January 2017 – FinTech and Blockchain Law Watch

New Special Purpose National Bank Charter for FinTech Companies

Jan 31 2017

New York partners Anthony Nolan and Judith Rinearson will be speaking in a Strafford live webinar on “New Special Purpose National Bank Charter for FinTech Companies: Evaluating the Benefits and Regulatory Pitfalls on Thursday, March 16 2017 at 1:00pm-2:30pm EDT. This will focus on a recent proposal by the United States Office of the Comptroller of the Currency (OCC) to consider granting special purpose national bank charters to FinTech companies that are engaged in fiduciary activities or in activities that include receiving deposits, paying checks, or lending money. The special purpose charter offers the benefits of federal preemption and some state licensing requirements. However, there are regulatory and supervisory burdens that must be carefully considered such as activity limitations, BSA/AML requirements and minimum capital and liquidity requirements.

Bank of England Governor delivers wide-ranging FinTech speech

Jan 26 2017

By Jonathan Lawrence

Mark Carney, the Governor of the Bank of England, has given a wide-ranging speech on FinTech which he delivered at the Deutsche Bundesbank G20 conference on 25 January 2017. It was entitled “The Promise of FinTech – Something New Under the Sun?”. Whilst recognising that FinTech’s true promise springs from its potential to unbundle banking into its core function, systemic risks will evolve. The challenge for policymakers is to ensure that FinTech develops in a way that maximises the opportunities and minimises the risks for society. Read More

Top Five Legal Trends for FinTech in 2017

Jan 25 2017

Judith Rinearson and Robert Zinn contributed an article to AmericanLawyer.com on legal trends to watch for in 2017 concerning FinTech. Trends include:

Major political change
Investments and M&A
Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF)
Blockchain & distributed ledgers
Cybercrime and data security

To read the article, click here.

Smart Contract Code versus Smart Legal Contracts

Jan 24 2017

By Susan P. Altman

In a recent CoinDesk Op-Ed, Josh Stark makes a useful distinction between smart contract code and smart legal contracts. He describes smart contract code as a program or script executed on a blockchain—this code being what many commentators misleadingly refer to as “smart contracts.” This (mis)use of the phrase has led lawyers to quip that smart contracts are neither smart nor contracts, they’re just code. The better term for blockchain code-enabled legal contracts is “smart legal contracts.”

Although Stark helps us a lot with terminology, his argument goes a little askew in suggesting that smart contract technology enables machine to machine commerce without enforcement by legal entities and therefore is a new tool for solving the problem of trust between trading parties. Individuals and companies are legal entities and at least two of them hold an interest behind every machine operation executing smart contract code. Just because there is no intermediary between the two (or more) parties to the transaction does not mean that traditional legal contract principles do not apply. Smart contract code speeds up and increases integrity in trading transactions by reducing friction in forming, executing and enforcing a contract. It is a new tool in our toolkit, but the toolkit is for building traditional legal contracts. Offer and acceptance, coupled with consideration, are still the basic principles of contracts, whether they are smart, stupid, oral, written or digital.

Automobile Companies Collide With Payment Providers

Jan 24 2017

By Jeremy M. McLaughlin

At the annual consumer electronics show in Las Vegas earlier this month, Honda demonstrated an in-vehicle payments platform. Through a partnership with Visa, Honda will enable drivers to pay for a variety of services through their car, such as for parking and fuel. The car manufacturer made clear, however, that it wanted to enable in-car payments for a variety of other services in the future.

Honda is not alone. Volkswagen Financial Services AG recently announced that it had purchased mobile payment platform PayByPhone. Ford has announced a virtual wallet service called FordPay. And on January 17, 2017, Daimler Financial Services AG announced that it had acquired PayCash Europe SA and was planning to launch its own epayments service, “Mercedes pay.” Read More

Accenture runs its largest ever fintech accelerator programme in shadow of Brexit

Jan 20 2017

By Cameron Abbott and Allison Wallace

After fielding more than 300 applicants around the globe, Accenture has selected 20 start-ups to participate in its largest ever fintech accelerator programme.

Artificial Intelligence, Blockchain and gamification technology are all key features in this year’s 12-week programme running in London.

By the end of the programme, 8 start-ups will be selected to present at the programme’s Graduation Day to a group of venture capitalists and financial industry executives. All of the start-ups will receive mentorship from representatives of 28 financial institutions.

Accenture’s Tom Graham told Finextra “the transformation requirements that the financial services industry must undertake to remain relevant arguably pose a bigger challenge than the immediate geo-political uncertainty casting a shadow over the industry”.

Paying for the Wall: Will President Trump’s Administration Scrutinize, Tax, or Seize Remittances?

Jan 20 2017

By Joseph A. Valenti, Daniel F. C. Crowley, Michael R. Komo

One of the most significant post-election questions for the financial-services industry—particularly global financial institutions that move money across borders—is what is the status of President-elect Trump’s proposal to tax electronic remittances to Mexico to pay for the wall between Mexico and the United States?

To read the full alert, click here.

Dubai International Financial Centre launches region’s first FinTech accelerator

Jan 17 2017

By Jonathan Lawrence

Dubai International Financial Centre (DIFC), the federal financial free zone situated in Dubai, United Arab Emirates, announced on 10 January 2017 the launch of the region’s first FinTech accelerator.

The FinTech Hive at DIFC accelerator aims to create a platform that will provide selected companies the opportunity to test and modify their FinTech advances. It will identify leading technology entrepreneurs and companies through a competitive process and offer them the opportunity to collaborate with executives from DIFC and regional and international financial institutions. Accenture has been chosen to set up and operate the accelerator

About 150–200 companies are expected to take part in the FinTech Hive over a five-year period, and no specific funding amount has been provided. The FinTech Hive is also interested in growing companies that have a product currently deployed outside of financial services but that are interested in entering this sector.

For the FinTech Hive at DIFC website, please click here.

The Future of Active Funds Part 2: Don’t Just Be an Active Fund …Be a Pro-Active Fund

Jan 17 2017

By Tyler Kirk

2017 will likely be the year of blockchain, and active fund shops should take notice. With over a quarter trillion dollars fleeing actively managed funds, see Part 1, 2016 was a disappointing year for active managers in the U.S. Blockchain’s cost savings might just be what the doctor ordered.

For 7 years the world struggled to understand bitcoin. Bitcoin was introduced around November 2008, declared property by the IRS in March 2014, and declared a commodity by the CFTC in September 2015. With bitcoin no longer novel, 2016 became the gestation period for bitcoin’s more profound invention, blockchain. As 2017 picks up momentum, we will begin to see financial institutions bringing blockchain applications in from the fringes of the industry and revolutionizing the financial markets. Consider the race by banks to patent their blockchain ideas. It doesn’t look like it will take 7 years for blockchain’s potential to become reality.

Competition concerns in the payment systems market

Jan 16 2017

By Jonathan Lawrence

The UK’s Competition and Markets Authority (CMA) has found that Mastercard’s acquisition of VocaLink gives rise to UK competition/anti-trust concerns. Mastercard UK Holdco Ltd, a subsidiary of Mastercard International Incorporated (Mastercard), is buying VocaLink Holdings Ltd (VocaLink).

Mastercard already owns and operates credit and debit card schemes Mastercard, Maestro and Cirrus, and has also bid to supply infrastructure services to UK interbank payment systems. VocaLink is a supplier of payment infrastructure services to three major UK interbank payment systems:

Bacs, the automated clearing system allowing credit and debit payments between bank accounts;
the Faster Payments Service (FPS), which enables near ‘real-time’ payments between bank accounts within the UK; and
the LINK ATM network.

Archive:January 2017