December 2017 – Page 2 – FinTech and Blockchain Law Watch

France’s Financial Markets Authority considers its options for regulating initial coin offerings

Dec 10 2017

By Claude-Étienne Armingaud, Emilie Oberlis, Alexandre Balducci, Sidney Lichtenstein and Alban Michou-Tognelli

The French Financial Markets Authority, the Autorité des Marchés Financiers (“AMF”), recently published a white paper requesting the views of stakeholders on the best means of regulating the fundraising activities based on cryptocurrencies and blockchain technology and is also launching a digital-asset research program called UNICORN (“Universal Node to ICO’s Research & Network”). In doing so, the AMF is following in the footsteps of the French Ministry of Finance, which published a draft document aimed at adapting the French legal framework to the use of blockchain technology on 19 September 2017 (see our coverage here).

The white paper focuses on initial coin offerings (“ICOs”) which are fundraising activities used to finance technology-based projects at an early stage of development. Participants to an ICO transaction receive tokens issued by the project initiator, in exchange for their investment in cryptocurrency or fiat currency. These tokens (a) have different characteristics depending on the transaction; (b) confer different rights to their owners; and (c) are intended for a technologically-oriented and informed audience that has a good understanding of (i) the nature of the project, (ii) the underlying technology, and (iii) the risks associated with the project.

UK FCA Announces Next Sandbox Cohort

Dec 07 2017

By Jonathan Lawrence

On 5 December, the UK Financial Conduct Authority (FCA) announced the firms that were successful in their applications to begin testing in the third cohort of the FCA’s regulatory sandbox. The sandbox allows firms to test innovative products, services or business models in a live market environment. The sandbox was a first for regulators worldwide. Since it opened, the sandbox has supported almost 70 firms in testing innovative products and services. The FCA is seeing more applicants from outside London and a broader range of firms. The FCA has also opened the application window for its fourth sandbox cohort.

New SEC Cyber Unit Obtains Emergency Action Against ICO

Dec 07 2017

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.

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

Dec 04 2017

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.

Bank of England Stress Tests Reveal FinTech Competition

Dec 04 2017

By Jonathan Lawrence

The Bank of England (BofE) published its 2017 UK bank stress test results on 28 November. The BofE found that incumbent institutions are probably underestimating the impact that increased FinTech competition could have on their profitability:

Diminishing revenue from overdraft products. Currently, unarranged overdraft fees are one of the biggest contributors to UK banks’ annual pre-tax profits. FinTechs, like personal financial management services, should help people better manage their money to avoid becoming overdrawn, and aggregation platforms will increasingly redirect customers to cheaper credit options, diminishing their need for overdraft facilities and reducing banks’ returns on such products. Banks may be doubly hit if the UK Financial Conduct Authority decides to impose a strict price cap on the overdraft fees banks can charge customers.

Archive:December 2017