FinTech and Blockchain Law Watch – Page 49 – At the Crossroads of Law, Innovation and Commerce

A digital currency for Australia

Oct 24 2016

Digi.cash recently launched Australia’s first digital dollar. The e-currency, which is digitally ‘minted’ as electronically signed coins and banknotes can be used on various devices including smartphones and computers. Digi.cash currently operates under an exemption ruling by the Reserve Bank of Australia, which limits the total obligations to make payments under the facility to $10 million.

There is no doubt that digital currencies have potential uses in several areas of the Australian economy. More recently, Australia’s big banks have indicated interest in possible adoption of digital currencies. Keeping this in mind, there are a few key opportunities and risks associated with the use of digital currencies that corporations might wish to consider: Read More

ING takes first step towards open banking in UK

Oct 24 2016

By Jonathan Lawrence

The Dutch multinational banking and financial services corporation, ING, is returning to the UK by launching a mobile app to help customers manage their money across multiple accounts. Last week ING unveiled Yolt, an app that aggregates data from accounts at different financial institutions, with their customers’ approval. As ING does not provide loans or take deposits in the UK, its new app will only include information on accounts held at other banks and credit card companies. It is one of the UK’s first examples of a bank providing a platform for customers to manage money held by rivals.

The UK Competition and Markets Authority called in August 2016 for high-street banks to adopt a digital standard called “open banking” by 2018. This will allow customers, if they agree, to have their account details and transaction history shared with third parties. For more details on the CMA report, click here.

CFPB Finalizes Much-Anticipated Prepaid Account Rule

Oct 17 2016

By Eric A. Love, Linda C. Odom and Judith Rinearson

On October 5, the Consumer Financial Protection Bureau (“CFPB”) issued its much-anticipated Final Rule for prepaid accounts under the implementing regulations for the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z). The Final Rule is effective on October 1, 2017 and governs “prepaid accounts” including:*

general purpose reloadable cards
mobile wallets and certain other electronic prepaid accounts
peer-to-peer payment products
student financial aid disbursement cards
tax refund cards
payroll cards
government benefit cards

Blockchain 101 for Asset Managers

Oct 12 2016

By C. Todd Gibson and Tyler Kirk

Over the last two years, it has been difficult to attend any asset management-related event or seminar without hearing the term “FinTech,” and in particular, “robo-advice” and “blockchain.” What is apparent, though, is that many industry participants have little understanding of what blockchain technology is and how it works. This understanding is important in order to identify creative ways of leveraging this technology to increase efficiency.

In the October 2016 edition of The Investment Lawyer, K&L Gates partner Todd Gibson and associate Tyler Kirk published an article intended to give those with a limited understanding of blockchain a baseline of knowledge and to provide an update on current trends with respect to the use of blockchain by fund managers and their service providers. In case you missed it, the full article can be found here.

Will Blockchain in Healthcare Inform Fintech?

Oct 06 2016

By Susan P. Altman

Blockchain is now a focus of the financial industry, but the technology could become widely used in the healthcare industry too, according to an article in Becker’s Health IT and CIO Review. Bruce Broussard, CEO and President of Humana, believes blockchain will become the next big healthcare technology innovation, particularly with respect to payments and payer contracts. Because the parties to those kinds of contracts (healthcare provider on one side and healthcare payer (such as a health insurer) on the other) may now have a safe and reliable way to share information without going through cumbersome central databases, information, as well as contractual processes, would be automatically verified and authorized. The end benefits may include lower administration costs, faster claims processing and less fraud. These are similar to the benefits that may arise from the use of blockchain in the financial industry.

Another healthcare application of blockchain may realize the holy grail of sharing health information across many healthcare systems by eliminating the middleman holding the central database and providing formerly disconnected parties with a safe information network. As with the financial industry, eliminating the middleman will have tremendous ripple effects throughout the healthcare industry. If the healthcare industry successfully implements blockchain, it stands to reason that innovations in healthcare technology will loop back to further push innovations in fintech.

The Sandbox is getting crowded

Sep 29 2016

By Jonathan Lawrence

In a recent speech delivered at the British Bankers’ Association FinTech Banking Conference, Christopher Woolard, the Director of Strategy and Competition at the UK Financial Conduct Authority spoke about the high level of interest in the FCA’s Regulatory Sandbox for FinTech ventures. The Sandbox aims to create a ‘safe space’ in which FinTech businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences of engaging in the activity.

