Tag: US

1
Comptroller Otting: A New Ally for a FinTech Charter?
2
FinTech outlook for 2018: US Banks look to AI
3
What the CFPB Leadership Dispute Means for the Prepaid Account Rule
4
SEC Cautions “Utility Token” Sponsors and ICO Market Intermediaries
5
New SEC Cyber Unit Obtains Emergency Action Against ICO
6
LabCFTC’s First Primer Covers Bitcoin, other Virtual Currencies, Virtual Tokens and ICOs
7
Initial Coin Offerings “Horrify” a Former SEC Commissioner
8
New Technology Targeting U.S. Loan Market in Attempt to Increase Liquidity
9
“True Lender” litigation heats up: small business sues marketplace lender and partner bank, alleging conspiracy to evade usury laws
10
A U.S. BitLicense? OCC Acting Comptroller Sounds Open to It

Comptroller Otting: A New Ally for a FinTech Charter?

By Dan Cohen

The FinTech charter may have an important new, if tepid, ally: U.S. Comptroller of the Currency Joseph Otting. Speaking at a press conference on December 20th, Comptroller Otting signaled a cautious openness to the charter, stating, according to various media outlets, that although he is “not sure what it [FinTech charter] looks like and how it’s funded…there’s a space there that a technology solution can solve.” The key question to him is “what is the requirement…to get that charter”, a topic on which he did not elaborate.

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FinTech outlook for 2018: US Banks look to AI

By Cameron Abbott and Harry Crawford

With 2017 at a close, US banks have set out their 2018 FinTech new year resolutions. According to American Banker, US banks are likely to focus their FinTech investment in 4 major areas in 2018:

  • Artificial intelligence and machine learning
  • Open banking
  • Cybersecurity and biometrics
  • Commercial banking innovation

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What the CFPB Leadership Dispute Means for the Prepaid Account Rule

By Eric A. Love and Dan S. Cohen

With Office of Management and Budget Director Mick Mulvaney in place as Acting Director of the Consumer Financial Protection Bureau (CFPB) and a legal challenge to his appointment to that position brought by CFPB Deputy Director Leandra English continuing to proceed through the courts, prepaid industry participants are rightly asking what this ongoing leadership dispute means for the CFPB’s sweeping Final Rule amending Regulation E and Regulation Z as applied to prepaid accounts.

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SEC Cautions “Utility Token” Sponsors and ICO Market Intermediaries

By Robert M. Crea

On December 11, 2017, the SEC released a cease-and-desist order against a purported “utility token” sold by Munchee Inc. (“Munchee”) and a statement by Jay Clayton on Cryptocurrencies and Initial Coin Offerings.  Two takeaways:

  1. The SEC will scrutinize so-called “utility tokens” under the Howey test, and Chairman Clayton believes that most token sales he’s seen constitute securities offerings.  The familiarity of the Munchee utility framework to other token offerings coupled with Chairman Clayton’s Statement could very well chill the market for utility tokens seeking to avoid application of federal securities laws.
  2. The SEC expects intermediaries operating in crypto, specifically law firms, accountants, consultants and broker-dealers, to be “gatekeepers” of investor protection.

We will be providing a fuller analysis in the next several days.

New SEC Cyber Unit Obtains Emergency Action Against ICO

By Robert M. Crea and Evan J. Glover

On December 4, 2017, the Securities and Exchange Commission’s (“SEC”) new Cyber Unit obtained an emergency asset freeze to halt a Canadian initial coin offering (“ICO”) called PlexCoin that had raised up to $15 million from thousands of investors.  The SEC filed its complaint (“Complaint”) in the Eastern District of New York, alleging that the sponsor and his company, PlexCorps, marketed and sold securities to investors in the U.S. and elsewhere under a variety of false pretenses, including that PlexCoin would yield a 1,354% profit in less than 29 days.  The complaint seeks permanent injunctions, disgorgement plus interest and penalties.

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LabCFTC’s First Primer Covers Bitcoin, other Virtual Currencies, Virtual Tokens and ICOs

By Anthony Nolan and Eric A. Love

The U.S. Commodity Futures Trading Commission’s (CFTC) New York-based LabCFTC has released a twenty-page primer (the “Primer”) about virtual currencies, virtual tokens and initial coin offerings (ICOs).  It’s the first in a series of educational primers that LabCFTC will issue in the coming months about innovations in the FinTech industry.

