Cryptocurrency 2018: When the Law Catches Up with Game-Changing Technology
The Shoe Finally Drops: CFPB Makes Final Changes to the Prepaid Account Rule and Delays the Effective Date until 2019
By Eric A. Love and Judith Rinearson
On January 25, 2018, the U.S. CFPB announced that it has finalized changes to its sweeping Final Rule governing most general use prepaid accounts, digital wallets and P2P payment programs. These changes have been long anticipated, and include a delay of the Final Rule’s effective date (until April 1, 2019), as well as the following notable features:
Error Resolution and Limited Liability
A major bone of contention for the industry was the fact that provisional re-crediting of claims of unauthorized transactions would be required even if the cardholder had not registered or been verified. Such a requirement would certainly have increased fraud. Under the new amendments, Regulation E’s error resolution and limited liability requirements will not apply until after the consumer identification and verification process has been completed. This new limitation does not apply to payroll cards and government benefit accounts, since these cardholders are usually already known to the issuers.
Starbucks – a trust legitimiser for blockchain?
By Cameron Abbott and Samantha Tyrrell
In a recent quarterly investor call, Starbucks’ Chairman Howard Schultz discussed the possibility of incorporating blockchain technology into Starbucks’ impressive digital repertoire.
Starbucks’ commitment to being a first mover when it comes to disruptive technology has already resulted in the hugely successful implementation of its mobile payment app, launched in 2015. The app allows users to order, pay and accrue rewards remotely and now accounts for nearly one third of Starbucks’ US transactions. According to Schultz, these figures may warrant a move towards integrating some entirely cashless stores throughout the US.
Hacking of digital currency exchange leaves Japanese company footing the bill
By Cameron Abbott and Allison Wallace
Coincheck – one of Japan’s largest digital currency exchanges – says it will repay hundreds of millions of dollars’ worth of virtual money, after hackers broke into its network, stealing a reporting 58 billion yen (AUD660 million) worth of NEM (a cryptocurrency like Bitcoin).
Hackers broke into the Coincheck network early Friday morning, but it wasn’t discovered until nearly eight and a half hours later. Read More
Open Banking: UK Parliamentary Roundtable
The UK All Party Parliamentary Group (APPG) on FinTech and APPG on Alternative Lending will be hosting an invite-only roundtable on Open Banking, taking place on 31 January from 9:00-10.30am at the Houses of Parliament.
Open Banking went live in the UK on 13 January. From this date, the high street banks were required to make their customers’ bank transaction data available to third party businesses when instructed to do so by the customer. This is the first major milestone in a multi-year programme to open all payment products to the market for financial services. Over time, it is expected to revolutionise the way consumers and small businesses use and access financial services.
Open Banking was the main remedy mandated by the UK Competition and Markets Authority (CMA) following its investigation into the supply of personal current accounts and banking services in 2016. The CMA concluded that UK banks do not compete hard enough for customers’ business; and that technology should be employed to enable customers to compare and access better deals from new providers.
The Roundtable will be an opportunity to hear the latest from the Trustee of Open Banking, Imran Gulamhuseinwala, two weeks after the new services went live; and to raise any concerns about the potential for consumer detriment. You can register your interest here.
Digital currency exchange providers, do you need to register with AUSTRAC?
By Jim Bulling and Michelle Chasser
Australian anti-money laundering regulator AUSTRAC has released draft AML/CTF Rules for consultation following recently passed amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act which expand Australia’s AML/CTF regime to digital currency exchanges. The amendments will come into effect from the date of Proclamation which is expected to be 1 April 2018.
Under the amendments exchanging digital currency for money (whether Australian or not) or exchanging money (whether Australian or not) for digital currency, where the exchange is provided in the course of carrying on a digital currency exchange business will attract obligations under the AML/CTF regime. Notably, exchanging one digital currency for another will not be regulated.
UK Islamic FinTech Panel Launched
An independent group of Islamic Finance and FinTech practitioners came together on 24 January for the inaugural meeting of the UK Islamic FinTech Panel. The panel aims to create momentum in the Islamic FinTech sector by building on London’s position as a global FinTech hub and as a recognised centre for Islamic Finance.
The panel will be chaired by Harris Irfan, MD of Cordoba Capital, an Islamic Finance and Islamic FinTech advisory boutique. Irfan was previously CEO of Deutsche Bank’s Islamic Finance subsidiary, Global Head of Islamic Finance at Barclays and Head of Investment Banking at Rasmala Group. A recent white paper on the Islamic Finance sector, published by Cordoba Capital and IslamicBanker, promoted the idea of an Islamic FinTech panel as a means to build a community to work alongside existing public sector infrastructure in order to provide support to sharia-compliant FinTech companies. If you would like a copy of the white paper, please contact Jonathan Lawrence.
CFPB Expects to Further Delay Prepaid Account Rule’s Effective Date
By Eric A. Love
On December 21, 2017, the Consumer Financial Protection Bureau (CFPB) issued a statement providing a status update about its comprehensive final rule amending the implementing regulations for the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) as applied to prepaid accounts (Final Rule).
The Final Rule extends Regulation E protections to prepaid accounts, thus requiring financial institutions to give consumers easy access to account information, investigate and resolve erroneous charges, and limit consumer liability for unauthorized charges in certain circumstances. In addition, the Final Rule applies Regulation Z protections to prepaid accounts that are linked to credit products. The Final Rule also sets forth certain requirements concerning disclosures and account terms posting and submission.
Qatar and Islamic FinTech
In the Qatar Islamic Finance Report “Expanding Horizons”, Islamic FinTech regulation and support are considered. The report is a joint venture of the Qatar Financial Centre (QFC), Thomson Reuters and the Islamic Research and Training Institute (IRTI). The report notes that the FinTech industry in Qatar remains very small. As a part of its efforts to support the Qatar National Vision 2030, the QFC held a Fintech event in January 2017. The report concludes that Islamic FinTech could be supported in three ways:
Is Bitcoin Islamic-compliant?
In a recent research paper, Mufti Faraz Adam has considered whether Bitcoin is Islamic-compliant. This is an important area of interest given the growing Islamic finance market which is expected to be worth more than US$6.5 trillion by 2020. The paper examines whether Bitcoin is money, a commodity or something else entirely.