Of 69 applications to join the Sandbox, the FCA has accepted 24 to develop towards testing. The FCA’s team has been expanded to meet demand. 40 of the unsuccessful first time applicants will be offered assistance via Project Innovate or other FCA staff, in some cases to prepare for the next cohort of the Sandbox.

Blockchain–powered contract management and outsourcing

Sep 28 2016

By Susan P. Altman

Add outsourcing services to the long list of industries that face disruption directly attributable to blockchain, which list already includes financial services, supply chains, IoT, risk management, digital rights management and healthcare. It is well-known that blockchain technology, that is, technology enabling distributed ledgers with continuously maintained and verified blocks of records, promises huge savings and disruption in the financial services industry. IBM has now partnered with the Bank of Tokyo-Mitsubishi UFJ (BTMU) to apply blockchain technology to the design, management and execution of contracts between businesses. IBM and BTMU are piloting a blockchain project to test its usefulness in automating business transactions for which one party has contracted with the other to provide goods or services. Initially, the technology will be used to monitor delivery and usage of equipment with a sensor that embeds information into the blockchain. The information will then automate invoicing and payment processes between the two companies.

Of especial interest to outsourcing lawyers is the announcement that IBM and BTMU will develop smart contracts on a blockchain to improve the efficiency and accountability of service level agreements in multi-party business interactions. It appears the technology is intended to be used in the increasingly common and complex environment of multi-party, multi-vendor services. Lawyers can expect to see more robust service level agreements with service providers within that complex environment, certainly in terms of accountability. However, it remains true that service levels are only as valuable as the relevancy of what is being measured. And that is still a decision that, for now, requires human input.

FinTech hub ecosystems

Sep 28 2016

By Jonathan Lawrence

A recent EY study looks at how the UK FinTech ecosystem compares to that of California, New York, Germany, Singapore, Hong Kong and Australia based on their status as FinTech hubs. The report considers four attributes in each region:

Talent (availability and pipeline)
Capital (seed, growth and listed)
Policy (regulatory regimes, government programmes and taxation policy)
Demand (consumer, corporate and financial institution)

The analysis was commissioned by the UK Government to inform policy and support the sector. It also includes case studies on Israel and China.

The study gives extremely interesting comparative data across the regions and provides recommendations for the UK Government based on the experience in other countries.

Further developments on Britcoin

Sep 15 2016

By Jonathan Lawrence

Victoria Cleland, Director for Banknotes and Chief Cashier of the Bank of England, gave a speech on FinTech issues on 8 September (see the speech here).

Of particular interest were Ms Cleland’s remarks on the Bank’s long-term research on the wide range of questions posed by the potential of a central bank-issued digital currency (CBDC), including whether a CBDC would be feasible and whether it would benefit the economy and the financial sector, over the medium term. To support its research, the Bank has invited contributions to a set of research questions on the opportunities and challenges that could arise from the introduction of CBDC (see the questions here).

Australia’s first listed FinTech investment company

Sep 14 2016

By Russell Lyons, David Bath and Marie Zuo

On or around 19 October 2016, H2Ocean is proposing to list on the Australian Securities Exchange as a listed investment company (LIC). Following a successful initial public offering (IPO), H2 Ocean will become Australia’s first LIC focused on investing in early and growth stage FinTech companies. H2Ocean proposes to invest in between 15 and 50 FinTech startups which will have typically graduated from an incubator or accelator program or will be backed by a reputable venture capital firm. These startups will be based in both Australia and overseas.

The H2Ocean IPO will allow potential investors to be exposed to FinTech investments and venture capital as an alternative asset class, which might not otherwise be directly accessible to the public. This unique offering in the Australian market comes at a time where global FinTech financing is trending towards venture capital backed FinTech companies and is expected to reach a record high in 2016.

So far, H2Ocean has gained support from Mike Cannon-Brookes, Atlassian co-founder, who will be subscribing for shares in the IPO. Mike Cannon-Brookes backed Australian payments company Tyro in its $100 million capital raising at the end of 2015.

Treasurer Scott Morrison also attended the H2Ocean launch last week. With high profile supporters and as Australia’s first listed FinTech investment company, H2Ocean is another encouraging sign for Australia’s FinTech future.