additionally, the Committee for Internal Market and Consumer Protection is also considering the issue later in April.
The European Commission has been considering regulation of virtual currencies through its Action Plan and proposals to combat terrorist financing, with legislation ready for the end of June 2016.

Category: Cryptocurrencies & ICOs