October 2017 – FinTech and Blockchain Law Watch

Wall Street banks face threat from Silicon Valley: McKinsey

Oct 31 2017

Last week McKinsey published its 2017 Global Banking Annual Review, which is summarized in this Business Insider article. The headline on that article is the title of this post and is both accurate and an understatement of the risks of technological and relationship disruption facing banks. This was a major topic of conversation at last week’s Money 20/20 conference, of which K&L Gates was a sponsor and which drew more than 10,000 attendees.

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

Oct 30 2017

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.”

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

Oct 26 2017

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.

Islamic Development Bank blockchain project

Oct 26 2017

By Jonathan Lawrence

The Islamic Research and Training Institute, the research arm of the Islamic Development Bank Group (IsDB) and SettleMint have agreed to build a blockchain-based financial product that can potentially be used to support development and inclusion in the 57 IsDB member countries. SettleMint, together with their local partner Ateon, based in Saudi Arabia, will be working on using blockchain’s smart contracts to create Sharia-compliant financial products to support development in IsDB member countries.

K&L Gates Becomes One of First Major Law Firms to Implement Own Private Blockchain

Oct 25 2017

Contact: Jeffrey J. Berardi

K&L Gates has undertaken plans to establish an internal, private and permissioned blockchain to assist in the exploration, creation, and implementation of smart contracts and other technology applications for future client use.

“We are hearing from our lawyers globally who are excited about getting hands-on experience working with blockchain applications,” commented K&L Gates Global Managing Partner James Segerdahl. “By investing in this technology that is expected to significantly impact the practice of law, K&L Gates is committed to finding practical and timely solutions that benefit both our clients and the firm.”

Next FinTech Steps in Bahrain

Oct 25 2017

By Jonathan Lawrence

The Central Bank of Bahrain (CBB) has announced the creation of a FinTech Unit. The aim of the Unit is to ensure the services are provided to individual and corporate customers in the FinTech sector. The announcement follows the CBB’s recent initiatives, which include a Regulatory Sandbox (which four companies have entered to date), in addition to the issuance of crowdfunding regulations for both conventional and Sharia compliant services.

The proposed Fintech Unit will be responsible for the approval process to participate in the Regulatory Sandbox, supervision of licensed companies’ activities and operations, including cloud computing, payment and settlement systems, and monitoring technical and regulatory developments in the FinTech field.

ASIC provides responses to industry feedback on its current and future approaches to RegTech

Oct 18 2017

By Michelle Chasser and Felix Charlesworth

On 15 September 2017, ASIC released its responses to industry feedback on its consultation Report 523 (REP 523). As mentioned in an earlier blog, REP 523 sets out the structure and framework for ASIC’s ‘Innovation Hub’ as well as its current and future approach to regulatory technology (RegTech).

Bank of England continues digital currency research

Oct 18 2017

By Rizwan Qayyum

A researcher at the Bank of England (“BoE”) recently explored the notion and technological requirements of a central bank issuing a digital currency (“CBDC”) and posited it may not be necessary to use distributed ledger technology (“DLT”) for the currency.

SEC’s Investor Advisory Committee Talks DLT, Blockchain

Oct 18 2017

By Eric A. Love

On October 12, the SEC’s Investor Advisory Committee (IAC) held a public meeting that included a panel discussion about blockchain and other Distributed Ledger Technology (DLT). The IAC advises the SEC on such regulatory issues as investor protection and securities market integrity.

The panel consisted of Nancy Liao of Yale Law School; Jeff Bandman, Principal at Bandman Advisors and previously Director of LabCFTC; Michael Bodson, President and CEO of DTCC; Fredrik Voss, Vice President of Blockchain Innovation at Nasdaq; and Adam Ludwin, Co-founder and CEO of Chain. Panelists largely focused on the potential benefits of blockchain and DLT for investors and the broader U.S. securities markets, as well as the accompanying risks that will likely require heightened regulatory oversight.

Bank of England FinTech Accelerator Lessons

Oct 16 2017

By Jonathan Lawrence

In remarks on 6 October: The Bank of England’s FinTech Accelerator: what have we done and what have we learned?, Andrew Hauser (Executive Director, Banking, Payments and Financial Resilience) surveyed the Bank’s current and future contributions to the FinTech regulatory debate.

Mr Hauser predicts that traditional distinctions between regulated and unregulated activities will blur as conventional models of intermediation being progressively ‘unbundled’. He posed questions about judging the appropriate positioning of the regulatory perimeter to ensure that risks are appropriately overseen whilst allowing valuable innovation to flourish. He highlighted a Proof of Concept within the Bank’s accelerator, Enforcd, which examines tools allowing the Bank’s legal team to draw out common trends in publicly available regulatory enforcement actions in order to inform the Bank’s own work.

Archive:October 2017