The Primer answers important questions about how CFTC regulations apply to virtual currencies, virtual tokens and ICOs.  Notably, the Primer reiterates that Bitcoin and other virtual currencies are appropriately categorized as commodities and also states that virtual tokens can in some instances be commodities or derivatives contracts even if they are also considered to be securities under the U.S. securities laws.  The Primer notes that, in applying U.S. commodity futures laws to virtual tokens, the CFTC will look beyond form and examine the “actual substance and purpose” of particular activities.

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Initial Coin Offerings “Horrify” a Former SEC Commissioner

By Robert Crea

On Sunday, November 26, 2017, the New York Times published an interview with Joseph Grundfest, former SEC Commissioner and current Stanford law professor.  Professor Grundfest is sharply critical of the posture of initial coin offerings under U.S. federal securities laws.  Given his persuasive voice on securities law matters and his influence in Silicon Valley, this interview may very well serve as a sobering wakeup call to the ICO marketplace.

Some notable quotes:

  • “ICOs represent the most pervasive, open and notorious violation of federal securities laws since the Code of Hammurabi. . . .It’s more than the extent of the violation . . . . It’s the almost comedic quality of the violation.”
  • “These are not hard cases . . . . You don’t need teams of accountants poring over complex financing documents [to bring enforcement actions].”
  • “We’re waiting to see a whole bunch of enforcement actions in this space, and we wonder why they haven’t happened yet. . . .I hope what [the SEC is] doing is planning on a sweep of 50 ICOs.”

The article may be found here.

New Technology Targeting U.S. Loan Market in Attempt to Increase Liquidity

By Vanessa Spiro and Susan Altman

Loan market participants may soon be able to use blockchain technology and tokenized cash to achieve swifter settlement of loan trades.  Both Synaps Loans and Finastra plan to introduce new blockchain-based platforms next year. They join the platform created by ClearPar and HIS Markit, which plans to reduce or eliminate wire transfers by promoting tokens that can ultimately be exchanged for cash.

The main objective of the technology is to reduce settlement time. Long settlement times result in costly use of capital and render the market less liquid in the eyes of regulators. The time between the agreement on material terms of the trade and the trade settlement date for syndicated loans is much longer–the median recently was 12 days- than that for other asset classes, such as equities. Several processes, such as implementation of the “delayed compensation” rules to incentivize quick settlement, have attempted to reduce settlement time. However, market protocol requires an exchange of finalized assignment documents among buyer, seller and agent bank, collection of “know-your-customer” information by agent bank, borrower consent, receipt of underlying loan documentation, agent bank verification of loan ownership and transfer of ownership on the loan registry.  Even under the best circumstances there are inadvertent delays, including those caused by blackout dates for amendments and absences by workers processing requests.

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“True Lender” litigation heats up: small business sues marketplace lender and partner bank, alleging conspiracy to evade usury laws

By David D. Christensen and Jennifer Janeira Nagle

Over the last several years, a number of U.S. state and federal government enforcement actions have challenged the viability of the bank partnership model that many marketplace lenders have used to fund consumer and small business loans.  Specifically, regulators have argued that, in partnerships where the non-bank entity controls much of the funding process or the bank has little-to-no risk of loss, the non-bank entity is the “true lender.”

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A U.S. BitLicense? OCC Acting Comptroller Sounds Open to It

By Eric A. Love and Hilda Li

In remarks delivered during a recent FinTech conference at the Federal Reserve Bank of Philadelphia, U.S. Office of the Comptroller of the Currency (OCC) Acting Comptroller Keith Noreika signaled that he is open to cryptocurrency companies applying for an OCC-issued FinTech charter.  According to the Acting Comptroller, part of the OCC’s role is to determine whether issuance of such a charter to cryptocurrency companies is consistent with the OCC’s “statutory obligations.”  He cautioned that, “just because you get in the door, doesn’t mean you get out the door on the other side with a charter.”  Video of the Acting Comptroller’s full remarks can be viewed here.

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